Active ownership 

Zurich Life has a long-term holding in a Taiwanese technology company which has had a consistently high ESG rating. We meet and speak with the company regularly and are consistently impressed with its strategy for sustainable value creation. The company’s corporate governance is excellent to the benefit of all stakeholders. The company has a strong commitment to being a technological lead, through cutting edge research and development. It also partners well with its customers and its highly qualified and motivated staff has driven long-term success, and exceptional investment returns. Occasionally, well-funded new entrants to the industry appear as a threat, but the company’s track record and innovative mind-set give us confidence to maintain our holdings, and also add to them as opportunities arise

We have a long-term holding in a best-in-class Irish building materials company. It gets the highest ESG rating with its consistently well managed operations, both existing and newly acquired. It is also best in class when it comes to its commitment to lowering carbon emissions in an industry which is naturally a high emitter. It continues to lead its peers in corporate governance practices with a majority independent board and key company committees are also independent of management. There is a strong and effective policy on employee safety in an industry with high exposure to potential injuries.

We don’t have a position in an Australian resources company which has extensive interests in high carbon emitting sectors. The company has not been prepared to outline a plan to either reduce emissions in line with global science base targets nor divest of the most culpable areas of the business. Corporate governance at the company is reasonable but its strategy of not responding to climate change imperatives makes the investment unpalatable to us. This is not only on the grounds of ongoing emissions but also the valuation risks of exposures to potentially stranded assets in the future.

A number of leading global companies get low ESG ratings due to different classes of shares and high founder and controlling stakes in the business. However, the evidence is very mixed on the impact of this on corporate sustainability and long-term success. It can be argued that a strong long-term vision - which often comes with the most far-seeing and successful entrepreneurs - outweighs the issues of board diversity and management control. We take each case very much on its merits. Naturally, we prefer a single share class and one share, one vote in line with best practice.  However, we are prepared to make exceptions when the business and investment case are strong enough to withstand the deficit in shareholder control. This is the case with many US companies, especially in the technology sector where issues of data management and protection can also arise.