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TIAA: 2020 Proxy Season Will See Heightened Focus on Environmental and Social Factors Amid Regulatory, Market and Economic Uncertainty

Originally published on TIAA.org.

Nuveen’s 2020 Proxy Season Preview predicts that a broader range of stakeholders will demand corporate action on climate change, gender parity and workforce diversity.

Nuveen , a leading global investment manager and subsidiary of TIAA, released its 2020 Proxy Season Preview, which predicts that corporations failing to adequately address environmental and social issues will face intense scrutiny from shareholders during the 2020 proxy season. Climate change, board diversity, human capital management and compensation issues will dominate investors’ top priorities.
“Amid unprecedented market uncertainty and the COVID-19 pandemic, driving positive outcomes at the companies in which we invest, through our proxy voting and our environmental, social and governance engagement work  is more important than ever to help mitigate risk and bolster value for our clients,” said Amy O’Brien, global head of responsible investing at Nuveen. “We believe 2020 will see the awakening of a broad swath of investors highly attuned to the relationship between a company’s financial performance and how effectively it manages these issues.”
Nuveen manages assets, including voting on proxy issues, on behalf of its clients and TIAA and implements TIAA’s Policy on Responsible Investing .
“This year’s proxy season will test companies’ ability to handle a significant crisis,” added Peter Reali, head of engagement at Nuveen. “We expect companies that prioritize strong corporate governance and conviction on environmental, social and governance-related issues will be better positioned to preserve long-term value for their shareholders.”
Backed by Nuveen’s deep expertise in responsible investing  leadership and its approach to proxy voting, the firm’s proxy season preview outlines five key trends to watch in 2020:
  1. Environmental and Social Topics are Investor Hot Buttons: The number of environmental and social proposals, and support for them, is likely to hit an all-time high for the fourth consecutive year. Already, these proposals account for 66 percent of all submitted proposals in 2020. Similar to 2019, political contributions and lobbying proposals, and climate change-related proposals, are expected to dominate in light of the 2020 U.S. elections and growing environmental concerns worldwide.
  2. Shareholders Will Expect Action on Climate Change: Once focused on disclosure around corporate sustainability, environmental shareholder proposals now expect tangible action beyond just disclosure, such as measurable carbon reduction goals – aligning with the Paris Agreement on climate change. To date, 77 percent of environmental shareholder proposals filed in 2020 focus on climate change versus other environmental stewardship topics, and 66 percent request action rather than just disclosure.
  3. Stakeholders Will Seek Transparency on Gender Parity and Workplace Diversity: Now that every company in the S&P 500 has at least one female board member, the focus will shift toward ensuring other under-represented groups have a seat at the table, especially in board leadership positions. Companies today recognize that workforce diversity, equal pay for equal work, and inclusive workplace cultures are a key competitive strength, which will likely spark an increase in proposals requesting transparency on pay equity, as well as goals for promoting, recruiting and retaining minority employees.
  4. Executives Should Expect the Integration of Environmental and Social Metrics into Compensation: Shareholders recognize they have the power to link environmental and social measures and objectives to executive pay, creating an opportunity to align incentive pay with these business strategies. While these topics will not dominate the 2020 proxy season, it is an emerging trend poised to gain traction over time, with a few prominent companies already in receipt of proposals targeting this objective in 2020.
  5. Regulatory Changes Will Create Hurdles Making the Future of Environmental and Social Proposals Uncertain: Regulatory changes recently proposed by the Securities and Exchange Commission (SEC) will create new impediments for environmental and social proposals in the long term. Although the SEC’s proposed changes will not go into effect in the 2020 proxy season, the amendments create an environment of uncertainty around important shareholder rights that will restrict shareholders’ ability to meaningfully engage with company management.
Nuveen’s 2020 Proxy Season Preview is available HERE . For more information about Responsible Investing, visit www.nuveen.com/en-us/thinking/responsible-investing .

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