Ethos published this Thursday the 20th edition of its voting guidelines and governance principles for the 2021 general meetings. Ethos asks the major emitters of greenhouse gases to publish and submit to shareholders' approval an annual report on their climate strategy and introduces new voting criteria into its guidelines.
Ethos guidelines, on which the voting recommendations issued for general meetings of Swiss and foreign companies are based, are updated annually to take into account the latest developments in governance. For their 20th edition, Ethos has decided to introduce a new chapter (point 1.2) dedicated to the approval of companies' climate transition action plans.
"This change in our guidelines illustrates the importance that companies' climate strategy has for investors today," says Vincent Kaufmann, CEO of Ethos. Investors want to know the concrete CO2e reduction measures that are in place, the reduction targets that are adopted and the progress that companies are making. All with reliable data, validated by external auditors."
While no Swiss company has yet announced its intention to voluntarily submit such a climate report to the approval of its shareholders, several are doing so at the international level. The investors grouped within the Climate Action 100+ initiative are very much in favor of such votes being organised in the future, in particular by companies which are highly emitting greenhouse gases. It is therefore essential that the Ethos’ voting guidelines already include objective criteria for approving such reports.
In the event of a vote, Ethos will verify several points. First, the report should cover the main issues related to climate change in accordance with the recommendations of the TCFD (governance, strategy, risks, opportunities). Then, targets for reducing CO2e emissions compatible with a warming up to 1.5 °C and covering all direct and indirect emissions (scope 1, scope 2 and more than 90% of scope 3) must have been set and published, including intermediate targets. Finally, the company will have to provide information on the progress made in relation to these objectives and take appropriate measures to reduce its CO2e emissions. Otherwise, Ethos will recommend opposing the climate report.
Diversity within governing bodies
In 2021, Ethos will also take a close look at the diversity within the boards of directors of companies listed in Switzerland, a topic that has been dear to the Foundation for many years. "According to a new provision of the Code of Obligations which will come into force on the 1st of January 2021, companies based in Switzerland will have 5 years (i.e. until 2026) to reach a gender quota of 30% within their board of directors and 10 years (until 2031) to reach 20% of women in the executive management, recalls Vincent Kaufmann. However, so far only 21% of SPI companies have at least 30% women on their boards."
While Ethos will continue to conduct a constructive dialogue with companies to encourage them to improve the diversity of their governing bodies, the Foundation board of Ethos has already approved the introduction of a new provision in Ethos’ guidelines for 2022. Ethos will thus oppose the re-election of the chairmen of the nomination committees - or of the chairmen of the boards if such a committee does not exist - at the 2022 general meetings of companies which will not have at least 20% of women on their board of directors. "2021 will therefore be a transition year which will allow us to inform companies that this change which will take place in 2022", explains Vincent Kaufmann.
Defending shareholders' rights
In the coming years, Ethos will be particularly focused on ensuring that the upcoming statutory changes induced by the modernisation of the Code of Obligations do not adversely affect certain shareholders rights. In particular, the revised Code of Obligations provides that from 2022 shareholders holding 0.5% of the capital will be able to add an item on the agenda of the general meeting. The threshold is currently expressed in the nominal value of the capital. Among the 48 companies in the SMI Expanded index, 23 currently have a threshold of less than 0.5% of the capital. Ethos will therefore oppose any statutory change that would undermine the current threshold.
Ethos proxy voting guidelines 2021
Main changes compared to the 2020 edition (in French)
Main changes compared to the 2020 edition (in German)
The list of SMI Expanded companies and their current threshold level for adding an item to the agenda of the general meeting