Hermes research on risk of ignoring Shareholder Rights Directive

Hermes Investment Management has surveyed investors across Europe and found that there is a growing risk of these investors ignoring their responsibilities as stewards.

The Shareholder Rights Directive survey was conducted with 175 European institutional investors to gauge levels of awareness and readiness for the Shareholder Rights Directive II, reveals that only a 3 per cent believe their organisation already meets all of its requirements and that 42 per cent have not even heard of the Directive.

Across Europe, there are variations on aware too, with German respondents showing the highest levels of awareness of the Directive at 88 per cent; whereas only 36 per cent of Italian investors are aware.

The Directive, which needs to be implemented by member states in 2019, is part of a wider push to align the interests of those along the investment chain – companies, managers, owners and end beneficiaries – as well as with broader stakeholders. Investors will be required – on a comply-or-explain basis – to report publicly on their engagement activities and voting decisions.

Saker Nusseibeh, chief executive of Hermes Investment Management, believes the Directive has the power to address systemic failures of the industry: “The Directive represents a profound shift for European asset owners and managers in becoming responsible stewards of investments.”

However, one part of good news was that investors surveyed recognised the importance of ESG concerns. Overall, more than two-thirds (68 per cent) believe that companies that focus on ESG issues produce better long-term returns for investors. This represents an upsurge from 48 per cent of investors who were asked the same question in a survey in 2017. Again, different countries have differing views, but 73 per cent of Dutch and 68 per cent of UK investors, believe companies that focus on ESG produce better long-term returns while 73 per cent of German respondents believe the consideration of ESG factors is part of their fiduciary duty.

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