The week in investor relations: Proposals for more voting transparency, how passive restricts bear markets and the ‘mega trend’ of climate change
– The Wall Street Journal (paywall) reported that the SEC proposed rule-making that would require money managers to disclose more information on how they use their voting power. The agency’s new proposal would require asset managers to categorize votes more clearly in SEC filings to help investors more easily identify and compare funds’ voting patterns. Under the proposal, the reports would need to be filed in a format that is easier to analyze. It would also require more disclosure around the effect of securities lending by funds.
– The growth of passive investment has insulated the US stock market from a prolonged bear market, according to research by brokerage StoneX, reported the Financial Times (paywall). The success of passive strategies has boosted large caps and growth stocks, while damaging the performance of value and small caps, said Vincent Deluard, global macro strategist at the firm. ‘A preponderance of evidence suggests that the rise of passive has played a major role in the stock market bubble of the past decade,’ he said.
– Climate change ‘is a mega-trend that, if you take advantage of it and get ahead of it, [is] going to be an alpha generator for the next 30 or 40 years,’ CalSTRS chief investment officer Christopher Ailman told CNBC. ‘If you don’t pay attention to it, it’s going to be a negative alpha and you’re going to be stuck with a low-beta return.’
– Reuters reported that FedEx Corp shareholders approved CEO Fred Smith’s $54 mn pay plan at the company’s AGM despite it facing scrutiny from the Teamsters labor union for including a reinstated cash bonus and extra stock options. FedEx asked investors to support its executives’ pay packages in a supplementary securities filing, explaining that the board’s compensation committee made ‘decisions in real time, based on the best information available’.
– Canada’s second-largest pension fund, Caisse de dépôt et placement du Québec, said it will drop all of its oil production assets, valued at C$3.9 bn ($3.08 bn), by the end of 2022 and reduce carbon intensity by 60 percent by 2030, according to Reuters. Caisse said it would be the first institutional investor in Canada to exit oil production assets.
– CNN reported that General Motors CEO Mary Barra will become the first female chair of the Business Roundtable, beginning in January. Barra pledged to continue to ‘help advance policies that offer greater economic growth and opportunities for all Americans.’ She will replace Walmart CEO Doug McMillon.
– Reuters reported that a group of global private equity firms and pensions funds that together manage more than $4 tn in assets have joined forces to standardize reporting on ESG performance of portfolio companies. The group, led by Carlyle Group and CalPERS, will track data on greenhouse gas emissions, renewable energy, board diversity and other metrics of companies in their portfolio. Boston Consulting Group researchers will aggregate the data into an anonymized benchmark and the member firms plan to meet on an annual basis to assess prior years’ data and build on initial metrics.
– Zoom Video Communications and Five9, a provider of call center software, have pulled their $15 bn merger following a prolonged drop in Zoom’s share price, reported Bloomberg (paywall). Since mid-July, Zoom’s share price has fallen by around 30 percent, making the deal far less attractive. The deal was cancelled by mutual agreement as it did not ‘receive the requisite number of votes from Five9 shareholders,’ said Five9 in a statement.
– US companies are set to maintain strong profit levels for the third quarter despite rising cost pressures, reported the WSJ. Analysts expect earnings per share for the S&P 500 to be around 30 percent higher than during the same period last year, according to data from Refinitiv. Economic data shows that, looking at the market as a whole, profit margins are holding up despite rising costs, noted the article.