The German Sustainable Finance Beirat (SFB), the body advising the government on the sustainable finance strategy, is calling on the cabinet and the financial regulator BaFin to design clearer guidelines for the implementation of a platform of collaborative engagement between asset owners and asset managers.
The SFB believes “there is a lack of clearer guidelines from regulators or legislators”, it said in a statement, an issue hindering the power of collective investor engagement efforts.
“The SFB sees great potential for more active shareholder behaviour in Germany. We are convinced that this will enable us to move companies more in the direction of sustainability and the transformation,” chair Silke Stremlau said.
However, existing “legal uncertainties” regarding the distinction between acting in concert and collaborative engagement mean that collaborative engagement is effectively not carried out in Germany, the SFB said in the final report of the Engagement Platform.
For example, engagement may lead under German law to the obligation for investors to make a takeover offer for company’s shares if their weight is 30% or more of the voting rights.
BaFin has analysed practical examples of collaborative engagement, but was unable to resolve all legal uncertainties, the SFB added.
One of the critical aspects to define engagement through voting rights, according to BaFin, is whether investors’ goals will have a lasting and significant change in a company’s business direction – a point that needs legal clarification, according to the advisory body.
The SFB came up with the remarks in view of the future implantation of the German Engagement Platform for Sustainable Impact (GEPSI) of asset owners and asset managers.
The GEPSI engagement platform brings together asset owners and asset managers of all sizes in Germany to discuss ESG issues, looking to network with international engagement platforms, particularly in Europe, it said.
The exercise of voting rights at annual general meetings (AGMs) is not a task for the GEPSI. The platform does not offer systematic voting rights advice, it added.
GEPSI also coordinated its plan with the occupational pension association Aba, fund association BVI, and the German Insurance Association (GDV), it said.
It also plans to conduct engagement with regulators and policy makers to promote Sustainable Development Goals. The platform will focus on the topics of climate and biodiversity protection, human and labour rights, diversity, corruption, and tax justice, according to the report.
“Concrete solutions for more collaborative engagement in Germany have been developed [by the SFB]. Legislators and market players can now use the results to catch up internationally,” said Michael Schmidt, head of the working group Engagement Plattform within the SFB.
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