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Global Sustainable Investement Alliance

The level of activism can also be attributed to legal and other barriers. While shareholder rights have been strengthened in Asia since the Asian financial crisis some fifteen years ago, a mixed picture in rules and practices continues. At a regional level, stewardship activities are still relatively weak due to high barriers to exercising rights and short term investment horizon; conflicts of interest between the investment management business and corporate and/or investment banking businesses within the same firm; and the political influences surrounding pension fund management. At root, many Asian issuers still perceive active shareowner stewardship as hostile to their interests. In India, independent proxy advisory services have only been established in the last two years, spurred by the 2010 requirement of the Securities and Exchange Board of India for Indian mutual funds to report how they vote at shareholder meetings. In Japan, stewardship activities have a longer history, but have not necessarily involved ESG issues. Many of the early actions in Japan involved getting cash-rich companies to pay higher dividends. In Europe, the European Union has in recent years taken steps to improve shareholder rights, especially on a cross-border basis through legislation such as the Shareholder Rights Directive (2007/36/EC). However, barriers to effective voting and engagement still exist, and new legislative proposals are expected to address some of these issues. African shareholder activism is nascent. Intra-country shareholder involvement is limited by the relatively small market capitalization and concentrated company ownership. In South Africa however, shareholder engagement is actively promoted by business media and more formally by asset owners and some investment managers. As an example, shareholder participation and access to voting platforms is on the increase due to industry initiatives such as the Code for Responsible Investing South Africa (CRISA) by institutional investors as well as major investors responding directly to socio-economic issues. Because of the differences across regions, shareholder activism is difficult to measure with certainty; however, it is evident that it is on the rise globally. This is partly in response to the financial crisis and the many corporate indiscretions unearthed in recent years. Shareholders are taking a closer interest in their companies in order to manage risk. Legislative advances in many regions have also contributed to shareholders increasingly using their power and voice. As voting of shares becomes easier on a cross-border basis, and engagement practices proliferate, one can also expect more investors to take an active interest in the companies in which they are invested. Global Sustainable Investment Review 2012 17


Global Sustainable Investement Alliance
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