SHAREHOLDER ENGAGEMENT REPORT
VOTING RIGHTS EXERCICE AND ENGAGEMENT
LYXOR International Asset Management
Financial Year 2020 EDITORIAL
In 2020, the Covid-19 crisis added to the global climate emergency and highlighted the close links between biodiversity, climate, health and society. Let’s not make this year the year of fatalism, but the year of awareness and a "climate awakening". The world of finance must take greater responsibility in meeting the challenges we face and act collectively to limit the rise in temperature to below 2°C.
As an engaged and responsible asset manager and shareholder, LYXOR has the ability to influence the companies in which we invest and redirect capital towards the development of a low carbon economy. We are convinced that responsible investment creates long-term value for society and shareholders. Listening to our clients, who are increasingly concerned by the ecological transition, and based on our fiduciary responsibility, LYXOR uses its power as a Florent Deixonne, shareholder to prepare a more sustainable future and to adapt to the Head of Socially challenges of an ever-changing environment. Responsible Investments
Our shareholder engagement is evidenced in concrete terms in three key figures for 2020: €14.7 billion of assets voted on, €2.6 billion of assets under management with climate-linked engagement and 19% of votes against at general meetings, testifying to our responsibility as shareholders. In 2020, we strengthened our dialogue with companies on climate change. As part of the drive to increase global awareness of this sensitive issue, LYXOR has engaged with companies on this necessary transformation, through initiatives such as the Climate Action 100+, CDP and our three thematic engagement campaigns (plastics and circular economy, localised water management, responsible cleantech) which have gained momentum this year. Furthermore, the extension of our engagement in Japan enabled us to contribute to the drafting of the first climate resolution at a Japanese company, Mizuho.
The climate will continue to be our focus in the new year 2021. In the run-up to COP 26 in Glasgow in November, we will continue to engage proactively with companies on issues as important as their alignment with the Paris Agreement, their commitment to achieving carbon neutrality and their integration of climate change issues at the highest management level. We will continue to encourage companies to direct their strategic development towards serving society.
We are pleased to present our shareholder engagement report for 2020.
2 CONTENTS
1. Engagement policy 7 Engagement relating to general meetings 10 Engagement relating to environmental, social and governance issues 13 Engagement relating to climate 16
2. Exercise of voting rights 28 General principles 29 Voting process 30 Overview of votes at general meetings 31 Background and voting scope 31 Analysis of the general meetings season 33 Analysis of votes against 36 Shareholders’ proposals 42 Votes derogating from the voting policy 49 Conflict of interest management 51
Appendices 52
3 KEY FIGURES*
€14.7 A+ 54% Bn
UN-PRI1 Rating « Active Assets voted on Shares of assets voted on2 Ownership », 2020
447 5,562 19%
Number of general meetings Number of resolutions Average opposition rate at voted at analysed general meetings
€10.2 €2.6 78 Bn Bn
Assets under engagement Assets under climate Number of companies met engagement during the course of our engagement
*The figures presented below correspond to the entire LYXOR Group composed of Lyxor International Asset Management, Lyxor Asset Management and Lyxor Funds Solutions. 1 United Nations – Principles for Responsible Investment 4 2 Based on equity-type underlying within direct replication investment vehicles. The funds where the exercise of the voting rights are delegated to an external manager are not taken into account. INTRODUCTION
LYXOR International Asset Management SAS This policy is reflected in two complementary areas: (hereafter referred to as “LYXOR”) is a fully owned • An engagement policy showing how LYXOR subsidiary of Societe Generale Group. This interacts with the companies held in its document outlines how LYXOR, on behalf of its portfolios; clients, exercises its role as an engaged and • A voting policy listing the main principles of responsible shareholder. corporate governance to which the asset management company adheres and the way Convinced of the environmental, social and in which these principles are applied when governance challenges, LYXOR has defined – as an exercising LYXOR’s voting rights at general extension of its responsible investor approach and meetings. in line with its adherence to the United Nations Principles for Responsible Investment (PRI) – a LYXOR’s voting and engagement policy for the 2020 shareholder engagement policy attached to the financial year is available on the website of the securities held by the CISs (AIFs and UCITS) it asset management company, at the following manages. address: https://www.lyxor.com/en/engagement- and-voting-policy-liam-2021
In accordance with the regulation of Articles L533-22 and R533-16 of the French Monetary and Financial Code, LYXOR reports in this document the conditions under which it applied its voting and engagement policy. This reports covers the 2020 financial year.
LYXOR’S 6 COMMITMENTS AS A SIGNATORY OF THE PRI
1 2 3 4 5 6 We will We will be We will seek We will We will work We will each incorporate ESG active owners appropriate promote together to report on our issues into and incorporate disclosure on acceptance and enhance our activities and investment ESG issues into ESG issues by implementation effectiveness in progress analysis and our ownership the entities in of the Principles implementing towards decision-making policies and which we within the the Principles. implementing processes. practices. invest. investment the Principles. industry.
5 THE GOVERNANCE COMMITTEE
An internal governance committee oversees the implementation of the LYXOR’s voting and engagement policy. This committee is composed of the following members:
Edouard Auché Florence Barjou Florent Deixonne Raphaël Dieterlin Marc Duval Secretary Chief Investment Head of Socially Head of ETF & Head of Private General Officer Responsible Index Product Wealth Investments Strategy Investments
Marc Noël Philippe Rémy Paul Marouzé Déborah Yomtob Head of Legal Chief SRI Analyst SRI Analyst Affairs Compliance Officer
In 2020, the Governance Committee met three times with an attendance rate of 88%. During these three meetings, the following matters were discussed : • Analysis of priority points of attention for the 2020 season • Analysis of the 2020 LYXOR’s engagement campaigns • Analysis of the 2020 voting season • Validation of the 2021 voting and engagement policy
3 88%
Governance Committee meetings in Member attendance rate of the 2020 Governance Committee meetings
6 ENGAGEMENT POLICY
7 GENERAL PRINCIPES
Convinced that a company’s performance is not based solely on its financial performance, LYXOR now expects the companies in which it invests to be transparent and to take the extra financial issues they face into account. Taking these environmental, social, societal and governance issues into account is beneficial to the long-term performance of companies and therefore in the long-term interest of investors.
In order to promote best practices in this area, LYXOR has thus defined an engagement policy that is structured around three axes:
• Engagement relating to general meetings
• Engagement relating to environmental, social and governance issues
• Engagement relating to climate
2020 ACTIVITY
In 2020, the Socially Responsible Investments team of LYXOR had the opportunity to conduct 118 engagement campaigns (+80%) with 78 international companies.
Evolution of the application of the engagement policy
118
78 65 41 36 32
Engagement campaigns Companies targetted by an engagement campaign 2018 2019 2020
8 Breakdown of engagement campaigns by theme
Climate Action 100+ 2% Plastics and circular economy 9% Localized water management 3% ESG 41%
Corporate governance and general meeting 45%
Breakdown of companies met by geography
Other countries Belgium USA 4% 2% 2% United Kingdom 2% Spain 12%
Netherlands France 5% 47% Luxembourg 2% Japan Italy 2% 5%
Germany 17% 9 ENGAGEMENT RELATING TO GENERAL MEETINGS
Background
As a representative of the CIS it manages, LYXOR Outside the general meeting period, LYXOR undertakes to exercise the voting rights attached promotes regular dialogue with companies on to the shares held by these CIS in order to corporate governance issues such as changes in promote best corporate governance practices (cf. the composition of the Board of Directors* and its Part II – Voting right exercise). In order to do so, committees, succession plans, the role and LYXOR uses its influence before general meetings functions of the Lead Independent Director, to initiate a constructive dialogue with companies changes in the remuneration policy, etc. and enrich the analytical work carried out internally by LYXOR.
2020 Activity
Engagement prior to general meetings is a bilateral dialogue where LYXOR presents its voting principles and the issuer presents the various points to be discussed at the general meeting. These discussions allow us to discuss the content of the proposed resolutions on the agenda of the general meetings, to ensure that they are aligned with shareholder interests and that they comply with our governance principles.
The issuer, which will have discussed with several of its shareholders, will have formed a fairly broad view of their voting intentions and will thus be able – if necessary – to review the content of its resolutions (be more explicit, make commitments, review thresholds, etc.) in order to align itself with investors’ expectations and best practices in place.
In some cases, these exchanges made it possible to clarify certain situations and thus support the resolutions proposed by the management (cf. Part II – Voting right exercise).
Breakdown of categories of persons met
Executive Officer Lead Independent 1% Directors 3% Others 15% Legal department / Sustainability / CSR Corporate law 26% 5%
Board Secretary 3% Chairman of the board Investor relations 3% 39% HR / Compensation 5%
* « Board » may designate the Board of Directors or the Supervisory Board according to the 10 structure of the company. The development of this shareholder dialogue has thus resulted in direct relations between LYXOR and members of the Board of Directors or Supervisory Board in addition to the companies’ investor relations officers. Members of Boards of Directors are increasingly available for discussions with LYXOR, aware of the importance of this bilateral dialogue and the influence that investors can have when voting. Accordingly, during the 26 engagement campaigns prior to general meetings conducted in 2020, LYXOR had the opportunity to hold discussions with 11 Chairmen of the Board, 4 Chairmen of the compensation committee, 3 Lead Independent Directors and 3 Executive Directors.
Among the various topics addressed during these campaigns, the subject of compensation comes up the most frequently, no doubt because of the growing regulatory developments on the subject, notably the European directive SRD II. LYXOR expects companies to be transparent about their compensation policy and to disclose the mechanisms used for granting variable remuneration.
Breakdown of themes addressed during engagement campaigns dedicated to general meetings
Board organisation Lead Independent Director 1% function 1% Others 9%
Board composition 21% ESG 27%
Compensation Shareholding 28% structure 3% Dividend 2% Strategy Auditors 6% 2%
The question of extra-financial issues is the second most discussed theme, showing the increasing integration of these issues at the highest level of management within companies. Finally, the issue of the Board composition and how it operates comes up very regularly. As a representative of many shareholders, LYXOR votes on the appointment and renewal of the members of the Board of Directors or Supervisory Board. In this respect, questions may be raised about the choice of candidates, particularly in terms of the skills brought to the Board, the diversity of members or their availability. Exchanges between LYXOR and issuers enable better visibility on the choices of the Board.
11 In addition to discussions with the issuer, the engagements dedicated to general meetings make it possible to initiate dialogue between LYXOR and other stakeholders. Indeed, this 2020 season was marked by a series of activist campaigns that have a direct impact on companies’ general meetings. Among the various cases of activism identified in 2020 in Europe, LYXOR was solicited at the Unibail-Rodamco-Westfield general meeting. As the agenda of the general meeting was modified at the initiative of shareholders, LYXOR talked to the various stakeholders in order to understand the arguments of each party and position itself in the best interest of the company and therefore of its shareholders (cf. Part II – Voting right exercise).
Finally, throughout the general meeting season, LYXOR, in line with its role as a committed and responsible shareholder, reinforced its proactive communication with issuers when opposing to at least one of the resolutions submitted to the vote was pre-recorded. Thus, more than 230 alerts were sent by LYXOR during the 2020 general meetings season to inform companies of negative votes.
€6.5 Bn
Share of LYXOR’S AUM under engagement related to general meetings
We are convinced that investors can be real players in the energy transition through increased dialogue and a demanding voting policy in line with a more sustainable world.
Paul Marouzé, Socially Responsible Investments Analyst
12 ENGAGEMENT RELATING TO ENVIRONMENTAL, SOCIAL AND GOVERNANCE ISSUES
Background
Taking into account environmental, social and governance issues is at the heart of LYXOR’s responsible investor strategy. Discussing with companies in order to understand how they manage extra financial risks and how they seize the opportunities associated with them is essential. LYXOR therefore considers that it is the Board’s responsibility to oversee the definition of the company’s extra-financial and climate risks and opportunities, as well as the strategy implemented by the management with regards to this risk and opportunity analysis. LYXOR’s objective with this type of engagement is to dialogue with companies to encourage them to improve their Corporate Social Responsibility (CSR) practices.
2020 Activity
Like engagement prior to general meetings, engagement on environmental, social and governance issues is beneficial for both the issuer and the shareholder. According to LYXOR, the main benefit of this type of engagement is to increase knowledge on these subjects. Every company, depending on its sector, geographical locations and its value chain, is confronted with different environmental, social and societal issues. These discussions allow issuers to better understand investors' expectations and sometimes their positioning in relation to their peers.
€6 Bn
Share of LYXOR’s AUM under engagement relating to ESG issues
13 Prior to each campaign, LYXOR thus identifies the most important issues for each of the companies it is planning on talking to, then analyses the company’s positioning in relation to its sector and peers, and then discusses its ambitions and action plans with the company. In 2020, LYXOR was able to discuss environmental, social and governance issues with 41 companies.
While, as mentioned above, every company faces its own environmental, social and governance risks and opportunities, certain topics are addressed without regard to the sector, geographic location or size of the company:
1. Decarbonization targets and action plans: several companies with which LYXOR has been in dialogue announced in 2020 a commitment to achieve “net zero emissions” by 2030 or 2050 and an alignment with a 1.5 or 2°C scenario. Below are three examples of best practices in various sectors:
Atos is committed to achieving « net zero emissions » by 2035, setting the most demanding decarbonization targets in its sector.
BP also announced in 2020 its ambition to become a net zero company by 2050 for all its operations. It is the first oil company to make such a commitment, setting an example for other oil and gas companies.
Legrand aims to eliminate its net greenhouse gas emissions by 2050 on all its activites, in line with a 1.5°C future.
2. Measures implemented to improve the quality of life at work for employees as well as targets for reducing inequalities: in addition to targets for the proportion of women on Boards of Directors, the issue of the place of women on the Executive Committee and among the highest management levels is increasingly addressed and implemented in a concrete manner with quantifiable and measurable objectives.
Of women at executive level in European and American companies, compared to only 3% in 20% Japanese companies3.
3 Gender Equality Global Report & Ranking 2021 14 3. The role of the company and its impact on one or more of the Sustainable Development Goals defined by the United Nations: the Covid-19 crisis threatens the progress already made towards achieving the Sustainable Development Goals, with a particularly worrying impact on Goal 3, which aims to ensure healthy lives and promote the well-being for all at all ages. None of the 17 SDGs is being spared by this crisis, starting with the first one, which aims to end poverty in all its forms everywhere. An additional 71 million people are at risk of falling into extreme poverty in 20204.
These meetings also provided an opportunity to discuss how ESG and climate issues are dealt with at the highest level of the company, i.e. the Board of Directors or Supervisory Board, in line with the recommendations of the Task Force on Climate related Financial Disclosures (cf. Part I – Engagement relating to climate).
Finally, in light of the Covid-19 health crisis, LYXOR also talked to companies about the measures put in place during the pandemic for employees and society. Questions around the protection of the physical and mental health of employees, the framework and flexibility of remote working and the support for a stable wage were also raised in order to ensure the commitment of companies to protect their human capital.
4 https://www.un.org/fr/coronavirus/articles/COVID-19-puts-2030-agenda-to-the-test 15 ENGAGEMENT RELATING TO CLIMATE
International politics really took hold of the subject at COP 21 by adopting the Paris Agreement (2015), which made it possible to define climate change ambitions at international level: to maintain the increase in global temperature below 2°C and further efforts to limit this increase to 1.5°C by 2100. Once the framework is defined, What are « science-based targets » ? it is necessary that everyone tackles the issue and develops practices Science-based targets provide a to resolve the problem. clearly-defined pathway for companies to reduce greenhouse LYXOR therefore decided to focus its engagement campaigns on the gas (GHG) emissions, helping issue of climate change, as it is undoubtedly one of the major prevent the worst impacts of climate challenges of the 21st century. The choice of climate change as a change and future-proof business major thematic engagement campaign is in line with LYXOR’s socially growth. Targets are considered responsible investor policy and its climate policy. science-based if they are in line with what the latest climate science To date, LYXOR conducts four thematic climate engagement deems necessary to meet the goals campaigns: of the Paris Agreement – limiting - Climate Action 100+ global warming to well-below 2°C above pre-industrial levels and - Localized water management pursuing efforts to limit warming to - Plastics and circular economy 1.5°C. Joint initiative of CDP, UN - Responsible Cleantech Global Compact, World Resources In addition to the engagement campaigns mentioned above and Institute (WRI) and WWF, Science presented in the rest of this report, LYXOR joined the CDP Science- based Targets identifies and promotes innovative approaches Based Targets (SBTs) campaign in 2020. The latter proposes that that enable companies to set GHG investors who are signatories to the CDP (formerly the Carbon reduction targets that are ambitious Disclosure Projetc) play a key role in the adoption of science-based and meaningful, but also consistent climate targets in the corporate sector, by collaboratively engaging with their industry. companies on this matter. This unique campaign builds on CDP’s tried and tested collective engagement mechanism to accelerate the adoption of science-based targets in the corporate sector. LYXOR joined this initiative in 2020 to mitigate climate risks to which LYXOR funds may be exposed.
LYXOR is signatory of :
16 Climate Action 100+
Background
In 2018, LYXOR joined the Climate Action 100+, an international intitiative led by investors to engage systemically with important greenhouse gas emitters and other companies across the global economy that have significant opportunities to drive the clean energy transition and help achieve the goals of the Paris Agreement.
Through this initiative, LYXOR aims to obtain commitments from the Boards of Directors or Supervisory Boards and/or key executives in order to:
1. Implement a strong governance framework, which clearly states the Board’s responsibility in addressing climate change risks and opportunities; 2. Take actions to reduce greenhouse gas emissions across the value chain, in line with the Paris Agreement’s goal of limiting global average temperature increases well below 2°C above pre- industrial levels and to move, as far as possible, to a 1.5°C trajectory. This implies the ambition to achieve carbon neutrality (net zero emissions) by 2050; 3. Improve their climate reporting in line with the recommendations of the Task Force on Climate- related Financial Disclosures (TCFD) and the Global Investor Coalition on Climate Change (if applicable) to enable investors to assess the robustness of corporate strategies against a range of climate scenarios, including well bellow 2°C, and to improve investment decision-making.
In 2021, LYXOR is supporting eight companies through the Climate Action 100+ initiative, in working towards a better consideration of their climate issues, whether in terms of their governance, their strategy or their ambition vis-à-vis the climate.
2020 Activity
Due to the global pandemic in 2020, progress under Climate Action 100+ has been slowed. Nevertheless, this has not prevented investors from making progress in establishing a dialogue with the companies involved: eight conference calls with investors enabled stakeholders to set objectives and then assess the progress of the action plans.
17 In response to the urgency of the climate crisis, Climate Action 100+ announced in August 2020 the creation of the Net-Zero Company Benchmark which brings together 159 companies from multiple sectors, including the companies followed by LYXOR. Investors, NGOs at the forefront of climate research, and corporate stakeholders have collaborated to develop robust, equitable indicators applicable to local markets and across sectors. The aim is to provide investors with a tool that is both transparent and robust to better understand the commitment to the climate by companies that emit the most GHG. This initiative will reconcile the expectations of investors and the actions of companies for which climate risk is constantly increasing. The results of company assessments will be used by the signatories to inform their actions during year five of the initiative.
Decarbonization of the whole economy will require action by energy players, on both the supply and demand sides. That is why the initiative’s lead investors sent a letter to all Climate Action 100+ companies, that included three requests: • Communicate in accordance with the new Climate Action 100+ Net-Zero Benchmark; • Set a long-term ambition to achieve net-zero emissions by 2050 or sooner across all material GHG emissions; • Collaborate with Climate Action 100+ to develop and implement net-zero transition action plans for the sector and the entire value chain.
The goal is to have an impact beyond the 159 companies engaged under CA100+. Large companies have to easily contribute to reduce scope 3 emissions because of their significant financial resources, their influence on suppliers and consumption patterns.
In 2020, several companies announced their desire to become carbon neutral as a result of investor engagement. For example, 43% of signatory companies have now set a clear ambition to reach net-zero GHG emissions by 20505. However, analysis shows that only 10% of companies have set targets which cover the most material scope 3 emissions for their sector.
Climate Action 100+ and LYXOR have seen progress in the area of governance. More than three-quarters of companies now disclose clear evidence of Board and Board committees involvement in climate change risks5.
€1.2 Bn
Share of LYXOR’s AUM under Climate Action 100+ engagement
5 2020 Climate Action 100+ Progress Report
18 18 The Task Force on Climate-related financial As a collaborative member of the Climate disclosure (TCFD) initiative was created in 2017 to Action 100+ engagement group, LYXOR provide a framework for companies and other welcomes Renault’s public support for the organizations to develop more effective, clear and TCFD recommendations, one of the transparent climate-related financial disclosures initiative’s area of progress. through their existing reporting processes. The disclosure recommendations are structured around four thematic areas that are intended to interlink and inform each other: • Governance • Strategy • Risk Management • Metrics and targets Better information will allow companies to incorporate climate-related risks and opportunities into strategic decisions. Investors have an important role to play in influencing the organizations they invest in to provide better climate-related financial information.
Enel, co-filing of a climate resolution at the annual general meeting of an Italian company
In May 2020, LYXOR, in collaboration with 25 institutional investors, representing approximatively 2.2% of the share capital, co-filed a resolution at the general meeting of the Italian company Enel S.p.A. This resolution concerned an alternative list of candidates for election to the Board of Directors, including a candidate who is a former executive of a wind energy company.
As part of the Climate Action 100+ investor coalition with Enel, LYXOR decided to participate in this collaborative engagement campaign. The appointment of a highly qualified Board member should help Enel to take action on climate change and meet the science-based targets the company set in September 2019 and ensure that its scope 1 and 2 emissions match the reductions required to keep global warming well below the 2°C scenario.
The Italian "voto di lista" system for the election of Board members facilitated this shareholder initiative. Independent in Italy, minority shareholders have the right to put forward Board members at the company's general meeting. As a co-filer of this resolution, LYXOR actively supported the list proposed by the minority shareholders.
Following a very close vote between the two lists, the list submitted by the minority shareholders (including LYXOR) obtained more than 51% of the votes in favor and was therefore adopted. The appointment of this expert to Enel's Board of Directors should help the company to shift from fossil fuels to more sustainable solutions such as wind and solar energy, as Enel's ambition is to be carbon neutral by 2050.
19 Plastics and circular economy
Background
The European Commission6 has adopted a new action plan for the circular economy - one of the main blocks of the European "Green Deal", Europe’s new agenda for sustainable growth. In this action plan, the European Commission predicts that plastic consumption should double within the next 20 years. But for now, 40% of the plastic is only used once7. It is therefore essential for all stakeholders (companies, suppliers, investors, regulatory bodies, etc.) to think about a sustainable integration of plastic in a circular economy.
It is in this dynamic that in 2020, LYXOR joined a collaborative engagement campaign on the theme of plastic and the circular economy8. The objective is to understand with key players what the stakes of plastic are and how to integrate the associated risks throughout the value chain.
Three sectors (packaging and consumer goods, electronics and automotive) have thus been identified as having an essential impact on this theme. Among these sectors, LYXOR, in collaboration with the other investors active in this campaign, has selected some twenty companies with a direct or indirect impact on this topic in order to engage in dialogue.
Throughout this initial three-year engagement campaign, LYXOR and the various stakeholders are addressing key issues, such as life-cycle analysis, which is crucial in establishing a circular economy, or the quality of recycled materials and the confidence in the material, one of the main challenges to increase the use of recycled plastics.
The campaign’s engagement strategy is based on the Ellen MacArthur Foundation’s initiative to accelerate the transition towards a circular economy. The foundation aims to promote a new plastics economy, and recommends three primary steps for companies and other stakeholders: • Decouple from fossil feedstocks; • Create an effective after-use economy; • Reduce leakages. These steps are in line with the concept of a circular economy.
6 https://ec.europa.eu/environment/circular-economy/index_en.htm 7 https://www.nationalgeographic.co.uk/10-shocking-facts-about-plastic 20 8 Engagement campaign coordinated by Sustainalytics To measure the progress of the campaign, each company is evaluated according to 6 KPIs: • Governance and reporting, in order to evaluate integration of circular economy principles intro strategy, Board-level consideration of this issue and the quality of public reporting; • Risk and impact assessment, in order to verify identification of plastic use intensive parts of the value chain and implementation of measures to address risks and impacts; • Input in the production and utility during use, this will look at the extent to which companies use virgin plastic products during production processes and the longevity of a company’s plastics material during the use phase; • Recycling practices and after-use, in order to assess whether the company discloses an operational framework to facilitate recycling or whether it sets quantified targets in terms of recycling; • Innovation, this reflects how far the company invests in innovation (through R&D or otherwise) aimed at reducing the lifecycle impacts of its operations. • Stakeholder cooperation, to indicate the extent to which the company cooperates with other stakeholders in this area and participates in joint initiatives, such as material recovery projects and/or pollution prevention programs.
In addition to assessing the commitment of companies, LYXOR explores practical issues regarding the establishment of a circular economy and exchanges on best market practices in order to find sustainable and accessible solutions for all stakeholders.
Through this engagement campaign around plastic and the circular economy, LYXOR contributes to three of the seventeen Sustainable Development Goals defined by the United Nations:
2020 Activity
In 2020, LYXOR engaged with nine international companies and conducted eleven campaigns on the theme of plastics and circular economy. LYXOR hopes to contribute to the transformation of the packaging and consumer goods, automotive, electronics and chemical industries alongside leading European, American and Japanese companies.
In addition to bilateral discussions, a virtual roundtable was organized with all the stakeholders involved in October 2020 to explore on the challenges and opportunities around the circular economy. This dialogue between investors, including LYXOR, eight companies from the sectors concerned and three other stakeholders identified two areas for improvement: the ‘input’ side of the production process and strengthening public reporting on circularity practices. The Ellen MacArthur Foundation also presented a report on the financing of the circular economy.
This thematic campaign has already led to significant progress in current practices, particularly with regard to governance and reporting. For example, a number of companies in the automotive sector have announced a high level of inclusion of circular economy principles in their new strategies. Some Boards of Directors have set up specialized committees on sustainability and/or circularity, whose mission is to define a sustainable strategy by taking into account waste and environmental risk management. However, some companies are struggling to bring operational practices up to the same level as their organizational commitment. The quality of recycled materials needs to be further improved in order to increase the confidence and use of recycled plastic on the input side.
21 A clear improvement in the innovation indicator is observed between 2019 and 2020, suggesting that companies have become aware of the importance of this issue. This has not prevented the establishment of targets for the inclusion of recycled plastic in products, for example, by some companies in the electronics sector. Companies are increasingly innovating to make products suitable for recycling or reuse at the end of life. Increased collaboration between companies and other stakeholders may be needed to transform individual innovations into top-level circularity practices across the Board. All packaging companies participating in this engagement campaign have joined the Ellen MacArthur Foundation’s Global Commitment and have therefore been able to increase their score on the commitment to achieve 100% recyclable plastics by 2025. In addition, companies in the food sector have joined forces in the NaturALL Bottle partnership to launch a packaging made of 75% bio-sourced plastic in 20209.
In 2021, LYXOR will continue its commitment to this theme, focusing on the implementation of the goals set and the integration of the new European action plan for the circular economy.
Average progress per KPI for the Plastics and circular economy campaign* 2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Governance & Risk, Impact & Input & Utility Recycling & After- Innovation Stakeholders Reporting Mitigation Use
March 2019 November 2019 November 2020
*Each of these indicators is scored out of 2.
€1 Bn
Share of LYXOR’s AUM under engagement related to the plastics and circular economy campaign
9 https://www.danone.com/fr/impact/planet/packaging-positive-circular-economy.html
22 Localized Water Management
Background
According to the United Nations10, water scarcity affects more than 40% of the world’s population and is expected to continue to increase with climate change. Apart from the impacts most associated with water – droughts, floods, extreme weather events and rising sea levels – it is inherently connected to various other key challenges including climate change, food security, involuntary migration, or biodiversity, etc. Reaching far beyond Sustainable Development Goal 6, dedicated to access clean water and sanitation, water is paramount for the achievement of most other SDGs.
It is for these reasons that the UN General Assembly launched the Water Action Decade (2018-2028) initiative to mobilize action that will help transform our water management. Aware of the growing challenge of this resource, LYXOR launched a collaborative thematic engagement campaign on water management in 202011.
Three sectors (food and beverages, the fashion industry and the mining industry) were thus identified as having a major impact on this theme. Among these sectors, LYXOR, in collaboration with the other investors active in this campaign, has selected some twenty companies with a direct or indirect impact on this topic in order to engage in dialogue.
This engagement campaign places emphasis on local water management, which is why two basins that are highly exposed to climate risks and essential for many actors have been chosen as case studies. Tiete, in Brazil, and Vaal in South Africa were selected as the two focus river basins for this engagement. The companies selected for this campaign are exposed to activities in one or both of these basins.
Most companies are aware of the importance of water management issues but do not make them a priority. The objective of this campaign is to remedy this phenomenon so that all companies can integrate these issues throughout their value chain. The starting point for good management of water-related issues is to properly map the risks and associated impacts that fall under the direct and indirect control of companies.
In order to measure the progress of the campaign, each company is evaluated according to 6 KPIs: • Water governance, to assess a company’s commitment to water management and consider the environmental/water management system, as well as attention for water challenges in the value chain; • Water risk and opportunity management, to focus on risk assessments, physical climate risk scenario analysis, water-related business opportunities and engagement with suppliers; • Water quantity, to explore a company’s approach to monitoring its water withdrawals and consumption as well as to improving its water efficiency; • Water quality, the quality-related aspects analyzed focus on the companies’ efforts to manage water pollution and restore ecosystems where appropriate; • Integrated water resources management, to evaluate each company’s acknowledgement of the need and its involvement in basin-level collaboration to manage water impacts and risks collectively and to assess any company measures in connection to the human right to sage drinking water and sanitation; • Public water management, to evaluate a company’s efforts in the specific river basin to monitor the availability of local water supply, maintenance and investment into water infrastructure and local enforcement of regulations, and to inform itself about local water crisis management procedures.
10 https://www.un.org/sustainabledevelopment/fr/water-and-sanitation/ 11 Engagement campaign coordinated by Sustainalytics 23 In addition to assessing companies' practices, the idea is to mobilize them more on this topic, in other words, to ensure that companies' approach to water risk assessment and management: • Proactively and effectively contributes to long-term business continuity; • Is environmentally sustainable; • Respects the development needs of the countries concerned.
Through this engagement campaign around localized water management, LYXOR contributes to four of the seventeen Sustainable Development Goals defined by the United Nations:
2020 Activity
In response to the water crisis that is already having dramatic consequences and could paralyze our global society in the coming decades, LYXOR supported in 2020 four international companies in improving their water management. These companies belong to the critical sectors identified for this thematic campaign, namely food, beverages and mining. The diversity of nationalities of the companies involved reflects the global nature of the water management crisis: South Africa, Belgium, the Netherlands and Mexico.
The health crisis has made this support even more relevant and essential, as countries such as South Africa have been hit hard by the restrictions on water management caused by the pandemic. Also affected by the increasing number of natural disasters in 2020, companies with more physical links and headquarters in the target basins have voluntarily committed to participate in this campaign, suggesting a strong awareness of the value of these dialogues on water management. This year was an opportunity to build trust between companies and committed investors and to take stock of water management. Public reporting appears to be largely an accurate representation of the corporate approach to water issues.
The focus is currently on reducing the quantity of water used, to the detriment of water quality, for which commitments rarely exceed the regulatory framework. There are wide disparities between the companies involved in water management: some focus on the immediate security of water supply for the company, while others favor a more sustainable perspective in consultation with regional stakeholders. The most advanced companies should lead by example and share their expertise in water management with the other actors involved in this initiative.
In 2021, LYXOR will assist companies in improving the first four indicators enabling the implementation of a more sustainable water management policy. Public water management and integrated water resource management will be addressed in more detail once companies have a better understanding of the issues, risks and opportunities related to water management. The ultimate goal is to share learnings and best practices from the operations of the companies and their respective sectors in order to encourage joint efforts in basins outside of those currently studied (Tiete and Vaal).
24 Average Progress per KPI score for the localized water management campaign* 2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Water governance Water risk & Water quantity Water quality Integrated water Public water opportunity resources management management management
April 2020 September 2020
*Each of these indicators is scored out of 2.
€190 M
Share of LYXOR’s AUM under engagement related to the localized water management campaign
25 Responsible cleantech
Background
Technological advances, the evolution of economic forces and the climate emergency are disrupting the daily lives of many industries and billions of people. LYXOR believes that clean technologies can play an important role in the transition to a low-carbon economy. The sector has already experienced strong growth in recent years. For example, renewable energy capacity is expected to increase by 50% over the next five years, thanks to solar photovoltaic (PV) and onshore wind technology12. This dynamic attracts significant investments, especially in the transport sector with the expansion of the production of vehicle batteries13 for example with the aim of electrifying transport.
The growing demand for these products poses new environmental, social and governance challenges, including the recycling of products such as wind turbine blades or vehicle batteries, which have received far less attention than the upside benefits of these technologies. It is advantageous to integrate these issues and promote circular business models for recovering materials when products reach the end of their life cycle.
It is in this context that LYXOR initiated in 2020 a thematic campaign on clean and responsible technologies14. The objective of this engagement campaign is to implement a holistic approach to assess and manage ESG risks associated with the development of this type of technology.
Three sectors (companies that manufacture wind turbines, solar photovoltaic panels and electric vehicles and/or vehicle batteries) were then identified as having a major impact on this theme. Among these sectors, LYXOR, in collaboration with the other investors active in this campaign, has selected some twenty companies with a direct or indirect impact on this topic in order to engage in dialogue.
To measure the progress of the campaign, each company is evaluated according to 5 KPIs: • Governance, to assess the company’s commitment the strategy for environmentally and socially sustainable production and sourcing; • Operational risk management, to ensure that the company has implemented policies and objectives to integrate environmental and social risks; • Supply chain management, to verify that the company proactively identifies and assesses environmental and social supply chain risks; • Circularity, to assess the company’s lifecycle approach from design to product recovery to minimize adverse environmental impacts; • Stakeholder engagement, to ensure that the company actively collaborates with authorities and other stakeholders to promote sustainable production, deployment and/or recycling.
In addition to assessing companies’ practices, this campaign aims to identify potential points of vigilance and improvement and work together in the search for sustainable solutions.
12 https://www.iea.org/reports/renewables-2019 13 https://www.iea.org/reports/global-ev-outlook-2020 14 Engagement campaign coordinated by Sustainalytics
26 More specifically, this thematic engagement aims to: • Apply a life-cycle approach to clean technology products; • Catalyze more sustainable production of some of the most popular cleantech solutions; • Explore ways to more effectively address environmental and social risks in production and supply chain.
Through this engagement campaign around localized water management, LYXOR contributes to five of the seventeen Sustainable Development Goals:
2020 Activity
As this campaign was initiated at the end of 2020, the first discussions around this new theme took place in early 2021 and will continue throughout the year.
€800 M
Share of LYXOR’s AUM under engagement related to the responsible cleantech campaign
27 EXERCISE OF VOTING RIGHTS
28 GENERAL PRINCIPLES
In the long term, good corporate governance must result in an improvement in the company's performance. In order to do so, shareholder engagement is essential. By exercising its voting rights, LYXOR can contribute to improving the economic and financial performance of the companies in which it invests on behalf of its clients, with the aim of encouraging the adoption of best practices and mitigate the risk of business failure.
The 6 pillars of good corporate governance according to LYXOR
Protection of long-term interests and shareholders rights
Independence and diversity of Board of Directors
Balance of the company’s financial structure
Fair and transparent executive compensation
Quality and integrity of financial information
Concentration of environmental and social responsibility
29 VOTING PROCESS
Before the general meetings, the dedicated Sustainable and Responsible Investments team carries out a detailed analysis of the governance of companies for which LYXOR will exercise its voting rights.
The composition of the Board, the separation of the functions of Chairman and Chief Executive Officer, the diversity policy, the compensation policy, the respect of shareholders’ rights, the dividend policy are among other topics analyzed by the team and discussed during engagement meetings.
Regarding compensation issues, LYXOR has developed its own methodology for evaluating the compensation policies implemented by issuers. Moreover, LYXOR uses the services of an external provider to support it. This proxy advisor establishes analysis and provides voting recommendations according to LYXOR’s voting guidelines. LYXOR relies on these recommendations but retains the final decision. After conducting a market survey of the different providers, LYXOR currently uses the services of ISS (Institutional Shareholder Services).
Where electronic vote is possible, voting is cast through a Proxy Exchange Platform on which LYXOR inputs its voting instructions. In exceptional cases where electronic voting is not possible, voting forms are filled out according to LYXOR’s voting policy and sent to the relevant issuers by post.
The formalization of voting decisions takes into account international corporate governance standards as well as the regulations and corporate governance codes in force in the various countries.
30 OVERVIEW OF VOTES AT GENERAL MEETINGS
Background and voting scope
In 2020, LYXOR has exercised its voting rights on the following scope: • French and Luxembourgish Funds (Fonds Communs de Placement – FCP) and SICAV15 • Securities of issuers domiciled in Europe: in order to prevent excessive costs inherent in the voting process, LYXOR participates in general meetings when the consolidated holding represents more than 0.10% of the company’s capital • Securities of issuers domiciled in the United States: LYXOR exercised its voting rights on its largest consolidated holdings • Equity securities of issuers domiciled in Japan: LYXOR exercises its voting rights on its largest consolidated holdings
As of this section, the data presented are specific to the management company LYXOR International Asset Management, including the funds in management delegation of LYXOR Fund Solutions.
For 2020, the voting scope included 55 funds16 and concerned 408 companies through 447 general meetings. Voting rights were exercised by correspondence or through Proxy Exchange Platforms.
Evolution of the number of general meetings voted 447 +183%
Progression of the voting scope between 2017 and 2020 200 208 158 99%
2017 2018 2019 2020 Attendance rate in general meetings17
15 Except the vehicles using a method of synthetic replication which are designed to track a financial exposure through a performance swap. Therefore, the returns of the vehicles do not depend on the return on the shares held by these funds. All dividends and profits are swapped with a market counterparty. 16 See Appendix 1 17 Rate restricted to the voting scope determined by the management company. LYXOR International Asset Management's attendance rate at general meetings across all general meetings held by issuers in voted funds, is 10% (on the basis of 4,673 general meetings).The reasons why some votes could not be exercised are mainly related to malfunctions in the chain of transmission of orders, and/or specific constraints such as blocking shares.
31 Europe 346 general meetings 4 281 resolutions 23% opposition rate
United States Japan 44 general meetings 53 general meetings 496 resolutions 733 resolutions 7% opposition rate 7% opposition rate
In 2020, LYXOR extended its voting scope to two new markets: the U.S. and Japan. While some types of resolution proposed at general meetings are common to all markets, such as the election of Board members or the amount of the dividend, others are specific to each markets. Accordingly, while voting on executive compensation has been widespread in the United States since the Dodd-Frank Act and in Europe since the European SRD II Directive, shareholders do not have the opportunity to approve executive compensation in Japanese companies. For more details, please refer to the Analysis of the general meeting season section.
32 Analysis of the general meetings season
General meetings are essential annual meetings where shareholders and management can discuss a wide range of issues such as the company’s strategy, its positioning or, for the past few years, its ambitions in terms of social and societal responsibility.
In 2020, the general meetings season was profoundly impacted by the global Covid-19 pandemic, which led to their digitalization. Due to health restrictions, general meetings were held either in a closed-door environment or in a hybrid format (interactive digital format), where shareholders still had the opportunity to ask questions to the Board. Due to health and legal constraints, some companies had to limit exchanges with shareholders, which sometimes had an impact on shareholders' right to information. The market slowdown due to the pandemic and the need to manage liquidity in an uncertain economic environment led some Boards to question the relevance of continuing to pay dividends (particularly banks in Europe following the European Central Bank’s decision). In addition, in some countries such as France, certain government assistance programs prohibited companies applying for loans or other grants from paying dividends. Many companies also decided to put share buyback programs on hold in order to maintain liquidity.
Finally, regarding executive compensation, some companies announced that executives had offered to reduce their fixed compensation and/or waive part or all of their variable compensation in solidarity with employees and stakeholders, some of them donating these sums to charities or NGOs. In some companies, Board members also waived their remuneration for the 2020 financial year while the number of meetings increased significantly in order to cope with the health and financial crisis.
Breakdown of resolutions voted on by category
44.6%
21.4%
15.6%
11.1%
5.1% 1.5% 0.4% 0.4%
Antitakeover Capitalization Directors Compensation Reorganisation Shareholder Routine & Miscellaneous Related Related & Mergers Proposals Business
33 While the composition of the Board of Directors or Supervisory Board remains the main subject voted on at the general meetings regardless of the geographical area, other issues are specific to certain areas, or even certain countries. Indeed, as the graph below shows, while compensation issues account for nearly 20% of the resolutions voted on by LYXOR in Europe, they represent only 3% of the resolutions voted at the general meetings of Japanese companies. Issues relating to the company’s capital, such as capital increases, are not a subject on which the shareholders of Japanese companies must vote, even though they represent 14% of the resolutions voted on by LYXOR in Europe.
Breakdown of voted proposals by category and geographic zone
86% 75%
34% 26% 18% 14% 12% 9% 5% 6% 4% 0% 0% 3% 2% 0% 2% 3%
Capitalization Board Compensation Reorganisations and Routine business Shareholder mergers proposals
Europe United States Japan
In 2020, LYXOR International Asset Management voted on 5,562 resolutions and voted against or abstained on 19% of these resolutions. However, the average opposition rate differs from one region to another.
Breakdown of resolutions voted by Lyxor International Asset Management in 2020 FOR 4,509 81%
AGAINST 1,007 19% ABSTENTION 46
Total number of resolutions voted on 5,562
Average opposition rate by geographical zone
23% 7% 7%
34 Europe United States Japan Evolution of the opposition rate from LYXOR International Asset Management LYXOR International Asset Management fully expresses its 23% fiduciary responsibility to its clients and 22% votes against resolutions that are 19% contrary to its voting policy. Whether on matters of compensation, Board composition, strategic 13% operations or financial transactions, LYXOR International Asset Management’s vote is guided by a detailed analysis of the proposed resolutions in order to contribute to improving the economic, financial and societal performance of the companies in which LYXOR International Asset Management is invested. 2017 2018 2019 2020
The decrease in LYXOR International Asset Management's average opposition rate in 2020 is mainly due to the opening of two new markets to voting: the USA and Japan. Indeed, the average opposition rate in these countries is much lower than in Europe (7% vs. 23%), for several reasons: • The voting scope defined by LYXOR in 2020 was mainly European (Japan representing 12% of the voted general meetings and the USA only 10%), which limits the number of resolutions on which LYXOR could vote against; • One of the main subjects criticized by LYXOR is executive compensation. However, this subject is not currently put to a vote for the shareholders of Japanese companies.
Average opposition rate by country
35%
28% 24% 22% In 2021, LYXOR will 18% strengthen its 16% 14% 15% presence in the 12% United States and 7% 7% 7% Japan by doubling its 4% voting scope in these 0% markets.
35 Analysis of votes against
Breakdown of votes against by Lyxor International Asset Management 1% 4% 5% 13% 17% 27% 25% 39% 40%
95% 100% 82% 87% 73% 71% 61% 60%
Antitakeover Capitalization Directors Compensation Reorganisation Routine & Shareholder Miscellaneous Related Related & Mergers Business Proposals
For Against Abstain
As in previous years, and as shown in the graph above, the main reasons for LYXOR International Asset Management’s votes against in 2020 focused on certain topics, such as: • The financial operations and antitakeover mechanisms (between 27 and 39% of votes against), • The executives’ compensation (29% including abstention), • The composition and compensation of Boards of Directors or Supervisory Boards (18% including abstention). Shareholders’ proposals are presented in the following section.
59%
In 2020, LYXOR International Asset Management voted against or abstained on at least one resolution at 263 general meetings, i.e. 59% of the general meetings at which LYXOR voted18 36
18 Details of the companies concerned are given in Appendix 2 Focus on the climate
As announced earlier this year, in 2020 LYXOR marked a new stage in its engagement in relation to the climate transition through several provisions enabling it to strengthen its opposition to companies that are insufficiently concerned about the climate and the environment. In practice, LYXOR expects companies belonging to the most climate-sensitive sectors19 to publish their CO2 emissions on scopes 1, 2 and 3. In the absence of such disclosure, LYXOR was able to vote against one or more resolutions filed at the general meeting of these companies. Votes against (or abstention) could also be recorded by LYXOR if the holding companies are or were subject to severe environmental controversies.
Breakdown of the types of resolutions voted against for climate reasons
6% 122 8%
Number of resolutions LYXOR has voted against due to climate failure20 86%
Discharge Election Shareholder Proposal Reasons why LYXOR opposed these resolutions 86% of these 122 resolutions were related to the discharge of the Supervisory Board or the Management Board/Executive Committee, 8% related to the renewal of Board members mandates and 6% related to shareholder 72 proposals.
67% of these votes against were related to the lack of disclosure by companies in the most climate-sensitive sectors of their greenhouse gas 33 emissions (scope 1, 2 and 3) and 27% were 10 related to severe environmental controversies that companies are facing or have faced. Discharge Election No disclosure of CO2 emissions Controversies
19 Automobiles, chemicals, construction materials, food beverage and forestry, industrials, mining and metals, oil and gas, transportation, utilities and power producers sectors 37 20 Détails of the concerned companies in Appendix 3 In 2021, LYXOR will further strengthen its climate transition voting principles as LYXOR will be able to vote against the reappointment of the Chairman of the Board, for companies which do not support the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and may also sanction resolutions related to executive compensation in the absence of extra-financial considerations within remuneration policies21.
As the graph below shows, 85% of these votes against are concentrated in Germany, mainly on discharge resolutions. Granting or refusing to give discharge to members of the Supervisory Board or the Management Board for their acts or omissions during the past financial year is a common resolution on the agenda of the German general meetings. However, this discharge does not prevent shareholders from taking legal action for damages against a Board member. The vote on the discharge is thus considered more as a vote of confidence in the members of the Board.
Breakdown of votes against for climate reason by country
101 Austria Belgium France Germany Japan Luxembourg 6 6 USA 2 1 1 1 3 1
Discharge Election Shareholder Proposals
What the experts say
Florent Deixonne, Head of Socially Responsible Investments at LYXOR explains how LYXOR’s voting and engagement policy is firmly focused on the climate.
21 Principles for companies in sectors most sensitive to climate considerations 38 Focus on diversity
LYXOR recognises the importance of Board diversity to a company's success because it can bring a variety of perspectives to bear on strategic challenges. When considering the individual quality of a person, diversity (cultures, experiences, ages, skills, gender balance, etc.) should be encouraged. Accordingly, with regard to the percentage of women on the Board, LYXOR analyses the company's compliance with national regulations in force, as well as local good governance practices and the change in the feminization rate of the Board over previous years. LYXOR also applies criteria according to geographical areas, in particular: • In Europe, LYXOR has set a target of 40% of women on the Board of companies located on the European continent (including the United Kingdom); • In the United States, LYXOR expects companies to have at least 25% of women on the Board; • In Japan, LYXOR requires the presence of at least one woman on the Board.
These different criteria have been defined with regard to the current practices observed in these geographical areas, the idea being to help companies achieve better diversity ratios while taking into account the level of maturity in this area. If a company does not comply with these various thresholds, LYXOR may vote against the renewal of the mandates of the nomination committee members or, more generally, the members of the Board.
Thus, in 2020, LYXOR voted against the renewal of 51 mandates of Board members due to a lower diversity rate than LYXOR expected. These votes against were mainly expressed to German and US companies.
Conversely, thanks to LYXOR's commitment and dialogue with companies, it has been able to support certain re-elections of members or chairman of nomination committee despite diversity rates below the threshold expected by LYXOR (see Part II - Votes that deviate from the principles set out in the voting policy).
Breakdown of votes against on diversity issues by geographic area
Others Spain 6% 12% USA 21%
Netherlands 8% Austria 4%
Luxembourg Belgium 4% Japan 12% 8% Germany 21% France 4%
39 Focus on compensation
As mentioned above, compensation issues have been an important part of discussions between investors and issuers for several years. Increased transparency in this area, mainly required under legislation, has led to profound changes in existing compensation policies. Shareholders, including LYXOR, no longer hesitate to voice their opposition at general meetings when compensation policies are insufficiently transparent or when they appear to be unrelated to the company's financial and stock market performance.
865 29%
Number of resolutions voted on by Lyxor Lyxor International Asset Management’s International Asset Management on opposition (or abstention) rate on compensation issues compensation resolutions in 2020
Compensation issues are reflected in different types of resolutions: • Vote on the compensation policy (ex-ante resolution) which will define the compensation of the company’s main executives for the next financial year; • Vote on the compensation report (ex-post resolution), which presents the way in which the compensation policy was actually applied during the financial year; • Vote on the individual compensation of one or more corporate executives; • Vote on long-term plans (stock option and/or share plans) from which executives may benefit from; • Vote on post-employment benefits (severance pay, non-compete agreement, supplementary pension plan) from which executives may benefit in the event if departure.
In analyzing the policies, remuneration reports or policies awarded to an executive, LYXOR relies on the following principles: • TRANSPARENCY of the various criteria used in determining compensation • COHERENCE between the company’s financial, extra-financial and stock market performance and the compensation of its main executives • INTEGRATION of extra-financial issues in compensation policies
This integration of extra-financial criteria (climate, diversity, health, safety, etc.) should ideally be evident in both the short-term and long-term components of compensation policies.
40 Case study: ENI SpA
At its 2017 general meeting, the Italian company ENI SpA submitted its long-term incentive plan for the financial years 2017 to 2019 to the vote of its shareholders. This was based solely on market and industrial performance conditions, which did not escape the attention of shareholders who voted against the resolution by more than 20%. In 2020, the company submitted its new plan for 2020 to 2022 to a vote and took the opportunity to revise the performance conditions attached to it: in addition to financial criteria, three climate criteria were added, enabling the company to align its executive compensation policy with its targets for reducing greenhouse gas emissions and its ambition in terms of circular economy and energy transition. The company was particularly transparent about the different levels of carbon intensity to be achieved in order to validate the Group’s decarbonization, the megawatts to be achieved in terms of installed electricity generation capacity from renewable sources and the number of circular economy projects to be realized22.
22 https://www.eni.com/assets/documents/governance/2020/eng/Remuneration-Report-2020.pdf
When a company decides to incorporate sustainability and environmental goals at the heart of its strategy, we believe it is essential that these same goals be reflected in executive compensation policies.
Déborah Yomtob, Socially Responsible Investments Analyst
41 Shareholders’ proposals
During the 2020 general meeting season, LYXOR International Asset Management voted on 71 shareholder proposals filed at 27 companies in Europe (excluding the so-called « list » proposals submitted to the vote in Italy), the USA and Japan.
Breakdown of shareholder proposals by country
29
15 14
7 5 1
France Germany Italy Japan Portugal USA
Breakdown of shareholder proposals by theme
27
14
10 9 1 2 1 1 1 4 1 Amend bylaws Directors Business Climate Compensation Financial Political related related authorizations contributions disclosure 42 For Against Abstain Examples of resolutions supported by LYXOR
Unibail-Rodamco-Westfield On September 16, 2020, Unibail Rodamco Westfield announced the launch of a new strategic plan called "Reset" of at least €9 billion, which included a €3.5 billion capital increase, a €1 billion cash dividend limit over the next two years, an additional €800 million reduction in its investments, as well as disposals totalling €4 billion by the end of 2021.
Following these announcements, a consortium of European investors (including a former Unibail Rodamco Westfield executive) holding approximately 5% of the capital initially called on investors to reject the capital increase, considered highly dilutive and unnecessary, considering that the Group had sufficient liquidity and access to the bond market. In particular, the consortium challenged the new “Reset” strategic plan and called for a refocusing of the Group’s activities on Europe through a strategic counter-plan called “Refocus”.
In line with the challenge to the strategic plan proposed by the management, the consortium added three resolutions to the Unibail Rodamco Westfield general meeting to appoint three new candidates to the Supervisory Board.
After analyzing the arguments of both parties, LYXOR decided to vote in favor of the capital increase, in order to allow the company to have this option if it deemed it necessary to implement, while also supporting the three candidates proposed by the consortium, believing that the presence of new candidates on the Board would lead to a stronger debate on the strategy to be adopted.
At the general meeting, the capital increase was ultimately not approved, and the three appointments were approved.
CISCO
An individual shareholder filed a resolution at the general meeting of the US company Cisco, requesting that the separation of the functions of Chairman of the Board and Chief Executive Officer be included in the company’s bylaws, so that in future the Board will be chaired by an independent member. This resolution did not call for an immediate change in governance but for the preparation of a succession plan for the CEO. Although the company has a Lead Independent Director and a Board independence rate of 89%, LYXOR supported this resolution, given the interest of minority shareholders to be represented by an independent Chairman. This resolution received 32% support and was therefore not adopted.
43 CMS Energy Corporation
At CMS Energy Corporation, an individual shareholder filed a resolution at the American utilities company’s general meeting requesting a report on the company's political contributions, including payments to trade associations. This report could have provided shareholders with a better understanding of the company's political engagement activities and its associated risk management. LYXOR therefore supported this resolution, believing that it would improve the company's transparency. However, this resolution only received 35% support and was therefore not adopted.
New York Community Bancorp, Inc.
At the general meeting of the American bank New York Community Bancorp, an individual shareholder filed a resolution to declassify the Board. This resolution called for all directors to have equal rights and an annual vote on their mandates. LYXOR voted in favour of this resolution, which aims to strengthen the responsibility of each Board member vis-à-vis shareholders. This shareholder proposal was approved with 85% shareholder support.
Raytheon Technologies Corporation At Raytheon Technologies, an individual shareholder filed a resolution at the US aerospace company’s general meeting, calling for a simple majority (50%) to be adopted when voting on resolutions, in order to eliminate the requirement for a supermajority vote, which is usually set at two-thirds (66.7%). As this resolution aimed to improve shareholders' rights, LYXOR supported it and it was passed with over 71% of votes.
44 MIZUHO : Japan’s first climate resolution On June 25, 2020, the first climate-related shareholder proposal was put to a vote in Japan at the Mizuho Financial Group General Meeting – the third largest Japanese bank in terms of assets. This resolution, filed by the Japanese NGO Kiko Network and supported by several Nordic funds, including the AP7 of Sweden, the APA and the MP of Denmark, asked Mizuho to include a provision in its bylaws setting out its commitment to disclose a plan for aligning its investments with the goals of the Paris Agreement.
Although the company’s Board recommended shareholders not to support the resolution, arguing that a revision of its charter was “unnecessary”, given that environmental risks had already been incorporated into the strategy and that information on environmental initiatives is proactively disclosed, the resolution received 34% support.
While this result was insufficient to pass the resolution, the pressure induced by the resolution had prompted the bank to announce in April 2020 that it would stop financing new coal-fired energy projects and end all coal-related loans by 2050. Mizuho was one of the top three lenders to the coal and mining sector over the past five years23.
LYXOR supported this first climate resolution in Japan because of the increased transparency requested on the climate strategy (financing of fossil fuels, exit from coal).
23 https://www.reuters.com/article/us-climate-change-mizuho-coal-idUSKBN23T0VW
45 Example of resolutions not supported by LYXOR
Deutsche Bank
At Deutsche Bank, as for the 2018 and 2019 general meetings, shareholder Riebeck-Brauerei von 1862 AG filed 5 resolutions in connection with ongoing investigations into suspected money laundering and tax evasion. These concerned various matters such as the dismissal of the Chair of the Supervisory Board, the dismissal of two other members of the Board and a request for a motion of censure concerning the members of the Management Board. The last resolution proposed an amendment to the compensation policy of the members of the Supervisory Board, in order to reduce their compensation in connection with the restructuring of the group. As the investigations are still ongoing, LYXOR voted against these external resolutions, which received between 1% and 10% shareholder support. With regards to the Board compensation policy, this is in line with market practice in Germany and LYXOR therefore considered that the proposal of the minority shareholder on this subject did not present any real improvement.
ERG SpA
At the general meeting of the Italian company ERG SpA, San Quirico SpA, the company’s reference shareholder with more than 62% of the capital, filed a resolution to introduce double voting rights for shareholders who have registered their shares after a period of 24 months. LYXOR, being in favour of the "one share, one vote“ principle, did not vote in favour of the resolution. In view of the share of San Quirico SpA in the company's capital and therefore its share of votes on the day of the general meeting, the resolution was approved with 79% of the votes. Orange As at the 2019 general meeting, the Orange FCPE (employee mutual fund) filed four resolutions in 2020: one concerning an amendment to the resolution authorising the Board of Directors to purchase or transfer shares in the Company; one concerning an amendment to the articles of association concerning the cumulation of mandates; another proposing an amendment to the resolution on the free allocation of shares to employees or executive officers; and one proposing a cash capital increase reserved for members of savings plans. As was the case last year, the resolutions submitted this year by the Orange FCPE were not approved by the Orange Board of Directors.
LYXOR considered that these resolutions were similar to those filed at the 2019 general meeting and that the rationale for these resolutions was not sufficiently detailed and therefore did not warrant a vote in favour. With regard to overboarding, although limits are essential to ensure the availability of Board members, LYXOR considered that the limits set by the French Commercial Code were sufficient. These resolutions received approximately 14% support from shareholders. 46 Kirin Holdings Co.
At the general meeting of the brewer Kirin Holdings, the shareholder Franchise Partners filed a resolution to appoint two independent directors, believing that it is necessary to refocus the company's strategy on its core business and to dispose of non-strategic assets such as the pharmaceutical business. In response to this shareholder, the eight-member Board in 2019 proposed the appointment of four new independent members, including two women and two foreigners, whereas the Board previously had none. As the company's Articles of Association only allow for twelve members on the Board, not all of the proposed candidates could be supported. LYXOR therefore supported the renewal of the mandates of seven members of the Board, four new independent members proposed by the company and one candidate proposed by the shareholder for his expertise in M&A, as a director, and the role he played in the drafting of the Japanese governance code. However, the two candidates proposed by the shareholder received only 35% and 20% support from shareholders and were therefore not elected.
Sekisui House Ltd
Shareholders - including former Sekisui House executives - filed several resolutions at the Japanese company’s general meeting. Their demands were for the appointment of eleven directors (seven independent and four non- independent) to the Board following a real estate scandal in 2017. These former executives question the involvement of current management and call for measures to be put in place regarding audit and compliance within the Board, as well as certain ESG practices and stakeholder communications. As the company's Articles of Association only stipulate a minimum number of directors on the Board, the eleven proposed candidates could have been appointed in addition to the twelve members submitted to the Board for a vote, which would have resulted in a total of twenty-three members. However, LYXOR only supported two independent candidates, the first for his experience as a director and the second for his experience in real estate and as a director and auditor, in order to keep the number of directors at a reasonable level. However, these candidates received only 35% and 20% support from shareholders. The other nine unsupported candidates received between 2% and 13% support.
Tohoku Electric Power Co.
As every year since 1992, the shareholders' association "Dump Nuclear Power" filed several resolutions at the general meeting of the Japanese company Tohoku Electric Power, calling for an end to nuclear activity and a ban on the construction of new power plants. These resolutions called for an amendment of the company's Articles of Association to take into account the cost of the plants and their safety, as well as the environmental risks associated with nuclear power, mainly in relation to radioactive waste. According to LYXOR, the content of the resolution is more a matter of the company's strategy and therefore a decision of the Board and/or executive management and should not be dealt with through an amendment of the Articles of Association. LYXOR therefore did not support these resolutions, which 47 obtained, as they did the previous year, low shareholder support of about 4%. Climate Action 100+ : Oil & Gas
The oil and gas industry is one of the largest sources of greenhouse gas (GHG) emissions, particularly from methane emissions24. However, it is also one of the most advanced industries in terms of scientific knowledge, technical skills, and economic and financial capabilities that can lead to the realisation of a virtuous energy transition. Growing pressure from investors and constructive dialogue with senior management, mainly through the Climate Action 100+ initiative, have prompted major European oil companies such as Repsol, BP, Shell and Total to set climate ambitions for 2050. The Paris Agreement and the European Climate Bill, in which the European Union intends to transcribe into legislation and industrial strategy a net zero target by 2050, have moved companies towards low-carbon solutions.
While the major oil companies are setting "climate ambitions" with quantitative and measurable scientific targets, to date very few have committed to the Science-Based Targets (SBTs) initiative to define decarbonisation targets for their activities, and none have yet submitted climate targets validated by the SBT initiative. The SBT initiative has yet developed a methodology to enable oil and gas companies to set science- based decarbonisation targets aimed at achieving the goals of the Paris Agreement. The first version of this methodology is currently public and under consultation. The final version should be validated and published during 202124.
Total : a shareholder resolution on climate change
At the Total’ general meeting on May 29, 2020, a coalition of investors filed a resolution to the agenda, that was not approved by the company’s Board of Directors. The purpose of this external resolution was to amend the company’s bylaws to strengthen the capacity of Total’s business model to work towards the objectives of the Paris Agreement. Specifically, the resolution called on Total to present a medium- and long-term action plan with intermediate steps and to specify how the company intends to reduce its absolute GHG emissions, including indirect emissions (Scope 3).
Including this request in the Articles of Association entailed legal and financial risks should Total fail to meet the targets set. This could create an imbalance between Total and some of its competitors, which are sometimes less advanced on climate issues.
Pre-General Meeting, in a joint statement with Climate Action 100+ members, Total committed to achieve carbon neutrality by 2050 for all its activities, from production to the use of energy products sold to its customers (scope 1, 2 and 3) in its European activities.
LYXOR decided to abstain on the external resolution in order to send a message to the Board of Directors on the importance of the transition to be led by Total and to support the significant progress made by Total. Indeed, although the objectives announced concern only Europe, LYXOR considered that this was a step forward on the part of the company, which would not justify amending the Articles of Association and the resulting consequences.
The Total case demonstrates that the energy transition is a long-term process, particularly for oil companies. Companies need the support and backing of their shareholders to achieve the objectives of the Paris Agreement.
24 https://sciencebasedtargets.org/sectors/oil-and-gas 48 Votes derogating from the voting policy
In certain cases, LYXOR may deviate from the application of its voting policy, in particular after dialogue with the company. In 2020, LYXOR deviated from its voting policy in eight cases. These deviations concerned the issues presented below.
Diversity
Following dialogue with company representatives, LYXOR supported the re-election of Board members in some specific cases, in particular due to positive changes in terms of the Board's diversity. Some examples are given below to illustrate certain cases:
Banco Bilbao Vizcaya Argentaria SA (BBVA)
In view of the positive evolution of the number of women on the Board of Directors over the last three years (27% to 33% in 2020), LYXOR supported the renewal of the mandate of a nomination committee member of the Spanish bank BBVA, despite a threshold below the 40% recommended by LYXOR.
Merlin Properties
LYXOR also voted in favour of the renewal of the mandate of a Board member at Merlin Properties, given the positive evolution of the number of women on the Board over the last three years, from 31% to 36%.
Telefonica
Due to the positive evolution of feminization of the Telefonica Board, from 11% in 2016 to 29% in 2020, LYXOR supported the renewal of the mandate of a member of the company’s nomination committee.
49 Independent audit committee
The composition of the Board's specialised committees (Audit, Nomination and Compensation Committees) is decided by the Board and not by the shareholders. However, LYXOR expects these committees to be sufficiently independent and may therefore sometimes vote against the renewal of certain members in view of their non-independence and their membership of these specialised committees. On the other hand, thanks to dialogue with companies, LYXOR can sometimes better understand the composition of these committees after the general meetings, and as such, vote in favour of the renewal of members' mandates. Deviations occurred at the following companies:
Kering LYXOR deviated from its voting policy on several resolutions at the general meeting of French luxury goods company Kering, following a discussion with the company. With respect to the composition of the Audit Committee, Kering undertook to review it immediately after the general meeting and to replace its current Chairman, who has reached the twelve-year seniority limit to be considered independent, with an independent member of the Board. Accordingly, LYXOR supported the renewal of this member's mandate.
Furthermore, LYXOR also supported the resolution proposing a modification of Kering's Articles of Association allowing to lower the minimum number of shares to be held by the members of the Board (from 500 to 50 shares) even though LYXOR recommends that these members invest personally in the company's shares in order to align their interests with those of the shareholders.
Given the performance of the Kering Total share over the last ten years, it seemed appropriate to lower this shareholding LYXOR also deviated from its voting policy at the general meeting of threshold. Under existing conditions, a the French company Total SE, concerning the renewal of the new director would have had to invest a mandate of the Lead Independent Director. As this Board member minimum of approximately €263,000 (at had reached 12 years of service, she could no longer be considered a share price of €525.90) whereas the independent. In a discussion with the company, it was clarified that average director's compensation in the 2019 financial year was approximately a new lead director would be appointed to ensure the €65,000. independence of this function. LYXOR therefore supported the renewal of her mandate as a member of the Board.
Stock option or free share plans
Equity-linked incentive plans should always be subject to detailed and demanding performance conditions measured over a long period of time and the dilution of these plans should remain reasonable. LYXOR analyses the resolutions concerning the allocation of free shares or stock option plans in detail and may vote in favour of certain resolutions despite the limits set in its voting policy.
SCOR SE
LYXOR deviated from its voting policy at the general meeting of the French insurer SCOR on two resolutions concerning the allocation of free shares to employees and executive directors, as well as the overall ceiling for capital increases. On these two resolutions, the threshold put to the vote was just above the ceiling. LYXOR therefore voted in favour of these resolutions. 50 Conflict of interest management
In 2020, LYXOR International Asset Management did not detect any conflicts of interest as part of the exercise of voting rights.
LYXOR International Asset Management’s voting details are available on LYXOR website https://www.lyxor.com/en/socially-responsible-investment
51 APPENDIX 1
List of funds that exercised their voting rights in 202025
ComStage DAX® UCITS ETF Lyxor FTSE Italia Mid Cap PIR (DR) UCITS ETF ComStage DivDAX® UCITS ETF Lyxor Global Gender Equality (DR) UCITS ETF ComStage EURO STOXX® Select Dividend 30 UCITS ETF Lyxor IBEX 35 (DR) UCITS ETF ComStage F.A.Z. Index UCITS ETF Lyxor INDEX FUND EURO ComStage MDAX® UCITS ETF Lyxor Italia Equity PIR UCITS ETF ComStage NYSE Arca Gold BUGS UCITS ETF Lyxor MSCI Digital Economy ESG Filtered (DR) UCITS ETF ComStage PSI 20® UCITS ETF Lyxor MSCI Disruptive Technology ESG Filtered (DR) UCITS ETF ComStage SDAX® UCITS ETF Lyxor MSCI EMU ESG Trend Leaders (DR) UCITS ETF Europa One R Lyxor MSCI Europe (DR) UCITS ETF Garant Dynamic Lyxor MSCI Europe Climate Change (DR) UCITS ETF Lyxor MSCI EMU GROWTH (DR) UCITS ETF Lyxor MSCI Europe ESG Leaders (DR) UCITS ETF Lyxor MSCI EMU VALUE (DR) UCITS ETF Lyxor MSCI Future Mobility ESG Filtered (DR) UCITS ETF Lyxor ETF CAC MID 60 (DR) Lyxor MSCI Millennials ESG Filtered (DR) UCITS ETF Lyxor ETF FTSE EUROPE MINI VARIANCE (DR) Lyxor MSCI Smart Cities ESG Filtered (DR) UCITS ETF Lyxor ETF MSCI EMU Small CAP (DR) Lyxor MSCI USA ESG Trend Leaders (DR) UCITS ETF Lyxor JAPAN (TOPIX) (DR) - Master Lyxor MSCI World Catholic Principles ESG (DR) UCITS Lyxor JPX-NIKKEI 400 (DR) - Master ETF Lyxor BEL 20 TR (DR) UCITS ETF Lyxor MSCI World Climate Change (DR) UCITS ETF Lyxor CAC 40 (DR) UCITS ETF Lyxor MSCI World ESG Trend Leaders (DR) UCITS ETF Lyxor Core EURO STOXX 300 (DR) Lyxor PEA PME (DR) UCITS ETF Lyxor S&P 500 Paris-Aligned Climate (EU PAB) (DR) Lyxor Core EURO STOXX 50 (DR) UCITS ETF Lyxor Core Morningstar US (DR) UCITS ETF Lyxor S&P Europe Paris-Aligned Climate (EU PAB) (DR) UCITS ETF Lyxor Core MSCI World (DR) UCITS ETF Lyxor S&P Eurozone Paris-Aligned Climate (EU PAB) (DR) UCITS ETF Lyxor Core STOXX Europe 600 (DR) Lyxor S&P Global Developed Paris-Aligned Climate (EU Lyxor DAX (DR) UCITS ETF PAB) (DR) UCITS ETF Lyxor ETF Core MSCI Japan (DR) - Master Lyxor World Water (DR) UCITS ETF Lyxor ETF MSCI EMU (DR) - Master Soc Gen Protection Permanente Lyxor EURO STOXX 50 (DR) UCITS ETF – Master SODIUM I Lyxor EURO STOXX Banks (DR) UCITS ETF
52 25 Some of the Comstage funds mentionned have since been merged into LYXOR funds. For more details, refer to the website http://lyxoretf.com/ APPENDIX 2
Details of general meetings concerned by at least one vote against or one abstention from LYXOR International Asset Management
Company Date Company Date Aareal Bank AG 27-May BasicNet SpA 09-Apr Accor SA 30-Jun BasicNet SpA 26-Jun Acea SpA 29-May Bayer AG 28-Apr Acerinox SA 21-Oct Bayerische Motoren Werke AG 14-May ACS Actividades de Construccion y Servicios SA 07-May Bechtle AG 27-May adidas AG 11-Aug Befesa SA 18-Jun Aedifica SA 08-Jun Beiersdorf AG 29-Apr AEGON NV 15-May Bertrandt AG 19-Feb Aeroporto Guglielmo Marconi di Bologna SpA 30-Apr Biesse SpA 21-Apr AeroVironment, Inc. 25-Sep Bigben Interactive SA 30-Jul ageas SA/NV 20-May Bilfinger SE 24-Jun Airbus SE 16-Apr Borussia Dortmund GmbH & Co. KGaA 19-Nov AIXTRON SE 20-May Bouygues SA 23-Apr Amadeus FiRe AG 17-Jun Brembo SpA 23-Apr Amadeus IT Group SA 17-Jun Brenntag AG 10-Jun American Water Works Company, Inc. 13-May Brunello Cucinelli SpA 21-May Anheuser-Busch InBev SA/NV 03-Jun Cairo Communication SpA 06-May Anima Holding SpA 31-Mar CaixaBank SA 21-May Aquafil SpA 18-Jun Capgemini SE 20-May ArcelorMittal SA 13-Jun Carel Industries SpA 20-Apr argenx SE 12-May Carlisle Companies Incorporated 06-May Arnoldo Mondadori Editore SpA 22-Apr Carrefour SA 29-May Aroundtown SA 06-May CECONOMY AG 12-Feb Aroundtown SA 24-Jun Cellnex Telecom SA 20-Jul Ascopiave SpA 29-May Cementir Holding NV 20-Apr ASTM SpA 12-Feb CenterPoint Energy, Inc. 24-Apr ASTM SpA 25-May Cerved Group SpA 20-May Autogrill SpA 21-May Chargeurs SA 28-Apr Avio SpA 06-May Claranova SA 29-Jul AXA SA 30-Jun Claranova SA 17-Dec Ball Corporation 29-Apr Coeur Mining, Inc. 12-May Banca Farmafactoring SpA 02-Apr Cofinimmo SA 13-May Banca IFIS SpA 23-Apr Coima Res SpA 11-Jun Banca Mediolanum SpA 16-Apr Compania de Minas Buenaventura SAA 15-Jul Banca Monte dei Paschi di Siena SpA 18-May CORESTATE Capital Holding SA 05-Jun Banca Popolare di Sondrio SCRL 11-Jun CoStar Group, Inc. 03-Jun Banca Sistema SpA 23-Apr Covestro AG 30-Jul Banco BPM SpA 04-Apr Credit Agricole SA 13-May Banco Comercial Portugues SA 20-May Credito Emiliano SpA 30-Apr Bankia SA 27-Mar Credito Valtellinese SpA 24-Apr
53 Company Date Company Date Crossject SA 25-Jun Garofalo Health Care SpA 29-Apr CTT - Correios de Portugal, SA 29-Apr Genfit SA 30-Jun Dai-ichi Life Holdings, Inc. 22-Jun Gensight Biologics SA 29-Apr Daimler AG 08-Jul Gruppo MutuiOnline SpA 28-May Danone SA 26-Jun Hecla Mining Company 21-May Dassault Systemes SA 26-May HelloFresh SE 30-Jun Datalogic SpA 04-Jun Henkel AG & Co. KGaA 17-Jun DBV Technologies SA 20-Apr Hermes International SCA 24-Apr DeA Capital SpA 20-Apr HUGO BOSS AG 27-May Delivery Hero SE 18-Jun Hypoport SE 09-Jun De'Longhi SpA 22-Apr I.M.A. Industria Macchine Automatiche SpA 10-Jun Designer Brands Inc. 14-Jul I.M.A. Industria Macchine Automatiche SpA 27-Oct Deutsche Bank AG 20-May Illimity Bank SpA 22-Apr Deutsche Boerse AG 19-May Immobiliare Grande Distribuzione SpA 11-Jun Deutsche EuroShop AG 16-Jun Infineon Technologies AG 20-Feb Deutsche Pfandbriefbank AG 28-May Infrastrutture Wireless Italiane SpA 20-Mar Deutsche Post AG 27-Aug Infrastrutture Wireless Italiane SpA 28-Jul Deutsche Telekom AG 19-Jun Interpump Group SpA 30-Apr Deutsche Wohnen SE 05-Jun Intesa Sanpaolo SpA 27-Apr DIC Asset AG 08-Jul ISRA VISION AG 14-May Digital Bros SpA 28-Oct Italmobiliare SpA 21-Apr doValue SpA 26-May Juventus Football Club SpA 15-Oct E.ON SE 28-May JXTG Holdings, Inc. 25-Jun Eckert & Ziegler Strahlen- und Medizintechnik AG 10-Jun K+S AG 10-Jun EDP-Energias de Portugal SA 16-Apr KBC Group SA/NV 07-May Ekinops SA 28-May Kirin Holdings Co., Ltd. 27-Mar Elica SpA 28-Apr Leidos Holdings, Inc. 01-May Elmos Semiconductor AG 22-May LEONI AG 23-Jul ENAV SpA 21-May LVMH Moet Hennessy Louis Vuitton SE 30-Jun Encavis AG 13-May Maire Tecnimont SpA 30-Apr ENCE Energia y Celulosa, SA 30-Mar ManpowerGroup, Inc. 08-May Enel SpA 14-May MARR SpA 28-Apr Eni SpA 13-May Masco Corporation 12-May EOS Imaging SA 30-Jun Masmovil Ibercom SA 08-Jul ERG SpA 21-Apr Mauna Kea Technologies SA 02-Jul Erste Group Bank AG 10-Nov Mediaset SpA 10-Jan Esprinet SpA 25-May Mediaset SpA 26-Jun EssilorLuxottica SA 25-Jun MERLIN Properties SOCIMI SA 16-Jun Eurotech SpA 28-Apr Metso Oyj 16-Jun Falck Renewables SpA 07-May Microsoft Corporation 02-Dec FAST RETAILING CO., LTD. 26-Nov Mitsubishi Estate Co., Ltd. 26-Jun Ferrovial SA 16-Apr Mizuho Financial Group, Inc. 25-Jun Fiera Milano SpA 20-Apr Mondo TV SpA 13-May Fiera Milano SpA 02-Oct MorphoSys AG 27-May Fincantieri SpA 09-Jun Mota-Engil SGPS SA 18-Jun FinecoBank SpA 28-Apr Natixis SA 20-May
54 Company Date Company Date New York Community Bancorp, Inc. 03-Jun SeSa SpA 28-Aug Nitto Denko Corp. 19-Jun Shop Apotheke Europe NV 30-Apr Nomura Holdings, Inc. 23-Jun Siemens AG 05-Feb Nordex SE 26-May SMA Solar Technology AG 04-Jun NORMA Group SE 30-Jun Societa Cattolica di Assicurazioni SC 26-Jun NOS SGPS SA 19-Jun Sodexo SA 21-Jan Novabase SGPS SA 12-May SOL SpA 15-May Novacyt SAS 29-Sep Solocal Group 24-Jul Orange SA 19-May Solutions 30 SE 26-Jun ORIX Corp. 26-Jun Suedzucker AG 16-Jul OVS SpA 09-Jul Sumitomo Mitsui Financial Group, Inc. 26-Jun PATRIZIA AG 01-Jul Sumitomo Mitsui Trust Holdings, Inc. 26-Jun Peugeot SA 25-Jun TAISEI Corp. 24-Jun Pfeiffer Vacuum Technology AG 20-May Takeda Pharmaceutical Co., Ltd. 24-Jun Piaggio & C SpA 22-Apr TAKKT AG 07-Jul Plantronics, Inc. 27-Jul Tamburi Investment Partners SpA 29-Apr Plastiques du Val de Loire SA 31-Mar Technogym SpA 23-Apr Poxel SA 24-Jun Telefonica SA 11-Jun PPL Corporation 13-May Thales SA 06-May QIAGEN NV 30-Jun The AES Corporation 23-Apr Quantum Genomics SA 16-Jul Tinexta SpA 28-Apr Rai Way SpA 24-Jun Tobu Railway Co., Ltd. 23-Jun Raiffeisen Bank International AG 20-Oct Tod's SpA 03-Jun Raytheon Technologies Corporation 27-Apr Tohoku Electric Power Co., Inc. 25-Jun RCS MediaGroup SpA 29-Apr Toray Industries, Inc. 23-Jun Reno de Medici SpA 29-Apr Total SA 29-May Repay Holdings Corporation 05-Aug Trevi-Finanziaria Industriale SpA 30-Dec Reply SpA 21-Apr Umicore 30-Apr Retelit SpA 24-Jun UniCredit SpA 09-Apr Rheinmetall AG 19-May Unieuro SpA 12-Jun RIB Software SE 26-Jun Unieuro SpA 17-Dec RWE AG 26-Jun Unione di Banche Italiane SpA 08-Apr S&T AG 16-Jun UnipolSai Assicurazioni SpA 29-Apr SAES Getters SpA 21-Apr Viscofan SA 23-Apr SAF-HOLLAND SA 20-May Vivendi SA 20-Apr SAF-HOLLAND SA 20-May Volkswagen AG 30-Sep Safilo Group SpA 28-Apr Vornado Realty Trust 14-May Safran SA 28-May Vossloh AG 27-May Salini Impregilo SpA 04-May Wacker Neuson SE 30-Jun Salzgitter AG 08-Jul WashTec AG 28-Jul Sanlorenzo SpA 21-Apr Wienerberger AG 05-May Sanlorenzo SpA 31-Aug Xilam Animation SA 10-Jun SAP SE 20-May Zignago Vetro SpA 28-Apr Saras SpA 22-May Zions Bancorporation, N.A. 01-May Scout24 AG 18-Jun zooplus AG 25-Jun Sekisui House, Ltd. 23-Apr
55 APPENDIX 3
List of companies concerned by at least one vote against or one abstention from LYXOR International Asset Management due to climate considerations
Discharge Bayer AG Germany Befesa SA Luxembourg Bilfinger SE Germany Brenntag AG Germany Covestro AG Germany Encavis AG Germany LEONI AG Germany NORMA Group SE Germany Pfeiffer Vacuum Technology AG Germany Suedzucker AG Germany Umicore Belgique Volkswagen AG Germany Vossloh AG Germany WashTec AG Germany Wienerberger AG Austria Election to Board American Water Works Company, Inc. U.S. Brenntag AG Germany Cœur Mining, Inc. U.S. CoStar Group, Inc. U.S. Covestro AG Germany Hecla Mining Company U.S. Umicore Belgique Shareholder proposals Tohoku Electric Power Co, Inc. Japan Total France
56 This document was produced for information purposes only. It does nots constitute any sort of contractual obligation nor an investment advice. LYXOR International Asset Management shall not be held liable for any decisions made on the basis of this document.
LYXOR International Asset Management shall not be liable for the non-exercise or partial exercise of voting rights due to delays, negligence or failures of external providers to LYXOR in transmitting or making available information and documents necessary for LYXOR to exercise its voting rights.
LYXOR International Asset Management reserves the right to update this document at any time.
Lyxor International Asset Management Tours Société Générale 17, cours Valmy 92987 Paris – La Défense Cedex France www.lyxor.com – [email protected]
Lyxor International Asset Management – SAS with share capital of 72,059,696 euros – RCS Nanterre No 419 223 375 Regulated by the French Financial Authority (AMF) – Copyright March 2021 – LYXOR AM. All rights reserved57 .