How digital proxy voting can empower both investors and issuers on ESG
Author: Jonathan Smalley, Co-Founder and COO, Proxymity
Boardrooms can often be transformed into echo chambers when it comes to the discussion of ESG. Much like the Microsoft logo bouncing against the walls of tired computer screens and never falling quite into place, so too has ESG often reverberated from skyscraper to skyscraper across the Square Mile or Wall Street, never quite settling down into the tangible, actionable and transparent practices which investors are increasingly demanding.
At a global level, the World Economic Forum’s Climate Governance Initiative has put forward principles and guidance for companies on integrating climate strategy into corporate governance and climate reporting frameworks, with an increasing number of asset managers now incorporating ESG considerations in their voting guidelines on director elections and pay practices. Investors are also recognising that tackling climate change demands a new strategy on corporate governance, particularly with evidence showing that many boards lack the ESG expertise to effectively navigate the Net Zero transition.
Arguably the most significant risks and, conversely, opportunities, facing investors are now revolving around ESG, with no indication of this trend abating over the upcoming proxy season or indeed years to come. The volume and breadth of ESG risk exposure continues to rise, and with it so do the number of investors utilising proxy voting to navigate this terrain, at times voting against company management to essentially communicate through corporate ballots.
2023: from dark clouds to positive digital transformation
Fraught with added macro-economic risks, the 2023 proxy season will no doubt see shareholders asking far more pointed questions of the companies in which they invest, and proposing far more transformative resolutions. Investor wish lists might include requests for companies to adopt and report on emission reduction targets and Net Zero transition plans, with advisory firms such as the Institutional Shareholder Services (ISS) recommending that shareholders vote against incumbent directors it finds lack emissions reduction targets.
Of course, it is not only shareholders who see the merits of a clear company focus and strategy on ESG. 75% of global executives from capital markets firms believe ESG offers an opportunity to improve competitiveness in the market. With a further 67% also stating that ESG offers an opportunity to attract further investment, the time is ripe for companies to enhance the ways in which they manage their corporate governance, increase transparency, and boost investment.
Within this environment, proxy voting takes on increased importance in determining the direction of travel for companies with regards to ESG. Digital proxy voting in particular comprehensively boosts the quality and frequency of communication by sending votes in real-time to issuers or their agents, without the need for manual intervention, and provides verifiable digital proof that their vote has been cast, thereby increasing trust between companies and investors eager to contribute to and vote on ESG proposals.
In fact, Proxymity’s research has revealed that when participants adopt its digital proxy voting solution, Vote Connect, votes arrive with issuers more than 48 hours earlier and usually show a deadline improvement of up to six days on average. The added time gained allows investors much needed breathing space to research voting decisions and make properly informed choices, with further opportunity to make their voice heard on ESG proposals well in advance of actual meetings. Digital proxy voting also removes the necessity of travelling to meetings in person and reduces the need for paper, thereby significantly cutting a company’s carbon footprint.
Unleashing the benefits of a digital investor communication ecosystem
For digital proxy voting to truly empower issuers and investors alike, a fast-moving, real-time, fully connected ecosystem, which embraces shareholder democracy, accountability, and transparency, must be in place. Rapidly increasing cost pressures amidst an unpredictable economic environment also necessitate a reliable, intuitive solution to investor demand for increased transparency around ESG.
The inefficient and disjointed infrastructure of traditional channels has seen a growing number of businesses reassess how they manage proxy voting, as they look to implement innovative digital proxy voting solutions that offer near instant communications between issuers and investors, through fully transparent and accurate electronic channels.
Proxymity Vote Connect, backed by most major global custodian banks and adopted by over 60% of FTSE 100 companies, provides an end-to-end digital connection that allows businesses to take control of investor communications and proxy voting processes, with real-time accurate distribution of meeting announcements, passed automatically and error-free through the full chain of ownership, and true vote confirmation for investor ballots.
While activist shareholders and disgruntled boards continued to battle it out in boardrooms across the globe in 2022, mainstream and retail investors will become increasingly keen to engage with companies in debates over corporate governance in 2023.
While digital proxy voting might never be a silver bullet for resolving conflict between investors and issuers, enhanced communication will provide an essential vehicle through which frustrations can be expressed in a constructive, clear, and timely manner, at a time when it is needed most, and for building and sustaining trust in corporate governance in the years to come.
How to identify the signs that your IT department need restructuring
Eric Lefebvre, Chief Technology Officer at Sovos
For firms to execute transformations and meet their overall vision, it is crucial that their CIOs are able to recognise the signs that their department is in need of some internal change. In the current economic climate, CIOs working to fulfil their organisation’s priorities and meet business goals might hesitate to acknowledge that their IT department needs restructuring, never mind be able to identify the signs.
However, these problems rarely fix themselves and organisational restructuring requires conviction and determination from leadership for it to occur successfully. So, what are some of the key signs that CIOs should look out for?
Struggling to keep up with industry demands
CIOs unsurprisingly are working in an extremely demanding environment at the moment. Meeting these evolving demands is crucial for companies. When demands are not met and not handled properly, this can have a lasting impact on organisational goals and objectives, and even impact the way in which transformations are put into effect.
Depending on the organisation’s structure, the way in which being unable to keep up with demands manifests itself can differ. Despite double digit reductions across the industry, the search for talent across the tech world continues, project costs continue to rise as the cost of labour has increased and schedules have been disrupted by significant attrition. Many companies will also find business costs, such as that of third-party software, are higher than planned and technology debt continues to pile up faster than it can be sunset.
Whilst leadership teams might dedicate their department’s attention on the factors discussed above, they may find that their team will fall short when it comes to timely deliverables and helping maintain your organisation’s tech stack and guide its business transformations. Looking beyond the immediate problems of high costs and considering an internal reshuffle may be the solution for many IT departments.
Internal conflict within the team
Organisational designs with underlying issues can cause constant friction, especially when they go unacknowledged. An IT department that lives in conflict will certainly be reflected in results and less than successful tech transformations. CIOs will find that by adopting an organisational design which works through staffing issues, will better innovate, especially if they can all work together.
Department leads should have a strong understanding of their team’s work environment and guide them through any long-term or potential problems. When an individual is working in a demanding or complex industry, working well with your team shouldn’t be the main impediment to innovation. By acting quickly to eliminate internal conflict, CIOs can better lead and ensure their team’s focus is entirely on producing more optimal outcomes.
Delays are commonplace
When a large amount of your team’s time is spent setting objectives, budgets and timelines for the projects they are working on, it is vital that they are met. When delays are coming from the IT department, they will inevitably hinder the development of any business transformation, especially if it prompts teams to spend excessive amounts of time rearranging budgets and timelines and therefore hindering innovation.
IT departments are a crucial aspect in many different parts of a company’s transformations, so remaining on track when it comes to timelines and innovation is critical to operational plans. If delays have become commonplace in an IT team, and external factors are impacting projects, CIOs should look at restructuring an IT department to solve these issues.
The strongest team relationships do not happen by accident and are the result of good planning, strong leadership and a motivated team. CIOs can ensure this by providing vision and long-term strategy with clear goals and objectives to produce high levels of quality output.
When internal issues are noticed in an IT department, and are noticeably impacting team morale or productivity, this should indicate the need for departmental restructuring. Be that due to an inability to meet market demands, issues with productivity and meeting deadlines or internal conflict, these issues all risk a department’s functionality and an organisation’s ability to achieve its goals. In short, don’t overlook the warning signs!
Top banking trends of 2023 and global outlook of banking and fintech for the year ahead
Author: Professor Marco Mongiello, Pro Vice-Chancellor, The University of Law Business School
You’d be forgiven for assuming that the global outlook for banking and fintech will be dominated by the usual suspects:
Artificial Intelligence – AI plays an increasingly prominent role in banking and fintech by enabling personalised services, fraud detection, predictive analytics, use of chatbots and robo-advisors.
Blockchain and Cryptocurrency – the secure, decentralised and swift system for financial transactions that blockchain has brought to the fore a few years ago, is now becoming ubiquitous. An increasing number of transactions are recorded through blockchains technology, primarily in the cryptocurrency market.
Digital Banking and fintech – accelerated by COVID-19 pandemic, the adoption of digital banking is a trend that will persist as customers have become accustomed to the convenience and efficiency of digital banking. Moreover, fintech enables access to financial services for previously underserved populations in developing countries or less affluent social groups in more affluent societies. This includes mobile banking services, peer-to-peer lending platforms, and microfinance solutions.
Open Banking – another global trend is the use of open APIs (Application Programming Interfaces) that allow third-party developers to build apps to facilitate customers’ access to financial data and services from banks.
Nonetheless, the challenges posed by these rapid changes are reminders that banking, an industry that by its very nature needs to be conservative, risk averse and solid, wobbles on the unchartered grounds of fast and turbulent innovation, where entrepreneurship instead thrives. The underlying rationales of banking and fast digital innovation are not incompatible but do need solid operations and thought-through decision-making to avoid causing catastrophic collapses.
The recent examples of Silicon Valley Bank, Silvergate, FTX and Wirecard are stark reminders that digital entrepreneurship applied to banking doesn’t just bring to customers the visible transformation of valuable new services, but also dents (perhaps as an unexpected consequence) the rationale itself of the role of banks in the global economy. Moreover, the central banks’ ability to contain the effects of single banks’ defaults is no longer a certainty, as experienced just over a decade ago and more recently. The markets’ sentiments are hardly reassured by the commitments of even the most coveted players, such as the European Central Bank, the Federal Reserve, and the President of the United States himself.
Regulators are lagging behind and their attempts to catch up may cause further seismic shocks to the global banking system. For example, another trend that is emerging is one of artificial intelligence decision-centres (i.e., decentralised offices of banks which take autonomous decisions on behalf of investors) outside the most stringent regulatory environments, enabling banks to operate globally more efficiently and more competitively. And we can expect that regulators will close the gap either abruptly, as it is currently happening in China, where private banks are subject to an escalation of regulatory and monitoring restrictions, or more gradually as it is happening in Europe and in the US.
The questions we face, as individual or trade customers of our high street banks, as direct investors or clients of managed funds, are whether banking will become more user-friendly yet, for our daily use but riskier, too, or is it simply becoming more efficient, transparent and also safer.
I’m afraid that the answer is by no means an obvious one. Therefore, caution, level-headed decision- making and critical thinking have never been as important as these days. Whether you are looking after your family savings or growing your pension reserve, the imperative is that you keep updated about the providers of the financial services you rely upon as well as about the general regulations that apply to your financial transactions. This is where, for example, you need to be familiar with your rights in case of cyber fraud, as well as learning how to minimise the risk of becoming a victim thereof. Also, taking additional steps to evaluate the credibility, solidity and reliability of the online provider of that app that was recommended by a trusted friend, may prove a very good move.
Similarly, whether you are the CFO of a medium or large company, or are a sole trader wrestling with your own business’s finances, you need to reflect on what you really want from your bank in the first place. That is before you started to be swayed by the whirlpool of offers of ‘opportunities’ to multiply your financial investments. Chances are that your initial approach to your bank was dictated by either a need for financing your working capital, as per your budget and strategic plans, or to find a safe place for your temporarily idle liquidity. Perhaps you were also after some basic treasury services such as swift payments and debt collection. Maybe some other financial services closely related to your business operations, e.g. factoring. The advice is to give very careful consideration to services that are more remote from your business, because the trend for the next years is that more and more of those will be offered to you. But many new services will disappoint those who, sadly, cannot afford financial mishaps as they look to run and grow their business.
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