Unilever ‘obsessed with sustainability’ says fund manager
Has Unilever “lost the plot”? According to a Times report, well-known fund manager Terry Smith alleged the consumer giant’s management is “obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of business”.
Unilever is famous for its focus on sustainability and corporate purpose, but Smith alleges this is now getting in the way of a healthier share price. Some may wonder how sustainability credentials could possibly be ignored, given the state of the climate and regulatory pressure to adapt and transition. But as companies shift their priorities, Unilever is proving not everyone will be pleased.
Activists demand boardroom changes
When activist investors take an interest in a company their most likely demand will be changes in the boardroom, according to new research.
Examination of the 100 largest activist campaigns by SquareWell, a shareholder advisory firm, reveals 64% result in a demand for reshuffling boardroom positions. This could be either a boardroom seat for the activist or the departure of existing board members. Close on the heels of boardroom musical chairs are calls for M&A action, either stopping a sale or insisting some form of disposal go ahead.
SquareWell’s report, Activists Go Big, looked at 100 campaigns between September 2019 and December 2021. According to the report: “Investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities.
“Stewardship teams are focused on ESG matters, primarily governance, and therefore campaigns by hedge fund activists that fail to leverage these aspects adequately will not convince the support of large, passive holders.”
KPMG admits the FRC was ‘misled’
Professional services firm KPMG is currently working through a series of painful confessions during a hearing led by the Financial Reporting Council (FRC), the UK’s accounting watchdog.
The FRC has accused the firm and six former auditors of providing “false and misleading information and/or documents” during routine audit inspection of work for Carillion, the collapsed instruction giant and Regeneris, a software company.
During the hearing KPMG this week admitted misconduct and misleading the FRC. In widely reported testimony, Jon Holt, chief executive of KPMG, said it was “clear to me that misconduct has occurred and that our regulator was misled”.
State Street urges ‘pragmatic clarity’ on net zero
State Street, one of the world’s largest asset managers, has called for “pragmatic clarity” from companies on their plans to transition to net zero on carbon emissions. The call comes in the fund manager’s annual letter to chief executives around the world.
The letter worries that some companies have been “brown-spinning”, selling off high carbon-emitting assets so they look greener without helping reduce the overall effect on climate change.
“As a long-term investor in companies making these commitments,” State Street’s letter says, “what we are seeking from these transition plans is not purity but pragmatic clarity around how and why a particular transition plan helps a company make meaningful progress towards the destination [net-zero emissions].”
State Street has also declared it expects all companies in its investment portfolio to have at least one woman on their boards. From next year it expects companies in major indices in the US, Canada, UK, Europe and Australia to have 30% women in the boardroom. “We expect this change to result in boards with three or four female directors on average and as many as 3,000-4,000 additional female directors across covered indices,” State Street says.