Tuesday 25th October 2016                 Change text size:

Financial Times advises on how to become a shareholder activist

Photo: Kyrre Lien, Scanpix / Orkla Group via Flickr

The Financial Times celebrated its 125th anniversary this February. Recognised globally as a member of an elite group of financial newspapers, it is the paper of record for the City and investment in the UK. A piece we read on May 3 pleasantly surprised us.

Without fear or favour, the article set out four actions investors can take to ensure that their stake has influence over companies and their well-remunerated management.

The decision to make shareholder votes on remuneration binding is a positive step but still does not go far enough to make companies more accountable and transparent to their ultimate owners – directly as shareholders or indirectly as pension holders.

The FT recommends:

Stay on top of the issues

We hope you can use Blue & Green Tomorrow for that, but we can also endorse the FT’s recommendations – Manifest and PIRC – and add to that EIRIS as good resources.

Contact your fund manager

The FT recommends the Financial Reporting Council which lists managers who sign up to the Stewardship Code, but checking if they are a member of the Principles for Responsible Investment (PRI) and the UK Sustainable Investment and Finance Association (UKSIF) is a good indication, too. UKSIF ran an Ownership Day in March this year to encourage financial professionals to engage in ownership that is more active. If your fund is not a signatory to any of these, you should ask why.

Vote your shares

In this instance, the FT points at the share registrars Equiniti, Computershare and Capita who will supply voting forms, often with the annual reports. Do not just file it; vote. The number of direct shareholders in the UK is dwindling and they tend to be in household names or privatised utilities.

Attend the AGM

The FT points at ShareAction and ShareSoc for advice into the format of annual general meetings (AGMs). Attending such an event might be your idea of hell, unless it’s Ecology Building Society’s, but it will give a real sense of how much the management team is listening. If you feel suitably annoyed, ‘do a Woolard’.

We would add a few general investment steps:

Pick your wealth manager/financial adviser carefully

This is crucial in ensuring they will match your values with your need for growth and income. The Ethical Investment Association and UKSIF provide a list of advisers and managers committed to aligning values and return. If your adviser tries to fob you off with the lazy myths of poor performance and comparisons with a basket of unethical stocks, then ditch them. They have clearly not done their homework.

Choose active managers

It’s important to choose funds that have managers who take an active role in ensuring environmental, social and governance (ESG) practices are exemplary. Again, being a signatory of the stewardship code, the PRI and UKSIF will help. Ideally, pick an ethical, sustainable or responsible fund.

Take note of the companies you are investing in

Your investment is an endorsement and asset that a company needs and will use. If you disagree with a company’s activities, do not give them your money, or demand they change their ways.

Unethical and unenvironmental behaviour will cost companies more and more, with consumers and activists now able to organise digitally and protest more effectively. This will harm your return, society and the planet.

The value of your investments may go down as well as up, but the pressure is mainly downwards in the medium to long-term for the most unsustainable.

We may live in financial times, but they look increasingly unsustainable. The FT’s contribution, given its reach and authority, is very welcome.

Further reading:

Happy 125th birthday to the Financial Times

Why share ownership is better than share rental

Ownership Day: parliamentary event outlines long-term benefits of active ownership

Ownership Day: half of investors want better voting transparency

The Guide to Ownership 2013

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