Corporate governance insights from the 2023 ICGN Toronto Conference

Author: Edd Micklem, VP, Head of Strategic Partnerships, Tumelo

Last week Will Goodwin, Tumelo's co-founder, and I attended the three-day International Corporate Governance Network (ICGN) conference in Toronto, Canada. This is our second ICGN event following a successful trip to Stockholm earlier in the year.

The conference was a fantastic opportunity to gain a global perspective on asset ownership trends and issues, especially as Tumelo looks to expand into international markets. Below are some of the insights that I found particularly valuable.

Asset owners are ready to engage on stewardship

Unsurprisingly, the asset owner community was predominantly represented by large Canada-based investors, including the Alberta Investment Management Corporation, Ontario Municipal Employees Retirement System and the Ontario Teachers Pension Plan. However, asset owners from other countries such as APG Asset Management from the Netherlands and the Universities Superannuation Scheme from the UK were also present.

These large investors are taking stewardship seriously and prepared to engage with their asset managers or directly with issuers on the investment principles and stewardship policies they have carefully curated. Their considerable size and the scale enables them to commit the necessary time and resources to such efforts. Most importantly, the substantial volume of AUM they wield ensures that their voices are heard.

There is something to be said about the lack of representation from smaller asset owners. They operate differently to the large players, often investing through pooled funds and thus lose the voting rights associated with shareholding — which remain a crucial tool in the stewardship process. One session briefly explored how tech solutions are allowing retail investors and asset owners to better interact with pass-through voting on their proxies, but did not cover the complexities of how an investor might represent their investment beliefs through voting. As Tumelo is firmly embedded in these efforts through our client-directed voting solutions, it would have been great to see more detailed discussions around extending shareholders' voting rights.

Talking about anti-ESG...

One of the most exciting sessions has to be the New York City Comptroller Brad Lander's keynote address on the anti-ESG rhetoric; particularly because it is such a polarising topic in the US state pensions scene. He reasoned that considering material ESG risks in the investment process is simply "common sense".

On green hushing, a phenomenon where companies take steps to stay quiet about their climate strategies, CEO of superfund HESTA Debby Blakey argued that it needs to be addressed through a "doubling down" on ESG efforts. She insisted that companies should not feel the need to keep their ESG initiatives under wraps for fear of receiving politicised attacks.

The pressure is on to combat climate change

Day three of the Conference solidified the ICGN's focus on sustainability and ESG through a range of discussions, from KPMG's breakfast talk on ESG disclosures, to a keynote speech on the importance of Canada's indigenous communities in the transition to renewables.

But perhaps the most strong call to action came from a plenary on a Just Transition, where the move towards net zero is approached from the perspective of societal welfare. The ICGN asserted that "climate change is the greatest existential threat of our times, threatening the global economy and communities worldwide". To combat climate change through a just transition, it insisted that:

"We need more action, more money, and more intent. We need game-changers."

Eyes on the UK

It was clear from the discussions that the UK remains a leader for many other nations on effective corporate governance and stewardship. Certainly, the FRC UK Stewardship Code has set a precedent that many others have followed, and who will be keenly awaiting its next iteration. On top of that, the UK has also committed to the latest International Sustainability Standards Board (ISSB) disclosure framework, which aims to establish standardised sustainability reporting practices across the globe.

Whatever decisions the UK makes, it has the opportunity to lead the market by example and set a high standard for the international corporate governance scene.