Investors and regulators need to pay more attention to how companies conduct and disclose their political activities, according to two reports released jointly on Thursday by the Principles for Responsible Investment and the Organization for Economic Cooperation and Development.
"With corporate political engagement more transnational and sophisticated than ever before, and in the face of the global climate crisis, it is more important than ever for investors to adjust the way they view corporate political engagement activities in the context of environmental, social and governance factors and make sure the companies they invest in are engaging policy makers responsibly," said the PRI report, The Investor Case for Responsible Political Engagement.
The OECD report, Regulating Corporate Political Engagement: Trends, Challenges and the Role for Investors, points out "mounting concerns" about the effectiveness of existing regulations in curbing undue influence from companies' political activities. The OECD report looks at regulations and related measures shaping corporate political engagement activities across 17 jurisdictions.
A growing number of jurisdictions are regulating lobbying activities, OECD found. Nine jurisdictions — Australia, Canada, France, Germany, Italy, Netherlands, the United Kingdom, the United States and the European Union — have voluntary or mandatory public registries for lobbyists to disclose activities, and some require public officials to disclose meetings with lobbyists.
However, "even in jurisdictions where transparency in lobbying is provided, the public availability of the disclosed information does not always provide enough scrutiny on the specific objectives of lobbying activities and the public officials or decisions targeted," the OECD report said.
Only two jurisdictions have relevant regulations requiring approval of political contributions — by shareholders, in the case of the U.K., or a board of directors, in the case of India, the report found.
"It's no secret" that corporate political activity can impact investments, and investors need to push for more information, said Clare Richards, senior engagement manager with the £3.5 billion ($4.7 billion) Church of England Pensions Board in London, on a webinar discussing the reports,
"Companies say they are performing better, but sometimes it is up to how they disclose. We'd like greater consistency, and also a focus on impact and outcomes," said Ms. Richards.