The week in GRC: US companies add more diverse directors and energy companies link ESG to executive pay

Oct 22, 2021
This week’s governance, compliance and risk-management stories from around the web

– According to The Wall Street Journal, the craze for sustainable investing is extending to the world’s oceans via ‘blue bonds.’ The debt is the latest iteration of investments known as green bonds, which aim to fight climate change and help the transition away from fossil fuels by reducing the cost of financing such projects.

For example, Seaspan, which has an operating fleet of 132 vessels, initially tapped asset managers for $500 mn of bonds in July – the company’s first US blue bond – to pay for ships that reduce carbon emissions, and the sale attracted more investors than anticipated. The deal demonstrates how investors’ demand for environmentally friendly debt has grown in recent years, part of Wall Street’s rush into selling investments that consider ESG factors.

CNBC reported that some oil and gas companies are joining dozens of public corporations across all sectors that link ESG to executive pay. As of last year, 51 percent of S&P 500 companies used some form of ESG metrics in their executive compensation plans, according to a report from Willis Towers Watson. Half of companies include ESG in annual bonus or incentive plans, while only 4 percent use it in long-term incentive plans.

A related survey last year of board members and senior executives found that nearly four in five respondents are planning to change how they use ESG with their executive incentive plans over the next three years. This reflects the current purpose-over-profit debate in the corporate world, with the environment ranking as the top priority.

Reuters reported that US buyout firm Silver Lake will acquire Intercontinental Exchange’s (ICE) stake in securities settlement platform Euroclear Holding for €709 mn ($822 mn). NYSE owner ICE had a 9.85 percent stake in Euroclear. Following the investment, which is expected to close in the first half of next year, Silver Lake wants one of its representatives to join Euroclear’s board, the companies said.

– The WSJ reported that, according to two new studies, US public companies added the most diverse slate of new directors on record to their boards over the past year, with an increase in the number of black nominees and elevated numbers of women and first-time directors. The gains were uneven, with about half of public company boards adding no new members and smaller companies lagging behind their bigger counterparts, according to a study from the Conference Board and data analytics firm ESGAUGE. In addition, more companies of all sizes have started disclosing the racial and ethnic make-up of their boards.

The second study, by Spencer Stuart, found that a third of new independent board members for S&P 500 companies identifying director demographics were black, an increase from 11 percent the year before, and 7 percent were Latino, up from 3 percent. Among the new arrivals, a little over three quarters of S&P 500 board members were white and 70 percent were men, according to Spencer Stuart.

Reuters reported that union-affiliated pension fund adviser SOC Investment Group (formerly CtW Investment Group) said it is pressing Rivian on human rights and environment concerns in the electric vehicle start-up’s battery supply chain ahead of its expected IPO. In a letter sent to Rivian board member Rose Marcario, SOC called on the company to ‘commit to a rigorous human rights assessment of Rivian and its value chain’ before it finalizes the S-1 document with regulators for its IPO.

‘Failure to address potential human rights abuses and environmental harms associated with the battery life cycle exposes Rivian to significant regulatory, litigation and reputational risks,’ SOC executive director Dieter Waizenegger said in the letter. As ESG issues take on growing import with investors, automakers have come under pressure to prove that such minerals as lithium and cobalt batteries are sourced for their electric vehicles without human rights abuses.

Rivian officials had no immediate comment.

– The WSJ reported that, according to people familiar with the matter, ExxonMobil’s remade board is debating whether to continue with several major oil and gas projects as the company reconsiders its investment strategy in a shifting energy landscape. Members of the board – which includes three directors nominated by an activist investor in May and two other new members – have expressed concerns about certain projects, the people said.

Exxon board members are considering the fate of future projects as the company faces pressure from investors to restrain fossil fuel investment to limit carbon emissions and return more cash to shareholders.

The company said it doesn’t discuss internal board deliberations. ‘Any depiction of the board’s discussions as being less than constructive in tone or substance is wrong,’ said an Exxon spokesperson.

– Deputy US Treasury Secretary Wally Adeyemo told lawmakers that the Biden administration’s financial intelligence and sanctions units need significantly more funding and staff to combat national security threats, including ones arising from ransomware and cryptocurrency markets, according to the WSJ.

The department needs additional funding to oversee expansive sanctions programs, implement major new anti-money-laundering laws and protect the US from terrorists, international criminal groups, state actors and others that have become increasingly adept at using the global financial system, Adeyemo said.

– According to Reuters, India’s Reliance Industries said a required majority of its shareholders have passed a resolution to appoint Saudi Aramco chair Yasir Al-Rumayyan to Reliance’s board as an independent director. Al-Rumayyan has been the governor of the Public Investment Fund of Saudi Arabia since 2015.

Reuters also reported that Velodyne Lidar’s founder and biggest shareholder warned that he plans to nominate two directors to the board next year based on his frustration with the sensor supplier’s falling stock price, high executive pay and the board’s failure to focus more on new research. ‘I will not allow Velodyne Lidar to continue to stagnate under current leadership,’ David Hall wrote in a letter to investors. ‘I intend to nominate two highly qualified director candidates.’

A representative for the company was not immediately available for comment.

 

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