Date: 13 November 2018, Tuesday
The Diversity Action Committee (DAC) organised a forum with BlackRock and the Singapore Exchange. Senior management of larger SGX-listed companies, investment managers and asset owners joined us to listen to distinguished speakers
on how good stewardship would help companies strengthen their capacity to deal with the opportunities and risks arising from disruptive changes in the value chain, climate change, social licence to operate, staffing for new business conditions.
KEY TAKEAWAYS AND VIDEOS
Event Highlights Video
– Ms YEO Lian Sim, Member of DAC, Special Adviser (Diversity) of SGX, and Vice Chair of the Task Force on Climate-Related Financial Disclosures (TCFD)
– Ms Barbara G. Novick, Vice Chairman, Blackrock
- ESG factors and performance are not mutually exclusive. Believes that companies with better ESG scores will do better over the long term.
- BlackRock sets voting guidelines and engagement priorities; companies are engaged 1-on-1 and also in larger settings.
- More clients are asking for sustainable solutions.
- BlackRock believes that there is nothing we should be asking companies to do that we’re not willing to do ourselves, whether it is on governance or commitment to gender diversity and diversity in general.
- Leading by example,
- Governance – Blackrock is a US based company but its board includes non-US citizens or dual citizens.
- Environment – Designed new data centres with energy efficient designs and located them in areas using hydro-power.
- Social – Has a host of programs for employees such as employee career advancement programs, identifying volunteer opportunities for employees and give them time-off to do so.
- ESG means different things to different asset owners. Some think of it as things to avoid (eg tobacco, carbon, weapons, defense). Others are forward looking and think of how to advance a particular issue (eg invest in companies developing more sources of alternative energy).
– Mr Chaly Mah, Chairman of Netlink NBN Trust, Singapore Tourism Board and Singapore Accountancy Commission
- Highlighted key changes to the Code of Corporate Governance – board independence and board diversity.
- Shared his experience interviewing many candidates to make up the board of directors of Netlink NBN Trust. While skillset was the first criteria he looked out for, he said to himself that if he found someone with these skillsets, it would be preferable if the person was female. He formed a board of 8 people, 25% are women.
- Not in favour of quota as it forces the hand of the chair and NC chair. Prefers boards to look for diversity in terms of skills, mix and experience whilst taking into consideration that there must be women on boards to get the diversity in place.
- He has heard that the quota in some of the European countries has actually helped women to come forward to serve on boards.
- He also spoke about the importance of board culture which sets the tone for the organization, and the importance for companies to stay on top of developments in technology and disruption.
- Barbara G. Novick Vice Chairman, BlackRock
- Chaly Mah Chairman of Netlink NBN Trust, Singapore Tourism Board and Singapore Accountancy Commission
- Neo Gim Huay Managing Director, Enterprise Development Group and Sustainability, Temasek
- Yiong Yim Ming Group CFO, City Developments Limited
– Hosted by Ms Divya Balji, Team Leader, Equities & Equity Markets Asia, Bloomberg LP
Topic 1: How do companies stand out to investors?
- Ensure that investors truly understand your business. Explain your growth strategy, growth sources and the new areas that you are keeping your eyes on (eg innovation, disruption).
- Give investors confidence in the leadership of the company by having adequate director independence and board diversity.
- Assure investors that the company will continue to excel in its core business but will also embrace new technology and changes in the market that complements the core business. Having a focus on ESG and innovation also attracts investors.
Topic 2: Returns versus ESG / sustainable investing
- Investors will need to balance the benefits of returns against sustainable investing. If investors exclude companies that are not sustainable enough, they could end up with a very narrow universe of investable companies.
- In the long term, investors could probably achieve both good returns and still have a focus on sustainable investments.
- There is investor appetite for companies that does well financially and does good at the same time. Mainstream funds such as KKR and TPG Capital have raised large amounts of capital focused on investing in companies that are positioned to address some of the sustainability issues.
Topic 3: Board Diversity
- Board quality is crucial.
- Boards must ensure that it has the people with the right skillsets and also a diverse set of skillsets to provide adequate diversity of thought. Having an adequate number of women on the board adds to the diversity of thought.
- Adding women to boards changes board dynamics, board culture and the decision-making process, for the better. (Observations based on actual experiences.)
- Quotas are not ideal as it becomes a check-the-box exercise for companies.
- What companies should do
- Have adequate women in the candidate pool to have a better shot at adding women to your boards. Ideally 50:50 male and female candidates, or at least enough numbers for the board to make a selection.
- To all-male boards:
- Institutional investors will include the topic of women on boards in its engagement with such investee companies. It makes investors question whether the board even searched for and considered any diverse candidates.
- Boards should reflect and ask themselves “are we even making an effort?”
- Not being able to find qualified women is an excuse that is no longer acceptable to investors. After a number of large investors said they would vote against the nominating committee of boards without women, boards started conducting board searches for open seats and conceded that they were able to find qualified women for their boards.
See more photos from the event here.