Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Putting the 'social' in ESG

Written by Li-Ann Chin, associate
Edited by Tom Gillingham, associate partner
19 May 2021

Good morning,

Pendragon, one of Britain’s largest car dealers, is set to face a massive investor revolt today, as Legal and General Investment Management and Hedin Group have confirmed they will be voting against several resolutions at the company’s annual general meeting, including its renumeration report.
 
The group has reportedly come under fire after paying chief executive, Bill Berman, a six-figure bonus despite shedding 1,800 jobs, axing 15 sites and using large sums of taxpayers’ money to furlough staff, in a move branded by shareholders as “inappropriate and “out of tune”.
 
Executive pay has been the biggest flashpoint at shareholder meetings so far this year, with the likes of AstraZeneca, Savills and Cineworld facing backlash in recent weeks over this exact issue. Last Thursday, a joint letter by the High Pay Centre think-tank and three trade unions urged 60 of the largest investors in the UK to vote against companies with wide pay gaps between management and workers.
 
Institutional investors assessing the performance of companies using environmental, social and governance (ESG) factors is by no means a new phenomenon. And yet, the attention has predominantly focused on “environmental” and “governance” concerns – until now. The pandemic has exposed certain injustices around work that can no longer be ignored. Companies are increasingly being scrutinised on their “social” commitments, namely, employee treatment, lay-offs and compensation.
 
In recent years, we have witnessed the financial industry take significant steps forward in the ESG space, with topics like the environment and diversity gaining awareness in the mainstream. Pay ratios are anticipated to be the next big issue. Trade unions are now pushing for low pay to be classified as a material issue because of the negative impact it has on employee engagement, staff turnover and productivity. Institutional investors have similarly called on all UK companies to start disclosing pay ratios.
 
The key takeaway? Businesses need to ensure their social commitments and initiatives are being clearly and concisely communicated to shareholders. This looks like a movement that is here to stay.

News

Confusion arose after prime minister Boris Johnson warned people not to travel to amber-list countries for holiday leisure purposes, amid mixed messages from ministers. On Monday, environment secretary George Eustace told the BBC Radio 4 programme that people could go to amber-list destinations if they wish, as long as they quarantined themselves upon return to the UK. Holiday companies are now reportedly refusing refunds, on the grounds that it is “legal” to travel to such countries.
 
A spokesperson for the New York attorney general’s office has confirmed that the ongoing inquiry into the Trump Organisation is “no longer purely civil in nature”. The investigation will now be carried out in a criminal capacity alongside Manhattan’s district attorney. The inquiry was launched in March 2019 over claims that former US president Donald Trump had inflated the value of his assets to banks when seeking loans, and understated them to lower his taxes.

Business and economy

During a speech at a Ford electric vehicle plan in Michigan, president Joe Biden outlined his £174bn electric vehicle plan, as he vowed to “set a new pace” for electric vehicle technology and reverse what he described as the Trump administration’s “short-sighted” rollback of emissions standards.
 
In his first interview since his election, Edwin Poots, new leader of the Democratic Unionist Party called on the UK government to scrap the controversial Northern Ireland protocol if necessary, arguing that maintaining a Brexit border in the Irish Sea is “playing fast and loose with the peace process”.
 
The latest inflation figures from the Office of National Statistics reveal that the Consumer Price Index for April has surged to 1.5%, more than double the 0.7% recorded in March. The jump has been attributed to a rise in gas and electricity bills, which has pushed the cost of living higher.
 
Andrew Bailey, governor of the Bank of England confirmed to the House of Lords economics affair committee that the bank’s Monetary Policy Committee would not tolerate a persistent overshoot in inflation from its 2% target, signalling that it would raise interest rates in such a scenario.

Columns of note

In riposte to last week’s Queen’s Speech that outlined plans to battle obesity with a range of public health interventions, Mark Littlewood, director general of the Institute of Economic Affairs, argues in The Times that the Nanny State Index has reportedly found no correlation between strict policies and longer lifespans for the population. The biggest problem with the nanny state is that it simply doesn’t work, he says.
 
According to a survey conducted by Charles Schawb, an American financial services company, at least 15% of retail investors started in 2020 as a result of the pandemic. Since then, social media platforms such as the likes of Twitter, Instagram and TikTok, to name a few, have been deluged by a barrage of ‘so-called’ investing accounts that provide trading advice to the masses – for free. What’s the catch? An investigation by the Financial Times reveals how dozens of privately traded shares have showed sudden surges following endorsements on Twitter.

Cartoon source: The New Yorker

Markets

What happened yesterday?

Stocks in London eked out a positive finish on Tuesday, following the publication of better-than-expected labour market statistics earlier.
 
The FTSE 100 ended the session in the green, up by 0.02% at 7,034.24, while the FTSE 250 rallied to add 0.53% to 22,332.56.
 
US stocks declined for the second day in a row, as investors weighed the rush to reopen the economy against inflationary pressure from a rise in commodity prices. The S&P 500 ended in the red, down by 0.85% at 4127.85 while the Nasdaq 100 dipped by 0.56% to finish at 13,303.64. The Dow Jones Industrial Average, on the other hand, plunged by 267.13 points, ending at 34,060.66
 
Sterling put in a mixed performance as it gained 0.38% against the dollar at $1.4187, while it traded at a 0.09% loss against the euro at €1.1624.
 
In company news:
 
Google launched Derm Assist, the first of its kind AI-powered tool that aims to assist consumers in self-diagnosing hundreds of skin conditions.
 
JP Morgan yesterday promoted two women – Marianne Lake and Jennifer Piepszak – as co-heads of its consumer and community banking unit. Both will reportedly be considered as potential successors to current chief executive Jamie Dimon when he eventually steps down.
 
Controversial retail investing platform Robinhood plans to reveal filings for its initial public offering as soon as next week, as it targets late June of this year for its market debut.

What’s happening today?

Finals
Escape Hunt
Experian
Great Portland
Lxi Reit
Ninety One Plc
Premier Foods

Interims
Future
Mitchells & Butlers

Q1 Results
Mhp Reg S

Trading Announcements
Regional Reit

AGMs
Alliance Pharma
Blackrock Lat A
Boku Inc.
Coats
Diaceutics
Dialight
Distrib. Fin.
Ekf Diagnostics
Funding Circle
Iq-ai Ltd

Kazatomprom S
K3 Business Technology Group
Keller
Perm Tsb Grp
Plutus Pwrgen
Regional Reit
Riverstone Cred
Safestyle UK
Sanne Group
Science Group
Verici Dx

UK economic announcements
(07:00) Producer Price Index
(07:00) Retail Price Index
(07:00) Consumer Price Index

Int. economic announcements

(10:00) Consumper Price Index (EU)
(12:00) MBA Mortgage Applications (US)
(15:30) Crude Oil Inventories (US)

Source: Financial Times

did you know

Research by professional services firm Alvarez & Marsal reveals that UK corporations are 40% more likely to face shareholder activism than those overseas. (Source: Financier Worldwide)

Parliamentary highlights

House of Commons

Oral questions
Wales
 
Prime Minister’s Question Time
Debate
Adjournment – Aaron Bell

House of Lords 

Oral questions
Merits of underwriting insurance indemnity for all care homes on an equivalent basis to the National Health Service – Baroness Tyler of Enfield
 
Transport decarbonisation strategy – Baroness Randerson
 
Co-ordinated implementation of the policies on which respective governments were re-elected, together with the implementation in Wales and Scotland of UK Government policies which impact on the responsibilities of the two devolved administrations – Lord Wigley
 
Debate on the Address
Foreign affairs and defence – Baroness Goldie and Lord Ahmad of Wimbledon

Scottish Parliament 

No business scheduled

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