EOS at Federated Hermes Limited publishes engagement priorities for 2024

12 February 2024

The plan, which is based on the long-term objectives and priorities of clients, identifies the issues with greatest potential to deliver long-term sustainable wealth for investors, including through positive societal and environmental outcomes.

EOS at Federated Hermes Limited (EOS), one of the world’s largest stewardship service providers representing client assets of US$1.4 trillion, has published its updated Engagement Plan. The plan, which is based on the long-term objectives and priorities of clients, identifies the issues with greatest potential to deliver long-term sustainable wealth for investors, including through positive societal and environmental outcomes. EOS also plans to intensify engagement on two rapidly evolving topics; halting and reversing biodiversity loss, and the responsible development and deployment of Artificial Intelligence (AI).

1. Board effectiveness

  • Aligning corporate behaviours with the long term interests of investors and as a result achieve stronger and more sustainable performance

  • Improving board functionality, composition and structure, alongside behavioural characteristics such as board dynamics and culture

  • Improving board diversity, including accelerating engagement on ethnic diversity issues that follow recent advances on gender diversity

2. Climate Change

  • Working with companies to adopt a strategy and greenhouse gas reduction targets aligned to the Paris Agreement, seeking to limit climate change to 1.5C, together with aligned financial accounts and political lobbying

  • Evaluate the credibility of company transition plans including their reliance on technologies

  • Engaging with companies in high methane emitting sector to deploy the best available technology to identify and mitigate methane emissions

  • Engage on physical climate risks and work towards a ‘just transition’ for employees and communities

3. Human and Labour Rights

  • Continued emphasis on supply chain rights where there is an elevated risk of forced labour, unsafe working conditions, and other adverse human rights impacts

  • Engage on the protection of indigenous and community rights, and human rights in high-risk regions such as disputed territories or areas of conflict

  • Focus on protection of digital rights in the virtual world, such as challenges to the right to data privacy and protection from unfair biases arising from the use of AI

4. Human Capital

  • Intensify engagement on upskilling workers, to advance productivity amid global unease about potential negative AI impacts on jobs and livelihoods and the cost of living crisis driving renewed interest in collective bargaining

  • Maintain focus on diversity, equity, inclusion and representation; asking companies to develop a strategy and action plan to achieve proportionate ethnic and gender representation at all levels

In addition to the four priority themes, EOS plans to deepen its engagements on biodiversity and artificial intelligence, two areas that have continued to rise up policy makers’ and company and investor agendas. Engagement on biodiversity will focus on companies reducing their impacts on biodiversity across the value chain, following the mitigation hierarchy, and aiming for a net-positive impact on biodiversity as best practice. EOS will also continue to engage on responsible development and deployment of AI, an area where the team is recognised for its leading expertise, having been one of the first players to publish a paper outlining Investors’ Expectations on Responsible Artificial Intelligence and Data Governance in 2018, followed by our Digital Rights Principles, published in 2022.

Bruce Duguid, Head of Stewardship, EOS at Federated Hermes Limited: “More than 60 EOS clients contributed to the evolution of our Engagement Plan 2024-2026, which aims to improve financial performance of individual companies and manage systemic risks to long-term growth in clients’ portfolios. It is clear that our clients priorities remain in the core areas of good corporate governance, climate change risks and opportunities, management of human rights risks, and good people management at companies.”

Howard Risby, Regional Team Lead for Europe, EOS at Federated Hermes Limited: “In addition to the core areas central to EOS’s Engagement Plan, we are also prioritising rising issues of concern across the UK and European markets. These include issues connected to natural resource stewardship, circular economy and zero pollution, and also responsible deployment of artificial intelligence. AI has the potential to drive a fourth industrial revolution and creates new opportunities for businesses, it introduces new ethical dilemmas and risks – issues we have been in dialogue with companies on since 2018”

Source: Federated Hermes
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