The Rights and Responsibilities of Institutional Investors (RRII) 2015

For the past ten years, Kessler Topaz Meltzer & Check, LLP has been proud to partner with Institutional Investor to co-host the Rights and Responsibilities of Institutional Investors conference (“RRII”).  This past March 19, 2015, delegates representing investment and legal and compliance officers of pension funds, insurance funds, and mutual fund companies of various sizes from around Europe and North America gathered to discuss shareholder activism and engagement through a series of panels, case studies, presentations, and workshops relating to the theme of “Fortifying Engagement through Collaborate Action.” Arnold Schwarzenegger, the bodybuilder, movie star, and former governor of California, concluded the day with a keynote address emphasizing the danger of climate change and outlining the role that investors can play in pressuring corporations to address the issue.

Afshin Molavi, Senior Advisor on Global Geo-Political Risk for Oxford Analytica and the NP Fellow at the Foreign Policy Institute at Johns Hopkins University School of Advanced International Studies began the day with a case study presentation entitled “Fast and Furious: The New Geo-Political Risk Environment Along the Old (New) Silk Road.”  Mr. Molavi’s dynamic and engaging presentation highlighted how events, fast-moving technology, changes in the composition of countries (stemming from the Arab Spring), and non-state actors like ISIS change the risk assessment for investors.

Following Mr. Molavi’s presentation, Raj Thamotheram, Chief Executive Officer at Preventable Surprises, and Howard Covington, Former CEO at New Star Asset Management, presented another case study on “Responsible Engagement and Climate Change.”  Mr. Thamotheram and Mr. Covington emphasized the dangers posed by climate change and suggested that despite the known concerns, investor engagement has not been as strong as it should have been.  The two suggested that to counter the climate change problem investors should become forceful stewards and vote for constructive, non-prescriptive and value enhancing actions rather than merely divesting of shares in companies that are not reducing emissions.  They also discussed how investors could take action to mitigate corporate lobbying.

The first panel discussion of the day was “Is It Possible to Be a Better Investor AND Active Owner?” and featured Alex van der Velden, Partner and Chief Investment Officer at Ownership Capital as moderator.  Panelists included Christopher Ailman, Chief Investment Officer at CalSTRS, Marcel Andringa, Chief Investment Officer for PME, Colin Mayer, Peter Moores Professor of Management Studies at Said Business School at the University of Oxford, and Marc Walker, the Global Chief Investment Officer for Unilever Pension Funds.  The panelists discussed the differences between short-term speculator activists and long-term activists and the need to get more people to think long-term.  They also made the case for investors investing in a smaller concentration of companies because there would be a decreased risk when investors knew more about the companies they were investing in and were able to adequately engage regarding ESG.

Rounding out the morning’s presentations were two workshops that delegates were able to choose between: one on whether investors have a fiduciary duty to withhold investments from corporations who create elaborate structures in order to avoid taxes (“Workshop A”) and the other on integrating SRI and ESG into the engagement process (“Workshop B”).  Workshop A was led by Anatoli van der Krans, Senior Advisor on Responsible Investment and Governance from MN and Francis Weyzig, Policy Advisor on Tax Justice and Economic Inequality for Oxfam Novib. Workshop B was moderated by Frank Curtiss, Head of Corporate Governance at RPMI Railpen Investments and featured as discussion leaders Claudia Kruse, Managing Director of Governance and Sustainability at APG, Martin Steindl, Senior Corporate Governance Officer at FMO, and Rasmus Juhl Pedersen, Head of Responsible Investment for PBU.  Both workshops included lively and constructive participation from delegates in the audience.

After lunch, Jan Erik Saugestad, Chief Investment Officer for Storebrand Asset Management, presented a case study on the growing market for green bonds and the need for good governance. Mr. Saugestad discussed Storebrand’s approach (Storebrand has been one of the leading green bond investors in Europe) and the importance of good governance practices including independently verifying projects and then later looking at the impact of green bond investments.

Lee Rudy, a partner at Kessler Topaz Meltzer & Check, LLP, presented a case study on the recent decision by the Delaware Supreme Court in the ATP Tour Inc. v. Deutscher Tennis Bund case and the implications that decision has on shareholder rights.  Mr. Rudy outlined the current debate in the Delaware legislature and alerted delegates to the risks that fee-shifting and other corporate bylaws present to shareholder rights. 

Following Mr. Rudy’s presentation, Darren Check, a partner at Kessler Topaz Meltzer & Check, LLP moderated a panel with panelists Jan Matej, General Counsel at AP1, Jack Ehnes, Chief Executive Officer at CalSTRS, Anatoli van der Krans, Senior Advisor for Responsible Investment & Governance at MN, and Anders Månsson, Partner at Setterwalls.  The panel topic was “Combatting Increased Shareholder Constraints” and featured a lively discussion about the Delaware legislative proposal on fee-shifting bylaws, forced arbitration, proposals to change proxy access, and access to annual meetings and boards of directors.

Moderator Bridget Uku, Investment Manager at Local Government Pension Fund (UK) and panelists Jillian Reid, Prinicpal of Responsible Investment – EMEA for Mercer, R. Paul Edmonds, Chief Legal and Governance Officer for the Ontario Pension Board, Christina Holms, Lawyer at PKA, Catherine Howarth, Chief Executive Officer for ShareAction, and Jan Erik Saugestad, Chief Investment Officer for Storebrand Asset Management presented on the topic “From Engagement to Divestment: What Role Should Outside Consituents Play?” The panel presentation discussed the pressure that investors sometimes face, from both members/constituents and outside groups like the media, to divest of shares related to fossil fuels or tobacco.  The panel highlighted how funds could incorporate their members views into investment decisions and take actions like opening up proxy access for fund members in order to participate in board elections and annual general meetings. 

Sasja Beslik, Head of Responsible Investment and Governance for Nordea Investment Funds, offered the final presentation before the keynote address. Mr. Beslik’s presentation was a call to action and group discussion concerning how investors can reorient their thinking and strategic messaging.

To conclude the day, Arnold Schwarzenegger gave a keynote address followed by an interview with Kessler Topaz Meltzer & Check, LLP partner Darren Check.  Mr. Schwarzenegger opened his address by sharing with the delegates his recipe for success: twenty two inch biceps, the ability to wrestle predators, and the ability to travel back in time to save humanity.  While Mr. Schwarzenegger’s address started out light-hearted and humorous, it took on a more serious note when he began to discuss how climate change is the issue of our time and how in order to get people and governments to take action, the problem needs to be presented holistically with emphasis on how climate change affects not only the climate but also health, the economy, and security. Mr. Schwarzenegger highlighted the actions that investors can take to combat climate change such as green investments and investing in renewable energy.