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Elliott’s Stake In Softbank
Toshiba's (TOSBF) independent directors will conduct a strategic review of the conglomerate's operations. The announcement comes at a time when shareholders have been engaging Toshiba on searching for suitors. Two of Toshiba's top three shareholders, 3D Investment Partners and Farallon Capital Management, on Friday criticized the company for not being open to offers to go private. Toshiba turned down a $20 billion take-private bid from CVC Capital this year. However, CVC also wanted to retain management, which was viewed by some within the company as an attempt to shield former CEO Nobuaki Kurumatani from shareholders. Chief Executive Satoshi Tsunakawa responded to 3D Investment and Farallon by saying that the company has "no reluctance to consider various proposals to increase corporate value, including going private." Toshiba also announced that a unit was hacked by the DarkSide ransomware group, which is believed to be behind the Colonial Pipeline attack.
Institutional Shareholder Services is recommending that Exxon Mobil (XOM) investors vote for three of Engine No. 1's four nominees to the company's board. The proxy advisory firm said it agrees that Exxon's board needs more independent industry expertise as the company develops an energy transition plan. Exxon “recognizes that the status quo will not persist indefinitely, yet has taken what appear to be only incremental steps to prepare for the inevitable,” ISS said in its report. Engine No. 1 said it was pleased that ISS recognizes that Exxon needs more independent expertise on its board, but added that investors should vote for its four nominees to ensure the company "avoids the fate of other once-iconic American companies." British insurer Legal & General Group (LGGNF) also came out in support of Engine No. 1's campaign this week. Investor Jeff Ubben is among the three new directors in a slate of nominees that Exxon is urging investors to support.
For the first time, women hold almost one-third of all board seats at S&P 500 companies, according to recruiter Russell Reynolds Associates. Latino board appointments at public companies quadrupled from a year ago, and 145 S&P 500 companies have added at least one Black director since last June, a much faster pace than past years. Keith Meyer, co-head of board and chief executive for recruiting at Allegis Partners, said as recently as a year ago, only around half of his clients asked about finding women and minority candidates. Now, "ninety plus percent of every board search that we've been asked to execute in the last nine months has had a strong focus on diversity, especially ethnic diversity," Meyer said. The momentum has been driven largely by controversial quotas, similar to the rule proposed by Nasdaq Inc. The stock exchange wants to require listed companies to have at least one female and one underrepresented director. The Securities and Exchange Commission will decide by August whether to approve Nasdaq's proposal.
Shares of Seven & i Holdings Co., Ltd. (SVNDY) surged to a two-year high on Thursday after reports that investor ValueAct Capital took a stake in the Japanese owner of the 7-Eleven chain, signalling a potential shake-up at the retail giant. ValueAct amassed a 4.4% stake in Seven & i and reportedly believes the sum of its parts is worth much more than its current market value. The hedge fund said the 7-Eleven business could be worth more than double what its parent is currently valued at if the company restructures itself to focus on the convenience stores or if 7-Eleven is spun out. “I share the same opinion. Seven & i will be better off focusing on the capital-light convenience store business,” said Oshadhi Kumarasiri, equity analyst at LightStream Research, publishing on the Smartkarma platform. In addition to 7-Eleven, Seven & i’s businesses include department stores, supermarkets and financial services. Last year it spent $21 billion to buy Speedway convenience stores in North America.
FirstEnergy Corp (FE), the U.S. utility that gave investor Carl Icahn seats on its board this year, is reportedly exploring divestitures as an alternative to raising cash by selling stock. FirstEnergy is trying to recover from the fallout of accusations it was involved with a $60 million bribery scheme involving financial aid for troubled nuclear power plants in its home state. The utility replaced its chief executive and let go of employees suspected of being linked to the corruption case, in a bid to assuage investor concerns. Its shares have recovered most of the value they lost when federal prosecutors unveiled the bribery scheme last July. However, credit rating agencies have warned the episode may continue to affect FirstEnergy's ability to access bond markets. FirstEnergy said last month it was seeking alternatives to issuing up to $1.2 billion of stock over 2022 and 2023, to help finance its spending plans. The firm is considering divesting stakes in some of its subsidiaries as one such alternative, according to four people familiar with the matter. This includes selling part of Monongahela Power Company, as well as pieces of West Penn Power and Potomac Edison. FirstEnergy could fetch $1.5 billion by selling all three outright, according to one of the sources. FirstEnergy agreed to give two board seats to Icahn's representatives in March.
Shares in Prudential Financial, Inc. (PRU) fell 5% on Thursday as the life insurer said the spin-off of its U.S. business would not take place until the second half. Analysts were expecting the demerger, announced last year following pressure from investor Third Point, to take place this month. Prudential had previously said the demerger would take place in the second quarter. The company said that while regulatory approvals for the demerger had been received from Michigan and New York, “regulatory engagement” was continuing so detail on Jackson’s first-quarter performance could be included. “The U.S. demerger will complete Prudential’s structural transformation into a business solely focused on the growth opportunities of Asia and Africa,” chief executive Mike Wells said in a trading statement ahead of the company’s annual general meeting on Thursday. Prudential’s shares were down 5.4% at 0930 GMT, one of the worst performers in the FTSE 100. Jefferies analysts described the demerger delay as “disappointing”, while retaining their “buy” rating on the stock. Wells said that while vaccination roll-outs should bring “a gradual return to more normal economic patterns”, uncertainty remained over the speed of roll-outs and their success. Prudential reiterated that it planned a $2.5-3 billion equity raising once the demerger is completed, likely to be through a global offering to institutional investors and a public sale in Hong Kong to retail investors.
Sources said eHealth Inc. (EHTH) has settled a dispute with Starboard Value LP by granting the investor one board seat for Magellan Health (MGLN) President James Murray two months after Starboard nominated four candidates. Starboard, which has a 7% interest in eHealth, said in a regulatory filing in March that it felt the company's stock was undervalued. At that time, eHealth said it had engaged in discussions with Starboard and was “open minded.” Starboard's nominations followed eHealth's settlement with Hudson Executive Capital, which had also said the share price was undervalued. The insurer's stock price has fallen 13% since January, closing at $61.39 on March 12. Scott Flanders has run eHealth since 2016, with the stock price rising 365% during his tenure. Starboard launched two new campaigns and gained five board seats in the first quarter of this year.
French food group Danone (DANOY) on Thursday said that most of the proceeds from a $2 billion divestment of its stake in China Mengniu Dairy Company (CIADY) will be returned to shareholders through a share buyback program. Danone, under pressure from investment funds over its shareholder returns, on Wednesday said it would sell its 9.8% stake in Chine Mengniu Dairy. "The transaction resulted in total gross proceeds of 15.4 billion Hong Kong dollars, representing about 1.6 billion euros ($1.94 billion). The settlement of the transaction will take place on May 17," Danone said. Former Danone boss Emmanuel Faber was ousted as chairman and CEO this year after clashes with some board members over strategy and calls from activist funds for him to resign over the group's lackluster returns compared with some rivals. French paper Les Echos this week reported that Antoine de Saint-Affrique was frontrunner to become Danone's new CEO. Danone declined to comment on that report.
Corporate governance advisor Pensions & Investment Research Consultants (PIRC) has recommended that Chevron Corp. (CVX) shareholders vote against CEO Michael Wirth at the company’s May 26 shareholder meeting. PIRC urged such opposition due to the company's combined board chair and CEO roles. The second-largest U.S. oil producer also faces several climate and governance proposals that London-based PIRC said it supports. PIRC is the first of the major proxy advisory firms to comment ahead of Chevron's shareholder meeting. PIRC further recommended votes in favor of shareholder resolutions that include asking the company to reduce the greenhouse gas emissions of its products and splitting the board chair and CEO roles following the next chief executive transition.
Pershing Square Capital Management owns a stake of nearly 6% in Domino's Pizza (DPZ). During an interview at The Wall Street Journal's Future of Everything Festival, investor Bill Ackman said there was a buying opportunity for a company he has followed for a long time when its shares recently slipped. He described Domino's as a strong company, and noted that the pizza chain does not have to rely on services such as DoorDash (DASH) because it has its own delivery infrastructure. Ackman revealed that he exited Starbucks (SBUX) when its stock started to rise. He started buying Starbucks stock in 2018 and once owned more than 1% of the company. Ackman said his special purpose acquisition company Pershing Square Tontine Holdings (PSTH) has zeroed in on an iconic private company. A deal could be completed in the next few weeks. Ackman has shifted his focus in recent years away from high-profile activist campaigns, instead working behind the scenes or on other types of investments. The likelihood of Ackman pursuing another proxy contest is "extremely low," he said.
Pensions & Investment Research Consultants (PIRC) on May 12 urged Exxon Mobil (XOM) shareholders to vote in favor of four nominees put forth by Engine No. 1 in a proxy battle seeking to overhaul the oil company's board. Engine No. 1 has nominated four board candidates and criticized existing directors over lacking a “credible plan” as energy markets move to cleaner fuels. PIRC advocated voting for the nominees—Gregory Goff, Anders Runevad, Kaisa Hietala, and Alexander Karsner—and against Exxon board members such as CEO Darren Woods. PIRC also recommended that shareholders vote to split the company's combined CEO-board chairman jobs.
ValueAct Capital is pressing for change at Seven & i Holdings (SVNDF) after building a 4.4% stake in the Japanese owner of the 7-Eleven convenience store chain. In a letter to its investors, ValueAct said it believes that the sum of the company's parts is worth much more than its current market value. The 7-Eleven business could be worth more than double the value of what its parent is currently valued at if the company restructures itself to focus on the convenience stores or if 7-Eleven is spun out, according to the investment firm. Seven & i's other retail and financial assets have fallen behind the convenience store business in contributing to cash flow, said ValueAct. The investor said 7-Eleven has the potential to be a giant in Japan like McDonald's (MCD) and Starbucks (SBUX) are in the U.S. ValueAct said it has engaged with Seven & i's board directors and management in recent months. ValueAct is up 18% since January after returning 12.5% last year, according to an investor in the firm.
A majority of Phillips 66 (PSX) shareholders approved a resolution Wednesday calling for the company to set concrete emission-reduction targets, according to preliminary results reported by climate activist investor group Follow This. Phillips 66 did not disclose the votes but confirmed the majority needed to approve the resolution filed by Follow This. A similar Follow This resolution for ConocoPhillips (COP) was approved Tuesday by 58% of shareholders. The Phillips 66 vote "raises the expectations for the upcoming votes at Shell (RDS.A) and Chevron (CVX)," said Mark van Baal of Follow This. "Big Oil can make or break the Paris Accord. Investors in oil companies are saying now: we want you to act by decreasing emissions." A Follow This climate resolution at BP for the company to map out a more aggressive plan for reducing emissions in line with the goals of the Paris Agreement fell short of the majority needed Wednesday. It garnered 20.7% support — a jump from 8.4% in 2019. The California Public Employees' Retirement System and the global investor engagement initiative on climate change, Climate Action 100+, have been criticized for not supporting the BP shareholder proposal. "We appreciate that NGOs are rightly calling for progress," said Anne Simpson, Climate Action 100+ Steering Committee member, and managing investment director for board governance and sustainability at CalPERS. "However, in this case the proposal duplicates a prior resolution, which was already passed." "A further concern for us is the binding nature of the proposal. The issues are complex and moving fast," she said. "If companies are not moving at the pace and scale needed, the next step for investors is voting on board members, as we are at Exxon (XOM), where we're supporting four new directors to oversee the company's transition to net zero."
British insurer Legal & General Group (LGGNF) has come out in support of a shareholder campaign at Exxon (XOM) to get the oil and gas giant to commit to a more ambitious climate strategy. Legal & General is the biggest shareholder at Exxon to express support for Engine No. 1's campaign. The 17th largest shareholder in Exxon, Legal & General has a $1.5 billion stake in the company. Engine No. 1 wants to add four new directors to the board of Exxon, and wants the company to embrace a more climate friendly strategy. Legal & General says its asset management division will vote in favor of Engine No. 1's proposal. Legal & General Investment Management also plans to vote against the re-election of Exxon Chairman and Chief Executive Darren Woods and lead director Kenneth Frazier. Legal & General voted against the re-election of Woods at last year's annual meeting. This year's vote is in two weeks.
Rep. Gregory Meeks (D-N.Y.), Rep. Carolyn Maloney (D-N.Y.), and Sen. Bob Menendez (D-N.J.) support legislation requiring companies to detail the racial, ethnic, and gender composition of their boards and executive officers to the Securities and Exchange Commission (SEC). According to diversity data on the nation's largest companies compiled by Bloomberg, 90 of the 100 polled corporations said their boards feature a director from an underrepresented background. The bill would obligate companies to post their numbers in proxy statements or yearly reports. Critics say the measure, in lieu of enforcement instruments, hiring goals, or mandates, will likely not encourage the widespread change its authors ultimately desire. "All of the reporting in the world can take place, but if there's actually no change, it's going to be insufficient," said Julie Nelson at racial justice non-profit Race Forward. The proposal joins other efforts to boost corporate board diversity, including a California statute that requires a minimum number of minority members on boards, and a similar proposal put forth for all NASDAQ (NDAQ)-listed companies. The SEC may drive the diversification push even without legislation, as confirmed SEC Chairman Gary Gensler said he asked agency staff to make recommendations about coaxing companies to disclose board-diversity data. He recently said at a House Financial Services Committee hearing that investors "increasingly want to understand these particular issues around diversity and more broadly human capital, both. And it's driven by what investors want to see and I've asked staff to try to serve up some suggestions on this."
On May 11, Carl Icahn's CVR Energy (CVI) ended its months-long fight with Delek US Holdings (DK) and said it would distribute its approximately 15% stake in the rival refiner to shareholders as part of a special dividend. CVR, Delek's largest shareholder, had wanted to acquire the company and nominated three directors to the board. However, Delek shareholders this month rejected CVR's candidates and elected all the eight Delek nominees to the board. CVR said it no longer wanted to acquire another refiner, instead planning to focus on renewable fuels, and agreed to issue a $492 million special dividend, payable in cash and its shares in Delek. CVR CEO Dave Lamp said, "This special dividend should allow us to monetize a gain on our investment in Delek—which would be nearly $116 million based on Delek's closing stock price on May 10." The company said that after the distribution, Icahn Enterprises (IEP) and affiliates, which own close to 71% of CVR, would directly hold almost 10.5% of Delek's stock.
AstraZeneca (AZN) CEO Pascal Soriot has suffered a shareholder rebellion on pay after the drugmaker significantly increased his potential bonus for the second year in a row. About 40% of votes cast at the company's annual meeting went against the pay raise, with about 75% of shareholders voting. Under the approved new policy, Soriot will be eligible for a bonus of up to 250% of his base salary, compared with 200% previously, and long-term share awards worth up to 650% of his salary, up from 550%. Large shareholders Aviva and Standard Life Aberdeen voted against the proposal. Advisory groups Institutional Shareholder Services, Glass Lewis, and PIRC had recommended that shareholders reject the proposal. The vote was the latest in a series of bruising rebellions at U.K. companies as investors take a stand on pay. Soriot's total pay package for 2020 was worth £15.4 million, the majority of which was based on his performance. The remuneration committee said the previous pay policy did not reflect AstraZeneca's position in the European pharma market, or the increased “scale and scope” of what the CEO and CFO were being asked to deliver. At the same meeting on Tuesday, shareholders approved AstraZeneca's $39 billion takeover of Alexion Pharmaceuticals (ALXN), with more than 99% of votes cast in favor.
Shareholder advisory The Pensions & Investment Research Consultants (PIRC) has recommended investors vote against Royal Dutch Shell's (RDS) non-binding resolution on its energy transition strategy at its annual meeting next week. PIRC said Shell’s strategy to cut emissions “does not seem to have a clear plan for the competitive aspects of the energy transition.” PIRC also recommended supporting a resolution filed by activist group Follow This urging Shell to set “inspirational” targets to battle greenhouse gas emissions. Shell said the Follow This resolution was “redundant,” urging shareholders to oppose it and “focus attention instead on the more detailed proposal from Shell which will help move the company forwards.” In February, Shell unveiled a plan to reduce planet-warming carbon emissions to net zero by 2050. U.S. proxy advisory company Glass Lewis last month recommended investors support the Shell resolution and vote against the one put forward by Follow This. PIRC said Shell’s climate resolution lacked individual accountability for the board and does not list the chairman as responsible for the strategy. It also criticized Shell’s plan to reduce carbon emissions “in step with society,” saying it should be leading instead. Shell’s emission reduction targets are intensity-based, representing emissions per unit of energy produced, technically allowing higher production. PIRC said it would prefer to see Shell set out targets for absolute emission reductions, not intensity-based. It also said the strategy appeared inconsistent with policy objectives and some of the targets.
Hedge fund Honest Capital has voiced its opposition to a $2.8 billion deal that At Home Group Inc. (HOME) signed last week to sell itself to private equity firm Hellman & Friedman. Honest Capital wrote in a letter to the company's board of directors to argue the deal was too low a valuation for At Home, given that it has plans to more than double its number of stores to 600 and consumers have more cash to refresh their decor. At Home has negotiated a 40-day "go shop" period with Hellman & Friedman that allows it to solicit bids from other potential buyers. Shawn Badlani, Honest Capital's managing partner, who had been a partner at activist investor Mick McGuire's Marcato Capital Management for nearly a decade, founded Honest Capital in 2020. Since its launch, Honest Capital has returned a net 109.6% largely by betting on smaller stocks. In the letter, Badlani argued that At Home's management is on track to deliver strong returns and that the company could be worth as much as $10 billion, based on expansion plans and revenue estimates. He also pointed to the fact that the company's management could earn big compensation packages in case of a change of control, questioning executives' alignment with shareholders' best interests.
Caligan Partners has amassed an 11% stake in Covid-19 test maker Fluidigm Corp. (FLDM), and sources say the New York hedge fund may pressure the company to conduct a strategic review and explore a sale of one of its business units. A person familiar with Caligan's thinking said the firm believes the company to be materially undervalued at a time its microfluidics business is shrinking while its mass cytometry business is growing. Fluidigm's stock price has fallen 14.5% since January, and the company cut its financial guidance for the year last week because it overestimated the impact of Covid-19 testing on returns. In 2019, Caligan won two board seats at Amag Pharmaceuticals, helped hire a new CEO, and ultimately helped sell the company.
Coast Capital is in conflict with a FirstGroup (FGROF) union that has accused it of trying to block moves to reduce the company's pension deficit. Coast Capital, which owns nearly 14% of FirstGroup, is unhappy with the terms of the company's £3.3 billion deal to sell its North American First Student and First Transit businesses to private equity group EQT Infrastructure. According to the Unite union, which represents thousands of FirstGroup workers, Coast has argued that £360 million of the proceeds should be paid to shareholders as a form of dividend, rather than being used to plug the company’s pension deficit. But Unite’s figure is wrong—FirstGroup has set aside £336 million for its pension schemes after agreeing to sell two of its three businesses in North America. Coast denied it was pressuring the company to decrease contributions into the pension plans, or reduce benefits to pensioners. Unite also highlighted a proposed 10p-a-share payout to shareholders as a result of the asset sale, when in fact the plan is to pay 30p per unit of stock. The union claimed Coast was seeking to secure the support of other shareholders to oppose the pension payments.
Proxy adviser Institutional Shareholder Services (ISS) has recommended shareholders of Italian defense group Leonardo (FINMY) vote against a liability action promoted by Bluebell Partners against the company's CEO. Last year CEO Alessandro Profumo was sentenced in the first instance to six years imprisonment for false accounting in his previous role as chairman of Banca Monte dei Paschi di Siena. In an April 28 letter, Bluebell, which owns 25 shares of Leonardo, said it wanted to propose the action and ask for damages stemming from the conviction. ISS said there was no ground to remove Profumo from his role and undertake any legal action against him as the sentence could still be overturned by the courts in the second or third instance. In October, Leonardo backed Profumo, saying, “conditions did not exist” for him to resign. But ISS also said Leonardo had omitted to provide information on Bluebell’s proposal sufficiently in advance of the first call of the general meeting, scheduled on Monday.
Elliott Management Corp. has built a stake in Duke Energy Corp. (DUK) and is calling for the company to add directors to its board and possibly take other actions to increase its stock price, according to sources. Duke has been in talks with Elliott, the sources said. Elliott may also call for Duke to sell some assets or make operational improvements, some of the sources said. The size of Elliott's stake couldn't be ascertained. Duke has a market value of approximately $79 billion and about $55 billion of long-term debt. In recent months, Moody's Investors Service and others have lowered the energy company's long-term debt rating, partly in response to the recent settlement of litigation concerning the cleanup of ash from its coal-fired plants. Duke in a statement didn't comment on Elliott's stake but mentioned its "strong progress over the last year that has cleared a path forward for growth, resolved equity needs at a premium valuation, settled rate cases and coal ash litigation, and accelerated our clean energy transformation, all of which has led us to increase our long-term EPS growth rate and outperform the S&P Utility Index." Duke on May 10 reported mixed first-quarter results, with better-than-anticipated profit and revenue just under what analysts had expected. The company had $992 million in net income, up from $938 million for the same period in 2020, and total revenue of $6.15 billion, up from $5.95 billion. Elliott has a long record of investing in power and utility companies. Meanwhile, Carl Icahn recently took a stake in FirstEnergy Corp. (FE) of Ohio, aiming to push the utility to boost its compliance and settle litigation resulting from a bribery scandal. The utility later entered into an agreement to add two Icahn appointees to its board and has since said it started talks with the U.S. Department of Justice to resolve the litigation.
Starboard Value has nominated four directors for election to the board of Box Inc. (BOX). Starboard recently announced its nomination plan, prompting a response from Box that noted the company had added directors to its board under an agreement with the investor last year. The hedge fund owns about 8% of Box. Starboard has criticized the cloud services provider for not taking advantage of business opportunities during the Covid-19 pandemic, such as the work-from-home trend. "While last year we were pleased to reach agreement on the appointment of two new independent director candidates, it is now clear that those appointments have not created enough change," Starboard said in a letter to Box's shareholders on Monday. Starboard's nominees include its managing member Peter Feld, and former Intel (INTC) chief marketing officer Deborah Conrad.
Starboard Value (SVAC) has presented a minority slate of board nominees for Box Inc. (BOX) to compete with CEO Aaron Levie and two other directors seeking re-election. In a letter to Box shareholders, Starboard said it has nominated four directors for the three seats in contention, with the additional candidates giving it some flexibility if Box adds seats ahead of the annual general meeting. Starboard, with a roughly 8% stake in Box, reported investing in the software company two years ago because of an opportunity to drive profitability, improve capital allocation, and augment governance to narrow the valuation gap Box trades at relative to competitors. Starboard claims Box has showed insufficient improvement since, despite management and the board's repeated pledges to do so. "The valuation gap has further widened during this time," declared Starboard Managing Member Peter Feld. "We believe opportunities for improvement still exist today, and our goal is to work with Box to help the company finally deliver on its promises." Starboard is known for wanting CEOs of the companies it invests in to have board seats, and if Levie was ousted, Starboard could push to establish a new seat for Box's CEO. Starboard announced last week that it intends to nominate directors without disclosing its plans. The move comes a year after the hedge fund reached a settlement with Box that added three new directors. Starboard said of particular concern were two recent financing transactions that were arguably unnecessary, including Box's agreement in April to issue $500 million in convertible shares to KKR & Co. (KKR) and grant it a board seat. Box said the proceeds from the deal would be used to repurchase common shares. The securities issued comprise more than 10% of Box's outstanding shares, and require KKR to vote along with any board recommendations. Feld said the transaction serves no business purpose, and in the face of a potential proxy fight with Starboard, it was conducted to "buy the vote" and dampen the voice of common shareholders. Box said last week that it continues to engage with Starboard but thinks additional board changes are unnecessary. It noted seven of its 10 directors joined the board within the past three years, and the company was on track for a revenue growth rate of as much as 16% by 2024 and operating margins of up to 27% over the same time. Box added that the KKR transaction resulted from a strategic review overseen by a board committee, including the directors Starboard supported last year, and will let shareholders decide whether to sell down their shares or engage in any upside potential with KKR as a committed partner.
Shareholders in Royal Dutch Shell Plc (RDS.A), BP Plc (BP), and Total SE (TOT) are demanding greater action on climate change, with resolutions on slashing carbon emissions set to dominate this month's annual general meetings. Activist group Follow This will propose a motion at BP on May 12 and at Shell on May 18, urging them to establish emission goals in line with the Paris Agreement. Shell's board has rejected the resolution, claiming its own plan to pump less oil, generate more gas and renewables, and cut emissions over the next 30 years is "more comprehensive." BP is also asking investors to spurn the resolution. Still, these proposals up the pressure on companies still depending on fossil fuels to underwrite the transition to cleaner energy. Shell agreed in February to put its transition plans to a vote, as did Total in March. "This has all come along faster than everyone expected," and the looming votes give "very little time to review the commitments," said Shu Ling Liauw at the Australasian Center for Corporate Responsibility. "It's a bit of game theory and opportunism to cement themselves as having endorsed climate plans," but "that doesn't mean there's substance." Backing varies among investors. In the Netherlands, resolutions tabled by Follow This have been supported by large players like NN Investments and Aegon NV (AEG), yet support among the largest U.S. investors is wanting. BlackRock Inc. (BLK), for example, has always opposed Follow This's proposals. Norway's sovereign wealth fund, which has a $2 billion stake in BP, also said it would side with the company. Smaller Shell investors like Sarasin & Partners LLP and U.K. local authority pension funds have pledged to support Follow This, but advisory firms Glass, Lewis & Co. and Institutional Shareholder Services are backing the oil giants. While large oil companies have in recent years unveiled plans to cut carbon output, Climate Action 100+ said none of the majors have fully detailed how they will end their net emissions.
Edward Bramson’s Sherborne Investors has sold its entire stake in Barclays PLC (BCS), giving up on a yearslong activist campaign to restructure the bank. Sherborne was one of the bank’s biggest shareholders with a 6% stake before the sale. Bramson unsuccessfully attempted to join the board of Barclays and petitioned its chief executive, American banker Jes Staley, to scale back investment-banking operations in favor of investing more in its U.K. retail bank. Sherborne said it sold its Barclays shares at an average price of £1.86. The bank’s shares rose more than 1% to £1.80 in early trading in London on Friday. They have gained 70% in the past 12 months, following a swoon during the pandemic selloff a year ago. “It is a pity that the opportunity did not arise to join the board of Barclays to assist in a turnaround,” Sherborne said in a statement. Staley opposed Bramson’s recommendations, and instead kept a large investment-banking operation, which proved to be a strong source of profits during the pandemic. Sherborne said it had begun building a position in another unidentified company. “We think that the new investment will produce better returns and has a clearer prospect of our becoming engaged in an operating turnaround, which is the primary contributor to Sherborne Investors’ investment returns,” the company said in a statement.
Delek US Holdings Inc. (DK) said its shareholders have supported its board nominees following a preliminary vote count. The company declared that investors "overwhelmingly voted to elect all eight of its highly qualified director nominees." Candidates included Uzi Yemin, William J. Finnerty, Richard J. Marcogliese, Gary M. Sullivan Jr., Vicky Sutil, Laurie Tolson, David Wiessman, and Shlomo Zohar. "We appreciate the support of our shareholders. Moving forward, we remain firmly focused on overseeing and executing the company's strategy and continuing to evaluate opportunities to drive value," Delek stated. "We look forward to maintaining our constructive engagement with our shareholders and remain committed to acting in the best interests of the company and all Delek shareholders." The vote came amid calls from CVR Energy Inc. (CVI) to implement changes, including divestment of Delek's convenience stores, and halting operations at the Krotz Springs and El Dorado refineries and repurposing them as terminals, renewable diesel production, or for other purposes. CVR Energy is majority-owned subsidiary of Icahn Enterprises LP (IEP) and owns roughly 15% of the outstanding common stock of Delek US. CVR Energy nominated three candidates to Delek's board, but Delek urged its shareholders to support its board's nominee slate. The preliminary results imply that investors have backed all other proposals considered at Delek's annual meeting. All Delek director nominees received approximately 90% or more of the voted shares, not counting those of CVR Energy.
Standard General has lost another proxy battle to Tegna (TGNA), a regional TV station operator in the U.S. The hedge fund, which owns 7% of Tegna's stock, was seeking to add new directors to the board of the company. Standard General had pressed Tegna on reviewing operations with hopes of improving its performance. However, in a statement on Friday, Tegna said preliminary vote counts showed that all 12 directors were re-elected. Standard General nominated three directors, but proxy advisory firm Institutional Shareholder Services recommended that investors re-elect all company directors. A year ago, the hedge fund nominated four directors to the board, including its founder Soohyung Kim. Standard General lost that vote as well. Most investors have reached agreements to settle their campaigns at companies this year.
Billionaire investor Nelson Peltz has sold more than $350 million worth of Procter & Gamble (PG) shares this week. In a Form 4 filing, Procter & Gamble disclosed Thursday that the founding partner of Trian Fund Management sold 2,763,197 shares in the open market over the past three days, valued at about $371.8 million. Peltz disposed of another 329,929 shares valued at $44.6 million, in the form of “a distribution of shares to the limited partner in the parent entity of a Trian Entity, in connection with the winding down of such Trian Entity.” Peltz started reducing his stake in the consumer products giant after he won a proxy battle and joined the company's board in 2018. He still has a 0.2% stake in Procter & Gamble that is valued at $784.2 million at the current stock price. Last month, Procter & Gamble reported fiscal third-quarter profit and sales that beat expectations.
The Coalition for a Responsible Exxon (CURE) called on Exxon Mobil's (XOM) board to recruit directors and senior executives with energy and clean fuels experience, echoing calls at the center of an ongoing proxy fight. CURE, which includes Seattle City Employees Retirement System, Dana Investment Advisors, and Interfaith Center on Corporate Responsibility, called on the oil company to tie executive pay more closely to financial performance and greenhouse gas reduction. Exxon shareholders on May 26 are set to vote on the biggest corporate battle to be decided on environmental, social and governance criteria. Pitted against Exxon is the hedge fund Engine No. 1, which has nominated four directors. A spokesperson for CURE declined to say how many shares of Exxon its 135 members hold. Overall, the group represents $2.5 trillion in assets, it said. CURE proposes broadening board and management experience, and splitting the Exxon chairman and chief executive roles. Current outside directors include only one member with energy industry experience and overall the board does not have the "confidence or expertise to challenge a powerful CEO/Chairman," it wrote. The combined CEO/chairman benefits shareholders and executive pay is determined by a committee of non-employee directors and gear to provide long-term shareholder returns, Exxon spokesman Casey Norton said. The group's report did not recommend votes for or against existing Exxon directors. Its members do plan to vote for new board leadership, the report said.
TEGNA Inc. (TGNA) shareholders demonstrated their strong confidence in the company at its May 7 annual meeting by re-electing all 12 incumbent nominees and none of the three candidates proposed by Standard General, which owned 7% of TEGNA shares. Last year the hedge fund ran four candidates, which also ended in defeat. With its focus on operational deficiencies failing to gain momentum thanks to TEGNA's record share price and strong subscription revenues, Standard General shifted tactics by citing diversity, equity, and inclusion (DE&I) issues, initially based on an incident mentioned by a nominee who exited midway through the campaign for conflict reasons, but later extending to broader DE&I themes at a previously unseen level. This strategy also proved unsuccessful, given TEGNA's long-standing devotion to DE&I and an outstanding track record of integrating and advancing DE&I in regards to its workforce, board, and business initiatives. All three proxy advisory firms took TEGNA's side, with Institutional Shareholder Services stating that "this is not a board that has been caught flatfooted or is reactive regarding issues of diversity and inclusion...the board's actions to rewrite all of its committee charters to include diversity oversight responsibilities and the company's hiring of a senior executive to oversee diversity show that the board had already focused its attention on DE&I." Standard General's two proxy contests embody a growing trend of repeated campaigns waged by a dissident at the same company, with no regard to the outcome of the initial campaign, the contest's economic cost, and the likelihood of winning in the second round. TEGNA's victory in the first proxy contest based largely on DE&I issues shows that a firm can still defend an activist campaign on the merits. Robust financial and operational performance and delivery of shareholder value, plus a strong record on ESG and DE&I issues, will best protect companies against future dissident campaigns.
Reports that Elliott Management Corp. has taken a large stake in Duke Energy Corp. (DUK) and pressed for changes has raised questions for investors. Guggenheim analyst Shahriar Pourreza says the timing for Elliot’s intervention — if true — appears odd. “The initial take we got from so many investors was, ‘Geez, if this is true, where were the activists a year ago? Why now?’" he says. A year ago, Duke had the troubled Atlantic Coast Pipeline hanging over its head, it faced significant liability risk because of a lingering dispute over its coal-ash liability in the Carolinas, and it needed to raise $1 billion in equity sales to finance its capital pending. A company with that much going on is often a target for activists who will move in, look to sell assets and simplify operations to increase cash flow and return to shareholders. But in the last 12 months, Pourreza says, Duke has done taken a lot of value-creating steps on its own and, as he wrote in a note this week, “is in some of the best shape it has been in recent memory.” Analyst Mike Doyle at Edward Jones agrees the move is puzzling. Duke's proposed sale of a 19.9% stake of its Duke Energy Indiana utility to the Singapore's sovereign wealth fund has solved its need for new equity sales, and it resolved its coal-ash liability issue in North Carolina, where it was most acute. The utility wrote off the Atlantic Coast Pipeline, which had become a growing risk for it and partner Dominion Energy Inc. Both Pourreza and Doyle say the ultimate goal of Elliott Management's stake in Duke might be to push the utility to reconsider its rejection of reported overtures from NextEra Energy Inc. (NEE) to purchase the power company or its Florida utility. Elliot Management founder Paul Singer and his fund have been active in a number of utility deals over the years. And activist activity in that industry does appear to be picking up recently, Pourreza notes, as some power companies have failed to keep up with changes in the industry.
Japanese companies are more likely to face hostile takeover bids, a previously taboo practice, as a result of Japan updating its mergers and acquisition (M&A) guidelines in 2019. The update recommended that companies organize special committees to examine incoming bids, rather than spurning them sight unseen. Other changes in progress imply more bids are on the horizon. M&A professionals also say Japan's experience is under close scrutiny in the Asia-Pacific region, with certain developments hinting at a nascent market for unsolicited takeovers. Yo Ota at law firm Nishimura & Asahi says rapid innovation must accompany such rapid change. Though many investors may welcome a more assertive Japanese market for corporate control, some companies are concerned about becoming the focus of potentially harmful bids, and must resort to more innovative defensive strategies. Ota has employed tactics like the tailored "poison pill," issuing stock warrants to existing investors, which successfully helped Toshiba Machine repel a hostile bid from a fund earlier this year. An increasing number of blue-chip Japanese businesses, in addition to foreign and domestic investment funds, have dismissed concerns over the reputational risk of making a bid that the engaged firm initially declares hostile. In the past two years, Japanese companies such as optical product maker Hoya (HOCPY), travel company H.I.S., and trading house Itochu (ITOCY) have embraced the hostile bid as a legitimate tool for corporate growth. Mitsubishi UFJ Morgan Stanley's Kensaku Bessho projects that furniture retailer Nitori's (NCLTY) successful $2 billion unsolicited bid for rival Shimachu in late 2020 will be a catalyst for change in the Japanese market because "people did not see this deal as an evil or hostile bid." Growth in unsolicited or outright hostile takeover bids for listed companies in Japan is partly a delayed effect of the 2015 governance code and its accompanying stewardship code. Both documents have engendered increased shareholder activism that according to CLSA has made Japan the world's second-largest market, after the U.S., for ongoing activist situations. Greater attention from investors, and pressure on previously indifferent shareholders, to force management to maximize corporate value have drawn interest to the 630 subsidiary companies listed on the Tokyo Stock Exchange. Ota notes that as part of the emphasis on corporate governance and shareholder value, many companies are being pressured to eliminate the "pre-noticed" poison pill strategy to defend against hostile takeovers.
BlackRock (BLK) supported 12 of 16 environmental and social shareholder proposals in the first quarter of 2021. The company voted against 53 directors and 47 companies because of inadequate management and reporting on climate risks, compared with 64 directors and 69 companies in all of 2020. In its Q1 2021 Investment Stewardship Report, BlackRock said it expects this number to increase during the peak proxy season. For the quarter, BlackRock conducted almost 1,000 engagements with more than 800 companies (a 24% increase over the same period last year), including 712 engagements on environmental issues (a 52% increase over the same period last year). Engagements on governance and social issues were consistent with last year. BlackRock also voted against nine for inadequate sustainability disclosure and seven for inadequate progress on social issues. The asset manager voted against management on one or more proposals at 35% of shareholder meetings, compared to 30% in first quarter of 2020.
In this video, Pershing Square Capital Management CEO Bill Ackman is interviewed by The Wall Street Journal's Jamie Heller at The Future of Everything Festival.
In a recent trend, “governance inclusion mandates” intercede directly in internal corporate governance by requiring specific changes to board membership. Some are “constituency mandates,” which add representatives of a specific constituency to the board. Others are “diversity mandates,” which require minimum levels of board membership of females or members of underrepresented communities. Underlying these proposals is the conjecture that inclusive boards will, somehow, make better decisions than laissez-faire, market-constituted boards. In a forthcoming paper, the authors develop a framework to assess if, and how, board inclusion mandates can lead to more pro-social corporate decisions. They note that inclusion mandates allow firms to make their own decisions, based on their own information, and without relying upon the government to regulate optimally. However, inclusion mandates do not necessarily change corporate behavior. There are two important exceptions to this “same activity” result. First, inclusion may allow inefficient contracts to be replaced with efficient ones (for example, allowing investment in firm-specific human capital of workers). Second, inclusion will lead to socially beneficial changes where the included group would expect to bear what would otherwise be externalized harm. In order to realize these improvements, the board representative must actually be accountable to the constituency she represents. These improvements also depend on how the constituency's claims on the firm are structured; poor design can actually lead to worse incentives.
GlaxoSmithKline (GSK) has attracted the attention of Elliott Management even though the pharmaceutical company is pursuing a demerger. GlaxoSmithKline is underperforming, but the most optimistic analysts believe the company could be worth about 35-45% more than its current share price. Chairman Jonathan Symonds, a former investment banker and finance director, already has said that the current team should lead the company beyond the split. However, he will need to keep his options open now that Elliott has entered the picture. GlaxoSmithKline is looking to spin off its consumer unit, and will need to persuade investors to put a higher price on what remains of the company. The pharmaceutical side of the company would benefit from a board that has more science and industry experience. GlaxoSmithKline has fallen behind on research and development because past management and shareholders prioritized dividends over investment.
Illinois has passed new state requirements that companies identify the gender and race or ethnicity of each board member. Regulators say they want to see fine details such as those provided by Boeing Co. (BA), which specified which directors were women, Asian, and African American. Archer Daniels Midland Co. (ADM) was more generalized, saying its board was 55% diverse. Companies, shareholders, and elected officials will be keeping a close eye on the next steps in Illinois' atypical mandate for director-by-director declarations. Rep. Chris Welch (D-Ill.) proposed what became the 2019 Illinois board diversity reporting law, arguing that "you can't go wrong with more data." "Over time investors want more detail, rather than less," said Morningstar Inc. (MORN) CEO Kunal Kapoor. "Putting sunlight on areas that lacked it has rarely had a poor outcome for investors." Although companies are not penalized for not fully reporting their board diversity, they may do so to avoid criticism by people scrutinizing the information, which began appearing on the Illinois Secretary of State's website last year. Illinois officials in April amended a disclosure form to make more explicit the call for companies to list the self-identified race or ethnicity of each director, and gender. In a March study, University of Illinois professor Richard Benton found 66 of the 74 companies that filed forms since the law was passed supplied enough data to parse out their racial diversity. Non-white people retained about 15% of the average company's boardroom seats, versus their 40% segment of Illinois' population. Yet opposition to disclosures seems low, even among companies with incomplete filings. For example, only two of 15 directors at U.S. Cellular Corp. (USM) listed their race on a form last July, while a company spokeswoman said for a more current filing, "100% of our members have self-identified." Phyllis Lockett at CME Group Inc. (CME) said diversity disclosures should provide a breakdown by race and ethnicity to help identify what groups might be underrepresented. Equilar reports that the S&P 500 listed 9% of directors as Black as of January, up from 8% in August. Hispanics were 4.2%, up from 3.6%, and Asian or Pacific Islanders accounted for 4.5%, up from 4.4%.
Carl Icahn's investment portfolio rose 9.2% in the first quarter, compared with a loss of 17.6% in the first quarter a year ago. The gain is a strong start to the year for his portfolio after it finished 2020 down 14.3%, and lost 15.4% in 2019. Major holdings for the portfolio include energy giant Occidental Petroleum (OXY), consumer products maker Newell Brands (NWL), and auto parts maker Dana (DAN). Occidental surged more than 50% in the first quarter after declining nearly 60% in 2020. Icahn, who owned more than 88 million common shares of Occidental at the end of last year, sold about 30 million shares from the end of March to the end of April. Newell rose about 27% in the first quarter, while Dana jumped 25%. An 18.5% increase in the portfolio's long book for the quarter was offset by a 9.2% loss by its short book. Aris Kekedjian succeeded Keith Cozza as president and chief executive officer of Icahn Enterprises (IEP) on May 10, and also joined the board of directors.
Frankfurt School of Finance & Management Professor Zacharias Sautner analyzes the impact of certain countries imposing mandatory environmental, social, and governance (ESG) disclosure regulations to force companies to properly disclose information on ESG issues in traditional financial reports or specialized standalone documents. Sautner and colleagues assembled a novel international dataset of country-level mandatory ESG disclosure regulations between 2000 and 2017, covering 25 countries that introduced such mandates. They observed that the uptake of mandatory ESG regulation is more likely in nations with common law origins and in countries with higher per capita carbon emissions. "Consequently, the gap between the supply of and demand for ESG information is possibly larger in common law countries, which implies a greater need for mandating ESG disclosure in such countries," Sautner states. Meanwhile, countries with higher per capita emissions greater likelihood of introducing mandatory ESG disclosures may indicate such reports are partly a disciplinary tool through which they hope to shrink their companies' carbon footprints. "Across the full sample, the percentage of firms that file ESG reports in the GRI [Global Reporting Initiative] or Asset4 database increases by 2.9 percentage points (pp) after ESG disclosure is made mandatory, a large increase relative to the unconditional frequency of 8.6%," Sautner notes. "Somewhat surprisingly, mandatory disclosure on average does not increase the quality of the filed ESG reports." Moreover, companies with lower ESG qualities are more likely to file ESG reports following introduction of mandatory disclosure, and show significant improvements in ESG reporting quality. "These effects are plausible as firms with better ESG qualities may have a higher propensity to voluntarily disclose ESG information—they are in turn less affected by mandatory disclosure requirements," Sautner writes. "Our findings suggest that mandatory ESG disclosure is most effective among firms where ESG-related concerns as well as information demands by investors are largest." Analysis also demonstrated that the accuracy of earnings per share (EPS) projections significantly rises, and the dispersion of projections significantly falls, after mandatory ESG disclosure introduction. "These results indicate beneficial informational effects resulting from mandatory ESG disclosure," Sautner says. He adds that "both the amount of ESG incidents and its significance decrease after mandatory ESG disclosure is introduced. This suggests that mandatory ESG disclosure exerts positive real effects by reducing ESG incidents." Furthermore, the acceleration of ESG information disclosure through mandatory disclosure rules may cause crash risk to decline after mandatory disclosure goes into effect.
Pershing Square Capital Management founder Bill Ackman said in a recent interview that sustained inflation could cause an unexpected tailspin in the stock market. "I think one of the 'black swan'-type risks for markets is a real spike in inflation that's not just a three-month spike, that's more sustained," Ackman said. "Also, meaningfully higher interest rates, which I think will affect the discount rates that people use to value companies. And I think those could be countervailing stock-market forces." According to Ackman, trillions of dollars in stimulus from Covid-19 relief bills and President Joe Biden's infrastructure proposal, historically low interest rates, and "benign policy" from the Federal Reserve would set the country up for "explosive GDP recovery and probably inflation." He added that "you could see certainly expectations change as soon as the next few months about how accommodative the Federal Reserve will be." To combat inflation, Ackman believes investors should own businesses with pricing power. "I think inflation is going to be real, and you're going to see wage inflation. I mean, everywhere there are 'help wanted' signs. It's very hard to hire people to fill its jobs, particularly with a stimulus package which includes extra unemployment benefits," Ackman said. "So it's a lot of pressure on wages I think, which I think ultimately is a good thing but could have, again, depending on the nature of the business...a negative impact."
Edward Bramson's mostly unsuccessful campaign to revamp Barclays (BCS), as evidenced by Sherborne Investors' sale of its 6% stake in the bank, is not likely to discourage further shareholder activism. European activists have stepped up their focus on the financial sector over the three years that Bramson was invested in Barclays. Valuations are even lower than they were three years ago, adding urgency for banks to refocus on their strongest businesses. Because Bramson is not a mainstream activist, Barclays hardly felt threatened, which damaged credibility among investors and other stakeholders. Sherborne Investors, which Bramson oversees alongside fellow partner and research director Stephen Welker, is far smaller than other activists like Third Point, ValueAct, and Elliott Management.
Investor activism is increasingly adopting a greater focus on environmental, social, and governance (ESG) concerns. According to the author, a member of the Singapore Institute of Directors, this "new" form of shareholder activism embraces the idea of shared values between businesses and stakeholders. At the same time, shareholders in Asian companies are becoming more active, including passive shareholders. For example, Blackrock (BLK) voted against the re-election of six independent directors during Malaysian glove manufacturer Top Glove's 2021 Annual General Meeting. That said, activism need not be confined to actions as overt as boardroom coups or shareholder revolts. Simply participating in public consultations, or even stepping up and getting more involved in corporate governance associations can be some of the more subtle ways to effect change.
In a recent interview, Bill Ackman of Pershing Square Holdings (PSH) discusses the GameStop (GME) frenzy and the general state of shareholder activism. Regarding GameStop, Ackman says he is interested in what retail investors are doing with the stock, though he remains uncertain about the company's true value. Ackman says he is "faint of heart" with respect to short-selling, and he notes that Pershing Square doesn't have a big short book. Regarding shareholder activism, Ackman believes that the strategy can be a vehicle for enormous value creation. He takes his own investment in Chipotle (CMG) as an example, noting that the stock has flourished in the four years since Pershing bought 10% of the company and added several board directors.
The Securities and Exchange Commission (SEC) has reopened comments on the proposed mandatory use of a universal proxy for all proxy solicitations in connection with contested elections for director that are not exempt under Rule 14a-2(b). As proposed, use of a universal proxy would be permitted but not required for other types of solicitations, including, for example, a “vote no” campaign or solicitations of proxies in support of a shareholder proposal. Each party in a contested election would distribute separate universal proxy cards. Within each group on a universal proxy card, the nominees would be listed in alphabetical order by last name. A dissident that intends to solicit proxies for its own nominees in a contested election for directors would have to give the company notice of the names of its nominees. The company would be required to inform the dissident of the names of the company's nominees for directors, unless the names of all nominees have been provided in a preliminary or definitive proxy statement. As proposed in 2016, the dissident would be required to solicit the holders of shares representing at least a majority of the voting power for the election of directors in order to trigger the universal proxy requirements. The dissident's plans could change after it provides the company with notice of its intention to solicit proxies for its own nominees for directors. The proposed amendments would amend Rule 14a-4(d) so that by consenting to be named in the company's proxy statement, the nominee would also consent to be named in the dissident's proxy statement, and vice versa. Universal proxy rules would require a significant investment of resources by dissident shareholders. As part of the 2016 Proposing Release, the SEC proposed additional amendments to the proxy rules relating to voting options and standards that are applicable to all director elections.
New research suggests that greater environmental, social, and governance (ESG) disclosure leads to greater ESG rating disagreement. Researchers analyzed ESG disclosure scores from MSCI, Thomson Reuters, and Sustainalytics, and included data on firms from 69 countries between 2004 and 2016. They report that after a country or stock exchange implements mandatory ESG disclosure requirements, the affected firms increase their ESG disclosures and experience greater ESG rating disagreement. ESG raters tend to disagree less about ESG inputs and more about ESG outcomes. Greater ESG disagreement is associated with higher stock return volatility and larger absolute price movements. Firms with greater ESG disagreement are less likely to raise external financing and instead tend to rely more on internal financing. These results are becoming even stronger over time, researchers add.
A report from Morningstar presents proxy voting as a backdoor entry to ESG investing for retirement plan participants. Just 3% of 401(k) plans currently offer investments labeled as adhering to ESG causes, but as investor advocates and regulators increase pressure for simpler and more transparent proxy voting procedures, it is possible retail investors could gain considerable leverage over the way fund companies currently vote on shareholder proposals, the report argues. “We’re suggesting proxy voting needs to be made more visible, so it does become a decision point for investors,” said Jackie Cook, Morningstar’s director of stewardship research.
The Securities and Exchange Commission has issued a Risk Alert highlighting staff observations from examinations of investment advisers, registered investment companies, and private funds engaged in environmental, social, and governance (ESG) investing. SEC staff continues to examine whether firms accurately disclose their ESG investing approaches and adopt and implement policies, procedures, and practices in accordance with their ESG-related disclosures. Staff noted that examinations would focus on matters such as portfolio management, performance advertising, and marketing and compliance programs. SEC staff found instances of potentially misleading statements on ESG investing processes and representations regarding firms' adherence to global ESG frameworks. Staff identified clear disclosures, policies and procedures that specifically address ESG investing, and oversight from knowledgeable compliance personnel as effective practices that may help firms comply with current regulations.