By Ross Kerber, US Sustainable Business Correspondent
Hello and welcome to the Reuters Sustainable Finance weekly newsletter. I'm looking forward to writing about business considerations of environmental, social and corporate governance (ESG) matters, which I've been covering for the last several years from Boston.
My goal is to track how investors, policymakers, analysts and other stakeholders consider ESG factors in evaluating and regulating securities. These topics once were considered sideshows but have taken on a new significance for many investors as global temperatures rise and because of social movements like #MeToo and #BlackLivesMatter.
Lipper and Morningstar each count around $2.5 trillion in funds globally that use ESG criteria in ways like evaluating portfolio companies’ social impact, with inflows continuing. The shift has provoked a backlash among Republican politicians – many from energy-producing states – who label such efforts “woke” overreach, using a term defined as attentiveness to racial and social-justice issues.
While many of the Republicans' proposed “anti-ESG” bills have faltered in state legislatures, their efforts continue and the criticism has pushed big fund firms and researchers to make their sustainable finance efforts more rigorous, lest they be swept up in regulatory scrutiny of “greenwashing.”
Hopefully this will be a useful roundup. Stories this week range from shareholder pressure on CEO paychecks to attitudes at Mattel about the Barbie movie, You can also follow me on LinkedIn where I’ll welcome comments and feedback.
If you have a news tip, potential content, or some general thoughts email me at email@example.com
A worker applies the name and number of Australia's Sam Kerr to a football jersey in the Nike FC shop in Sydney, Australia, August 14, 2023 REUTERS/Carl Recine/File Photo
Shareholders ease pressure on CEO pay
Most big U.S. public companies offer their investors an annual “Say on Pay” advisory vote on the compensation of their top executives, the results of which have grown steadily more critical in recent years.
But now it appears the trend has reversed or at least stabilized. New data from compensation consultant Farient Advisors shows 70% of companies in the S&P 500 won support from at least 90% of votes cast on their executive compensation this year through July 31, covering the bulk of big U.S. companies. That’s higher than last year’s figure of 69% of S&P 500 companies over the same period, and the first time there has been an increase since 2018, when 81% of the index won 90% or more support for their executive pay.
At the other end of the spectrum, only 2.5% of S&P 500 companies got less than 50% support for their executive pay through July, down from 3.9% last year and from 3.5% in 2021.
Farient director Brian Bueno said the trend reflects factors including rising share prices that have made investors less critical of companies this year. He also cited a decline in the median pay of S&P 500 CEOs to $14.6 million for 2022, the pay reported in proxies this spring, from $14.9 million the prior year. Lower CEO pay would draw less investor discontent.
In addition, companies may have themselves to thank for following good pay practices, or for implementing reforms to appease angry investors after a poor showing. “Maybe some companies are getting credit for good behavior,” Bueno said.
He cited the case of chipmaker Intel, where at its 2022 shareholder meeting only 34% of votes cast supported the $178.6 million pay package of new CEO Patrick Gelsinger. According to Intel’s proxy statement, the board’s compensation committee in response made changes such as raising performance targets Gelsinger must meet in order to receive stock awards. This year, on May 11, 92% of votes cast voted in support of the pay. Intel declined to comment on the matter beyond its public disclosures.
“This is a success story,” Bueno said of Intel’s changes. “They really did a full sweep of their pay program” in response to the vote. An Intel spokesperson declined to comment beyond its official disclosures.
Some good news came Aug. 10 when China’s Alibaba reported its strongest quarterly revenue growth in nearly two years. But the sobering part was that the results were helped by gains from a domestic e-commerce unit focused on low-cost products to attract consumers amid a soft economic outlook.
Insurers such as Prudential Financial and OneAmerica stand to reap major windfalls from the relaxing of a 31-year-old rule on reporting interest rate losses, a Reuters review showed. The industry lobbied hard for the change, which will free up cash they can use to write new policies, grow their businesses or use for dividends and buybacks.
A $2.25 million gene therapy from Novartis was the most expensive drug in the world when launched in 2019 to address spinal muscular atrophy, and it has since been outpriced by a $3.5 million hemophilia gene therapy from CSL Behring, with 26 more gene therapies in late-stage development. Drugmakers say these drugs can generate cost savings, but others wonder if the treatments should be priced lower.
IRL Mattel Gender Diversity > Barbie Movie Mattel
Mattel has said it is benefiting from the box office success of the “Barbie” movie about its doll that has been popular with girls since 1959. The film portrays the company as a bastion of The Patriarchy led by a bumbling Will Ferrell. But Mattel’s Real Life boardroom diversity is pretty good according to the company’s latest proxy statement and industry figures compiled by research firm Equilar. “We embraced the self-deprecation in the film,” a Mattel spokesperson tells me.
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