Fortis Investments and Deminor Rating, a provider of comprehensive corporate governance services, said they have signed the first pan-European co-operation agreement to bolster corporate social responsibility (CSR) proxy voting.
With this agreement, Fortis Investments believes itself to be the first fund management company to systematically use its voting rights, on a pan-European basis, to approve or disapprove individual companies’ reports and accounts on the basis of CSR disclosure adequacy.
Fortis Investments’ focus on corporate governance initially involved use of Deminor’s general services with regard to proxy voting, the company said.
This development is seen as an important second step and reflects Fortis Investments’ belief that governance mechanisms should be used to ensure that companies improve their CSR disclosure standards, the company said.
Fortis Investments believes that good CSR practice reduces corporate risk and enhances shareholder value. By raising its knowledge of the CSR risks inherent to the companies in which it is invested, Fortis Investments has enhanced its ability to accurately assess a company’s risk/reward profile.
“We believe shareholders are entitled to understand the risks inherent in the companies in which they are invested. High standards of corporate social responsibility reduce corporate risk and enhance shareholder value,” said Stewart Armer, Head of Product Specialists for Fortis.
Fortis said it defined a set of CSR disclosure standards for companies that will be applied by Deminor Rating, who will advise as to whether or not companies reach these standards.
The transparency standards relate to three key CSR factors (environment, human resources and external social policy) and two accountability factors (board commitment and reporting).
Deminor Rating’s analysis will result in a final company CSR score, the companies said. Fortis Investments sets threshold levels that take into account sector differentials. If a company’s score falls below the defined sector threshold Deminor will send Fortis Investments an alert, they said. Fortis will then take a formal final decision to vote against the company’s report and accounts at the AGM, the companies said.
This CSR disclosure governance procedure applies to all of Fortis Investments’ European Equity funds and to all European Equity mandates where Fortis Investments has client permission to vote, the companies said.