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Global ESG Research Update —
2021 stewardship priorities

We outline our stewardship priorities for the balance of 2021. We also provide an update on our ESG engagement and proxy voting activity in the quarter.

The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional or institutional investors only.

The challenges of the past year have highlighted the potential for ESG factors to become even more relevant to the investments we make on our clients’ behalf and underscored the increasing importance of stewardship by fiduciaries and active investors. In 2020, an unprecedented number of our corporate engagements included ESG topics, a trend we expect will continue in 2021 and beyond. In particular, we expect many conversations to address executive compensation, climate change, and diversity, equity, and inclusion (DEI).

Ahead of proxy voting season, we are paying close attention to executive compensation plans. Following layoffs and furloughs during the COVID19 pandemic, outsized executive pay plans are under greater scrutiny. We prefer executive pay to be aligned with company performance. Outsized pay packages that set low bar for performance may be inconsistent with the experience of shareholders and other stakeholders.

Another focus is climate change, which we believe poses material long-term financial risks for economies, companies, and society, and therefore, our clients’ investment portfolios. Companies will need to prepare for both the physical and transition risks associated with climate change. We expect to engage more deeply with companies to help them assess and improve climate preparedness and disclosures. In December 2020, Wellington became a founding member of the Net Zero Asset Managers initiative. This opportunity enables us to demonstrate continued leadership on climate issues, deepen engagements with portfolio companies, and enhance consultative partnerships with clients.

Finally, we continue to improve our understanding of portfolio companies’ response to and action on racial inequity. While we believe DEI practices can impact long-term performance, we are only able to adequately assess these practices when robust disclosure is in place. We encourage companies to disclose the racial and ethnic composition of their boards and, starting this year, in the US, we plan to vote against the reelection of nominating or governance committee chairs that fail to disclose this information. We also expect companies to communicate…

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