Climate change and human capital management are on the top of investors' 2020 sustainability agendas for engaging with boards of the companies they invest in, according to Morrow Sodali's Institutional Investor Survey, released Tuesday.
In its fifth year, the survey of investors with a collective $26 trillion in assets — who were asked which issues matter most about the companies they hold — found that 91% and 64% of respondents, respectively, focused on climate change and human capital management.
The survey, conducted in January, was a combination of online surveys and one-on-one meetings with 41 respondents, which have $15.5 trillion in assets invested in active investments and $10.5 trillion invested in passive ones.
Climate change was a priority according to survey respondents' last year as well but not the extent as this year, David Shammai, cross-border corporate governance director at Morrow Sodali, said in an interview.
When asked, how environmental, social and governance factors' implementation shaped investment decision-making, 86% of respondents named climate change as a topic with the most significant impact in the last 12 months. Some 45% of the surveyed investors citied reputational risk and 36% of respondents said human capital management had the most impact.
The survey also found that almost half of investors would consider voting against a director to influence outcomes.
Nearly two-thirds, or 64%, of investors said they were more likely to support an activist's case if the company showed weak governance practices, while half of investors said they support am activist's protest against the company if that company had a track record of misallocation of capital.
The survey also showed that a more explicit non-financial information is needed as an important indicator of sustainability.
Just over 90% of investors said portfolio companies could improve in terms of making clear connections to financial risks and opportunities, while 68% said they require greater clarity about the process by which companies identify risks and opportunities.
To assess companies, 81% of survey respondents utilize Sustainability Accounting Standards Board's standards and 77% said they utilize the Task Force on Climate-related Financial Disclosures' guidelines.