Sustainable investments: Ethos sets the tariff

The Ethos Guidelines, on which the voting recommendations for the general meetings of Swiss and foreign companies are based, are revised annually to reflect the latest developments in corporate governance. In this 20th edition, Ethos introduces a new chapter (point 1.2) regarding the approval of reports on companies' climate strategy.

"This change in our guidelines illustrates how important companies' climate strategy is to investors today," emphasizes Ethos Director Vincent Kaufmann. "Investors want to know what specific CO2e reduction measures are being implemented, what reduction targets are being set and what progress companies are making. The information should also have been checked and confirmed by external auditors."

Climate strategy report increasingly important for companies

Although no Swiss company has yet announced that it will voluntarily submit such a climate strategy report to its shareholders for a vote, several international companies have already decided to do so. The companies included in the initiative Climate Action 100+ associated investors are in favor of the future implementation of such votes, especially by the companies that generate high greenhouse gas emissions. It is therefore essential that the Ethos guidelines on the exercise of voting rights already provide objective criteria for the approval of such reports, as the investor writes.

In case of a vote, Ethos would review several aspects: First, the report should address the main challenges of climate change according to the recommendations of the TCFD (governance, strategy, risks, key figures and targets). Then the company should have set and published reduction targets, including interim targets, for CO2e emissions. The targets should be consistent with a warming of the atmosphere to a maximum of 1.5° and cover all direct and indirect emissions (Scope 1, 2 and more than 90% of Scope 3 emissions). Finally, the company should provide information regarding progress towards the targets and implement appropriate measures to reduce its CO2e emissions. Otherwise, Ethos will recommend the rejection of the climate strategy report, the foundation stresses.

Diversity in management bodies

In 2021, Ethos will also take a close look at diversity on the boards of listed companies in Switzerland. The topic has long been important to the foundation, he said. "According to a new provision of the Code of Obligations, which will come into force on January 1, 2021, companies domiciled in Switzerland have five years (until 2026) to adapt to the gender benchmark of 30% women on boards and ten years (until 2031) for that of 20% on executive boards," explains Vincent Kaufmann. "Currently, only 21% of the companies in the SPI count at least 30% women on their boards."

Ethos said it would continue to engage in constructive dialogue with companies and encourage them to increase diversity in their governance bodies. However, the Foundation Board has already approved the introduction of a new provision in the Ethos Guidelines for 2022. According to Ethos, at the 2022 general meetings, the foundation will thus oppose the re-election of the chairmen of the nomination committees, or the chairmen of the boards of directors if there is no such committee, if the companies do not have at least 20% women on their boards. "2021 will therefore be a transition year during which we can inform companies about the change coming in 2022," explains Vincent Kaufmann. 

Defense of shareholders' rights

Ethos will also pay particular attention in the coming years to ensure that the amendments to the Articles of Association, which are pending in connection with the revision of the Code of Obligations, do not weaken certain shareholder rights, the foundation writes. In particular, the revised Code of Obligations stipulates that, from 2022, shareholders holding 0.5% of the capital will be able to put an item on the agenda at the Annual General Meeting. Today, the threshold is expressed as the nominal value of the capital. Of the 48 companies in the SMI Expanded currently have 23 a threshold value that is below 0.5% of the capital.. Ethos will therefore oppose any amendment to the Articles of Association that would increase the current value. 

Source: Ethos