SeekInvest Academy

Many investors want to invest in alignment with their values, but may also have significant barriers to making portfolio changes, such as incurring taxes or de-alignment with overall financial goals. One approach to re-align investors to their values might be to focus their philanthropy on issues deemed important. Investors who care about climate change might note that the S&P 500’s carbon footprint is 64 metric carbon tons emissions per $1 million of investment.

Collectively the DOL’s and SEC’s proposed proxy voting rules create an opportunity for plan fiduciaries to exercise greater influence over corporate governance issues, including ESG matters. With these proposals ERISA fiduciaries may come under greater scrutiny for how they develop, monitor and implement corporate governance and proxy voting. Once there is greater transparency around how fiduciaries are exercising their governance responsibilities, participants may want greater say on what is in their best interests.

Advisor / investors can create custom values-based metrics on which to build a portfolio or fund-level profile against which they can judge whether an investment is more or less aligned with their objectives – financial and non-financial

Direct indexing is probably best suited to investors motivated by particular issues, beliefs or highly specific objectives. Improved tax management and efficiency can drive significant value, but maximizing this benefit requires understanding an investor’s specific facts and circumstances in a given tax year and long-term planning.

Given proxy advisors’ monopolistic position and because no one is publicly measuring or tracking the impact of their recommendations means that proxy advisors are generally protected from backlash associated with the potential downside risks and losses shareholders may face, creating a moral hazard.

Regardless of legislative points of view, standard disclosures across sustainability and ESG topics, regardless of materiality in a specific company’s instance, is necessary to provide a foundation for evaluation across firms and time.  Allowing companies to provide contextual guidance about how such disclosures fit into risk management activities or long-term strategy also provides useful information upon which investors and other market participants can base decisions.

The investment process starts with understanding highly-specific values not focusing on generic ESG labels or assumptions.

Will they or won’t they vote?  If they do, how will they vote? Retail shareholders are generally not engaged in corporate governance.  As noted previously, in 2020, US retail investors owned c. 29% of shares outstanding, but only voted 28% of their proxies.  Millennials, however, are more motivated: 46% of retail investors aged 25-40 said […]

Transparency is creating retail shareholder proxy voting apathy Last week’s blog post briefly discussed the decline in retail shareholders voting proxies and why corporate issuers might want to engage retail shareholders.  Several papers have documented and explored reasons for retail shareholders proxy voting apathy and the apparent indifference to exercising their rights in corporate governance.  […]

Retail Shareholder Proxy Voting in Decline, but Still Important According to Broadridge’s Proxy Pulse for 2020 US retail investors owned circa 29% of shares outstanding and voted proxies on 28% of their shares, which was significantly lower than the 92% voting rate across the institutional shareholder base. Ian Robertson in his 2018 analysis of retail […]