New research by the School in collaboration with Morrow Sodali, and commissioned by the Financial Reporting Council (FRC) sheds light on the profound influence and impact of proxy voting advisors and ESG rating agencies on actions and reporting by FTSE 350 companies, as well as their effect on investors, including asset managers and asset owners
Dr. Anna Tilba, Associate Professor in Strategy and Governance was the academic lead for this research project and working with Morrow Sodali the research aimed to address critical questions surrounding the recommendations and ratings provided by proxy voting and ESG rating agencies. The study delves into the resulting impact on FTSE 350 companies' behavior, reporting, governance policies, and the so-called 'tick box' behavior. Additionally, it examines the engagement processes and outcomes over the past two years among FTSE 350 companies, investors, and proxy voting/ESG rating agencies.
The findings of the study challenge conventional assumptions about the clear-cut and direct impact of recommendations and ratings provided by proxy advisors and ESG rating agencies. While acknowledging the influence of these entities on behavior and voting decisions, the analysis reveals a more nuanced perspective, as observed from voting patterns and interviews with investors. This study aims to reflect the diverse range of perspectives expressed by companies, investors, proxy advisors, and ESG rating agencies during the extensive research process.
The research spanned from October 2022 to March 2023, during which Dr Tilba and Morrow Sodali obtained and analyzed survey responses, conducted interviews and roundtable discussions, and examined AGM resolutions and voting outcomes.
This research study serves as a crucial contribution to the ongoing dialogue and will inform discussions on governance policies, practices and engagement strategies.
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