Investment stewardship is an integral part of our sustainability strategy. It includes dialogue with companies (engagement) and the exercise of voting rights. Engagement and voting are used in both active and passive Swisscanto investment funds. Zürcher Kantonalbank's Asset Management recently published the "Active Ownership Report" on this topic. It contains extensive information about our activities.
The more voting rights an individual investor can bring together for long-term goals, the more effective their voting power becomes. That is why we participate in global engagement initiatives such as Climate Action 100+, Task Force on Climate-related Financial Disclosures (TCFD) and the Climate Bond Initiative. We also recently joined the Forum pour l'Investissement Responsable (FIR). The investors' association based in France supports investors in encouraging publicly traded French companies to increase their climate protection efforts and transparency.
Fabio, how does the engagement of Zürcher Kantonalbank's Asset Management affect the companies' sustainability agenda?
Fabio: We are in direct dialogue with 100 to 200 Swiss companies. An initial meeting is held, followed by various follow-up meetings in which objectives are defined and their implementation tracked. In discussions with the management and the Board of Directors, we address any UN Global Compact violations, set CO2 reduction targets or address issues of good corporate governance. If a dialogue is unsuccessful in the medium to long term, we consider dismissing members of the Board of Directors by exercising voting rights, rejecting remuneration proposals or not granting discharge. Moreover, no further capital can be added to the company or the equity portion in the portfolio can be underweighted and ultimately sold as the last resort. Finally, we have defined a CO2 reduction path for our sustainable investment funds, to which we are committed.
How do we communicate with foreign companies?
Fabio: We sometimes delegate engagement and voting activities to renowned partners such as Sustainalytics. Sustainalytics conducts dialogue with top management at over 300 globally active companies on our behalf. Where necessary or appropriate, Zürcher Kantonalbank's Asset Management supports investor initiatives on ESG issues as part of its memberships and thus participates in collaborative engagements.