July 15, 2021 | Editor: Martin Wennerström
OECD to revise Corporate Governance Principles
The OECD has announced that it will review the G20/OECD Principles of Corporate Governance with the aim to adapt these “to the post-COVID-19 reality.” The organization noted that the pandemic aggravated structural weaknesses in the “corporate sector” and concluded that strengthening corporate governance should be a priority to promote economic recovery. The review will be guided by a June 30 OECD report entitled “The Future of Corporate Governance in Capital Markets Following the COVID-19 Crisis.” The report highlighted the rise of complex corporate structures, wherein there is a heightened risk of abusive practices, as a key challenge for policy makers. The study also found that an increase in passive institutional ownership has resulted in lower scrutiny of individual company performance and risks, that a rising degree of state ownership has laid bare the need for a “level playing field with respect to the governance of state-controlled listed companies and their private investor-owned peers,” and that the pandemic had prompted concern over COVID-19-related executive pay adjustments.
OECD (1) | OECD (2) | OECD (3) | ESG Investor
SEC pushes for more diversity, less greenwashing
A U.S. SEC advisory panel has made recommendations addressing what it describes as an underrepresentation of women and people of color at the board and senior management levels in the asset management industry. The panel cites studies which found “widespread gender and racial bias” in asset and asset manager allocation decisions. The proposed measures include enhanced disclosure requirements on fund board and fund adviser diversity. The same panel has also recently issued recommendations meant to curtail “greenwashing” through enhanced issuer and investment product disclosure.
China to increase scrutiny of offshore listings
Chinese authorities have proposed new regulations requiring a cybersecurity review ahead of foreign listings of companies holding data on more than 1 million users. The review would focus, inter alia, on the risk that data may be “affected, controlled, or maliciously used by foreign governments.” The development occurs on the back of an investigation into the cybersecurity of Chinese ride-hailing firm Didi Chuxing, which recently IPOed on the NYSE. Following these events, China’s LinkDoc Technology Ltd suspended its US IPO, potentially portending a wider trend of Chinese companies calling off their US listing plans in favor of alternatives such as Hong Kong.
China (1) | China (2) | Reuters | Forbes
UK regulators team up to promote diversity
The Prudential Regulation Authority, the Financial Conduct Authority, and the Bank of England issued a joint paper highlighting policy options to increase diversity in the UK financial sector. The paper cites evidence that diversity and inclusion are correlated with “positive outcomes in risk management, good conduct, healthy working cultures, and innovation.” The measures proposed include linking progress on diversity and inclusion to variable remuneration. The regulators also recommended the adoption of non-gender board diversity targets, as well as board-level delegation of diversity and inclusion responsibilities. A public consultation on the paper will run until September 30, 2021.
Governance in Brief – March 23, 2023
SVB Financial Group sued after the collapse of Silicon Valley bank unit SVB Financial Group, the parent company of Silicon Valley Bank, and two of its top executives, CEO Greg Becker and CFO Daniel Beck, are being sued by shareholders following the bank’s collapse. The lawsuit, filed by retail shareholder Chandra Vanipenta on behalf of a group of shareholders, accuses the bank and its two top executives of filing false and misleading financial reports.
Governance in Brief – March 16, 2023
Canada introduces climate reporting framework Canadian regulators have issued new guidance for the country's banks and insurance companies to better manage climate-related risks. The framework, which requires disclosure on governance, strategy, risk management, and metrics related to financial institutions’ greenhouse-gas emissions, was first drafted in 2022.
Governance in Brief – March 9, 2023
The U.S. Congress has passed a resolution repealing a Department of Labor (“DOL”) rule empowering retirement plan managers to consider climate change and ESG factors in their investment decisions. The rule, introduced by the Biden administration, falls under the Employee Retirement Income Security Act (“ERISA”), a federal law which sets protection standards for participants in private pension plans. Biden’s ruling entered into force in January this year, overturning prior Trump-era DOL rules that limited pension fund managers to restrict their investment strategies to “pecuniary factors.”
Governance in Brief – March 2, 2023
Indian regulator proposes enhancement to ESG disclosure rules India’s securities and market regulator SEBI has released a new ESG disclosure framework for public consultation. The proposed regulations impact India’s 1,000 largest companies by market capitalization, ESG funds and ESG ratings providers. For the largest companies, the regulator proposes areas of assurance of ESG disclosures and reporting and assurance of ESG footprint of the supply chain. The proposals expand on the 2021 Business Responsibility and Sustainability Report (“BRSR”) guidelines and propose mandatory assurance of certain KPIs under ESG disclosure. The KPIs contain intensity ratios such as GHG emissions, water consumption, and waste generation. For supply chain, SEBI will introduce a comply-or-explain approach for the top 250 companies starting in 2024, and assurance beginning in 2025. For ESG funds, SEBI proposes that at least 65% of AUM be invested in companies reporting on comprehensive BRSR and provide assurance on BRSR core disclosures. Under the proposed rules, ESG rating providers should also provide a “core ESG rating” based on assured information in addition to their own products.