Ms Woodland, to be based in Hong Kong, will lead the Sustainable Investment team alongside current team head, Sydney-based Dr Ian Woods. Ms Woodland has 18 years of investment experience in portfolio management and trading roles, primarily with UBS in London and Hong Kong.

For the past year Ms Woodland has worked for ADM Capital, where she focused on sustainable investment programs in Indonesia. She holds a Degree in Financial and Business Economics from Newcastle University (UK), a Masters degree in Corporate Environmental Governance from the University of Hong Kong and is a CFA Charterholder,

Earlier this year Karin Halliday, Senior Manager Corporate Governance with 34 years of experience with AMP Capital, moved from Sydney to London to support the globalisation of the ESG capability.

Additionally, from the start of 2019, Adrian Williams will fulfil the role of ESG Director, Real Estate and Listed Equities. Over the past 10 years Adrian has held senior roles within the Real Estate business of AMP Capital including Head of Corporate Responsibility and Business Platform, Head of Finance and Acting Chief Operating Officer. Outside AMP Capital, Adrian also has more than 30 years of grass roots involvement in the establishment and running of not-for-profit and social enterprises and is passionate about the importance of driving social change.

The appointment of Ms Woodland and Mr Williams increases the size of the Sustainable Investment team to six people. Dr Woods and his team have run the Australian-focused AMP Capital Sustainable Share Fund for more than a decade and supported AMP Capital’s public markets teams globally in integrating ESG into their investment processes.

David Allen, Global CIO, Equities, said: “I am delighted to welcome Emily to the team, whose passion for ESG and impact investment struck me from the first time we met. Under the joint leadership of Emily and Ian, we have great aspirations to deepen and broaden our offerings to clients, both within Australia and globally.

“Investing in companies with long-term sustainable business models is an important part of our investment approach across all asset classes. More specifically, there is growing demand from clients to be able to invest globally in companies that are changing the world for the better, while also delivering strong long-term financial outcomes. Over time, we aim to help clients meet this need.

“With Adrian also joining our Sustainable Investment team, we seek to leverage AMP Capital’s ESG experience across private and public markets, for the benefit of clients.”

AMP Capital is recognised as a global leader for its ESG and responsible investment approach, and recently received A and A+ ratings in the annual reporting and assessment of signatories to the Principles for Responsible Investment (PRI).

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Karin Halliday

Non-financial performance measures for executives play an important role in encouraging companies to build the capability required to deliver strong financial results and sustainable returns for shareholders, according to AMP Capital.

AMP Capital’s latest Corporate Governance Report looks at the complex issue of executive pay and how the tendency to categorise non-financial measures as ‘soft’ has had the effect of devaluing their importance.

AMP Capital Senior Corporate Governance Manager Karin Halliday said management should be incentivised and rewarded for what they have done and also how well they have set the company up for future performance. This means using financial and non-financial measures.

Ms Halliday said: “Total reliance on financial performance measures can be harmful if they discourage executives from focusing on the strategic goals linked to building and enhancing the capability required for long-term value creation. Over the long term, non-financials will impact financial outcomes. The timing is just less clear. For example, profit growth attained at the expense of customer satisfaction is not sustainable nor is profit growth achieved by underpaying workers or neglecting legal responsibilities.

“Given the impact factors such as employee engagement or workplace diversity or culture can have on company value, there will be times when it makes sense to link executive bonuses to such measures. At the end of the day, executives focus on what gets rewarded. If one’s pay, wealth and reputation depend on how successfully certain things are done, it is natural that this is where attention will be directed.”

Ms Halliday noted that shareholder support for such hurdles can only be guaranteed when there is a clear link to long-term value creation and companies can be trusted to judge performance fairly.

Ms Halliday added: “To assist shareholders, companies should articulate the nature and purpose of the hurdles as clearly as possible, indicate how the quality of performance will be judged and identify what is considered to be over and above the day-to-day requirements of the role. It’s also important that performance measures are objective and not easily ‘game-able’. Shareholders want evidence that ‘at-risk pay’ is, indeed, ‘at risk’.”

Within the report, AMP Capital also identified the prominent ESG trends investors should watch. They include:

– Sugar and obesity: a risk to earnings.
– Disruption: technology with the potential to upend mature industries.
– Climate change: momentum on renewables will continue.
– Corporate governance: CEO pay and persistence of bonuses.
– Social licence to operate.
– Supply chain: scrutiny broadens beyond the garment sector.
– Food and agriculture: human resistance to antibiotics.

Ms Halliday said: “As long-term investors, understanding the way the world is changing is crucial. At any point in time, a complex web of trends is shaping industries, creating headwinds and fuelling tailwinds. For instance, sugar is emerging as one of the most prominent investments risks for the global food and beverage industry while technological change is heavily impacting manufacturing, finance and retail. AMP Capital is also now investigating other supply chains outside of the garment sector, particularly electronics and food and agriculture. Each of these trends have the potential to materially affect investment returns over the long term.”

In addition, the AMP Capital Corporate Governance Report examines AMP Capital’s new ethical framework, highlights the recent AMP Capital paper on the roadblocks impacting gender diversity on Australia’s corporate boards, and summarises AMP Capital’s proxy voting and engagement activity.

For calendar year 2016, AMP Capital submitted votes on 1156 resolutions at 221 company meetings.Of these resolutions, 93 per cent were supported.AMP Capital either voted against or specifically abstained from voting on 7 per cent of resolutions.

While the 2016 proxy season saw a high number of strikes against remuneration reports, AMP Capital’s more supportive vote outcomes reflect both the quality of companies we hold and constructive conversations with companies.

The full report can be downloaded at: http://www.ampcapital.com.au/about-us/esg-and-responsible-investment/corporate-governance

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Karin Halliday

Driverless cars, the sharing economy and blockchain are three of the top sources of disruption for Australia’s insurance and diversified financial services sector, according to AMP Capital’s latest Corporate Governance Report.

Disruption is an integral part of AMP Capital’s environmental, social and governance (ESG) research into Australian companies. The way companies position  themselves for change provides ESG analysts with unique key investment insights.

AMP Capital’s analysis of the financial services sector found the five companies in the sector with the highest ESG scores outperformed the five companies with  the lowest ESG scores every year over five consecutive years.

AMP Capital Corporate Governance Manager Karin Halliday said: “Disruption is proving to be one of the buzz words of 2016 across all sectors but we have  been considering the impact of disruption on our portfolio for a number of years. Businesses that have succeeded for decades will become unseated by innovative start-ups and tech companies if they don’t adapt to rapid change.

“Our deep dive confirmed the potential impact to insurers from driverless cars and the sharing economy is large. Interestingly, we found if automation technology reduces car collisions to the extent expected, motor premiums may fall by up to 54 per cent without impacting insurers’ margins. This neatly demonstrates disruption in action: it can bring opportunities as well as challenges.”

While there has already been much discussion about blockchain’s potential to disrupt the payments system, the potential for capital markets has only just started to be explored.  The report notes potential benefits from the use of blockchain in capital markets such as more visible and verifiable dark pools; permanent, time-stamped, transparent records of all  transactions and trades; and the automation of post- trade processes.

This edition of the Corporate Governance Report also investigated how investors are managing climate change risk in their portfolios almost a year after the Paris Climate Change Agreement.

There are three main climate  change risks that  manifest themselves in equity and corporate bond portfolios:

• Impact on company valuations as a result of policies to reduce the greenhouse gas emissions of companies (and their value chains) within a portfolio.
• Impact on company valuations of fossil-fuel producers and distributors as a result of policies to reduce greenhouse gas emissions.
• Impact on company valuations from the physical impacts of climate change.

AMP Capital has undertaken significant work on all of these issues, most recently analysing the impact on company valuations for its equity portfolios and how best to communicate the greenhouse gas exposure of investments to clients.

Ms Halliday  said: “We’ve found investors must first understand their greenhouse gas exposure of the companies but adding up all of the emission figures without careful  consideration may lead to a risk of double or triple counting the same emissions, which would artificially inflate the portfolio’s assessed level of exposure.

“There is also a need to carefully choose the context in  which investors are considering these emissions. Given investors’ exposure is a function of their investment, it makes sense to consider emissions in the context of a company’s  market capitalisation rather than a company’s revenue.”

AMP Capital’s analysis has found the potential exposure for investors in the  MSCI  World index was 134 tonnes of  carbon dioxide per  million dollars of company market capitalisation or 0.134 tonnes of carbon  dioxide per $1,000 invested in the MSCI World Index as measured on an equity share of emissions basis. Four sectors – utilities  (41 per cent), materials (21 per cent), energy (18 per cent) and transportation (6 per cent) – make up the bulk of the index’s exposure.

For investors in the ASX 200, the exposure was 130 tonnes of carbon dioxide per million dollars.  While investors in  the MSCI Emerging Markets Index are estimated to have an exposure of 373 tonnes of carbon dioxide per million dollars due to greater exposure to emission-intense sectors.

The AMP Capital Corporate Governance Report also provided an update on the progress made with regards gender  diversity, global corporate governance insights and an overview of AMP Capital’s proxy voting and engagement activity.

For financial year 2015/16, AMP Capital submitted votes on 1388 resolutions at 272 company meetings.  Of these  resolutions, 91 per cent were supported. AMP Capital  either voted against or specifically abstained from voting on 9  per cent of resolutions.

AMP Capital submitted  votes on 237 remuneration  reports.  In total, 86 per cent of reports were supported.

The Corporate Governance  Report can be downloaded here.

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Karin Halliday

Australia’s  chief executives receive, on average, more than double the total pay of the  second highest paid executive in their company, according to an analysis of  executive pay in AMP Capital’s latest Corporate Governance Report.

The analysis of pay received by executive teams in the S&P/ASX 200^[1] also looks at the way in which executive pay is set and reviewed.

AMP Capital has found that, including bonuses, the average CEO was paid a total of  $3.8 million in 2014.

Excluding the CEO,  the average key executive^[2] at a company in the S&P/ASX 200 received $1.4 million while the second  highest paid executive received an average of $1.6 million.

AMP Capital Corporate Governance Manager Karin Halliday: “CEOs deserve to be paid a  premium for running a listed company in Australia as every facet of their role  is crucial to investors.  As investors,  we are particularly interested in the board’s rationale for the size and  composition of executive pay.  Executive  remuneration should be weighted towards being a fair payment for the role for which the executive has been hired.  We  look for evidence that executive pay is reasonable and aligned with shareholder  interests.

“We recognise the challenge of setting pay, particularly when a new CEO  begins. We encourage companies to set  executive pay with reference to the value the executives provide rather than  simply allowing past payments or global benchmarking studies to determine future payments. We also encourage  boards to be transparent about the factors they consider when setting pay so shareholders can assess it appropriately.”

The Corporate Governance Report has also revisited the topic of gender diversity  among Australian listed company boards, finding continued improvement.  In 2010, 60 per cent of the companies AMP  Capital held had no women directors. By 2015, this number had fallen to 21 per cent, which is tracking in the right  direction although more remains to be done.

Ms  Halliday said: “AMP Capital believes there is a sound business case for  improving gender diversity. In addition  to demonstrated links between performance and the number of women on a board, we have found that when companies have more women directors, they present fewer  characteristics of poor governance.”

Given the proven benefits of diversity, AMP Capital encourages companies to focus on developing their senior women and addressing unconscious bias by casting the  net more widely when making appointments.

The AMP Capital Corporate Governance Report also includes an analysis of what  investors should make of the Paris Climate Change Agreement as well as an overview of AMP Capital’s proxy voting and engagement activity.

During 2015, AMP Capital submitted votes on 1453 resolutions at 279 company meetings. Of these resolutions, 90 per cent were supported.AMP Capital either voted against or  specifically abstained from voting on around 9 per cent of resolutions. AMP Capital was excluded from voting on 1 per cent of resolutions due to conflicts of interest^[3].

In  the full year 2015, the number of remuneration reports AMP Capital supported continued  to rise; this year 84 per cent of reports were supported, up significantly from  the 2008 low of 61 per cent.

^[2]A key executive is defined by accounting standard AASB124 as an  executive that has the authority and responsibility for planning, directing and  controlling the activities of the company. AASB124 requires companies to report  remuneration paid to these key executives in their accounts.

– See more at: http://media.amp.com.au/phoenix.zhtml?c=219073&p=irol-newsArticle&ID=2144447#sthash.QHSpOOw9.dpuf

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The report states shareholders are increasingly interested in how succession planning drives the quality of leadership and equips companies to capitalise on emerging opportunities and tackle short and long term challenges.

Quality of leadership is one of the many intangible factors AMP Capital considers when assessing investment opportunities.

AMP Capital Corporate Governance Manager Karin Halliday said shareholders who take an active interest in the more intangible drivers of value, such as leadership and succession planning, can make better informed investment decisions.

“A board needs to know where a company is heading and whether they have the right management in place to take them there.  Shareholders play a valuable role in engaging with boards and shining a light on such issues.

“Simply asking directors about governance issues such as succession planning elevates the importance of these topics and encourages directors to address them,” said Ms Halliday.

“The same thing happened with CEO pay when the ‘Two-Strike’ rule was introduced.  While companies know how they will remunerate and what management skills they need, the increased scrutiny has led to constructive dialogue with shareholders.”

The report also provides an update on the benefits of board gender diversity.  AMP Capital has found the number of companies it invests in that have no women directors has fallen from 60 per cent to 34 per cent in the last four years.

Ms Halliday welcomed the improved diversity. “In my assessment, boards that have no women are more likely to have other governance issues such as board composition concerns, related party issues and remuneration concerns,” she said

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Companies and shareholders need to understand each other’s objectives.

Addressing more than just near-term share prices is key to shareholder and company success according to the latest AMP Capital Corporate Governance Report.

The AMP Capital Corporate Governance 2013 mid year report states that responsibility falls both to companies to understand and also to shareholders to clarify their objectives before a mutually beneficial relationship can be established.

AMP Capital Corporate Governance Manager Karin Halliday says companies are under increasing pressure to deliver a complicated set of outcomes for their diverse shareholders.

“Companies and shareholders are not all the same, each have different objectives and different challenges. We’d all benefit from understanding each other’s position but to do that shareholders need to be clear about what they want and have a way to communicate that effectively,” Ms Halliday said.

“Shareholders must also give companies room to successfully balance short and long-term drivers of value.”

Ms Halliday warns that companies and shareholders who focus on the short-term may be sacrificing tomorrow’s growth for today’s gain. The report provides an update following the recent tragedies in the Bangladeshi garment industry where sustainable practices were overlooked for short-term reward.

The Corporate Governance Report is released twice a year and provides a summary of AMP Capital’s corporate governance activity. AMP Capital takes seriously its responsibilities as an investment manager, as an agent of shareholders in companies and as a steward of its clients’ assets.

The latest report includes an analysis of the first half of the 2013 proxy season, detailing the votes cast and the governance issues considered. Additionally it provides a snapshot of voting statistics for internally-managed global portfolios.

AMP Capital submitted votes on over 338 resolutions at 72 company meetings in the first half of 2013 in Australia. Of these resolutions 83 per cent were supported. AMP Capital either voted against, or specifically abstained from voting on around 16 per cent of resolutions including resolutions relating to remuneration reports and incentive plans.

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