The 21st edition of its proxy voting guidelines and corporate governance principles is an opportunity to strengthen the sustainability and diversity requirements of the Ethos Foundation. The criteria for approving a sustainability or a climate report submitted to shareholder approval have been detailed. In addition, the re-election of the chairperson of the sustainability committees of companies with high CO2 emissions whose transition plan is deemed unsatisfactory will be refused.

Ethos has published this Thursday its proxy voting guidelines and corporate governance principles for 2022. As a central element of its responsible investment policy, this document constitutes the basis for Ethos’ voting recommendations at general meetings (AGM) of listed companies in Switzerland and abroad. 

This 21st edition includes two major developments. On the one hand, Ethos precisely defines the elements required to approve a sustainability report, a strategy or a climate alignment report that would be submitted to the vote of shareholders. On the other hand, and as already announced last year, Ethos stipulates that it will recommend opposing the re-election of the nomination committee’s chairperson – or the chairperson of the board of directors if such a committee does not exist – if the board of directors of the company does not include at least 20% of women.

Sustainability issues at AGM

While more and more companies are committing to reduce their CO2 net emissions to zero by 2050 (“Net Zero”), Ethos has been putting pressure on the largest emitters of greenhouse gases since last year so that they voluntarily submit their climate plans and strategies to the approval of their shareholders (“Say on Climate”). At the same time, the indirect counter-project to the Swiss popular initiative “For responsible businesses – protecting human rights and the environment” foresees the obligation for listed companies or companies of a certain size to prepare a sustainability report and to submit it to the vote of the shareholders. If the entry into force is scheduled for 2022, the new due diligence duties will apply for the first time in fiscal year 2023. As for the first votes at the AGM, they should be held in 2024.

"In view of this legislative development, it seemed important to us to publish our demands on companies this year already," says Vincent Kaufmann, CEO of Ethos. By communicating our expectations early enough, we want to initiate a constructive dialogue with companies so that they can take our criteria into account when preparing their reports. "

Thus, for Ethos to recommend approving a sustainability report, it will have to be drawn up according to a recognized standard (GRI or SASB) but also contain relevant indicators for each material issue which will have been previously verified by an independent third party. The report should also include quantified and ambitious social and environmental targets and be published early enough before the AGM. Finally, there should be no doubt as to the quality, veracity and completeness of the information published.

Regarding the climate alignment strategies and reports submitted to shareholders' approval, Ethos notably expects companies to publish their CO2 emissions in accordance with the GHG protocol and to set reduction targets compatible with a maximum 1.5° C global warming and covering all direct and indirect emissions (at least 80% of scope 3). They will also have to publish interim reduction targets, detail the measures taken to reduce their emissions and demonstrate that these effectively meet the targets.

Tightening of requirements for the re-election of directors

Ethos will also take a close look at sustainability and diversity criteria in the re-election of board members. Regarding diversity, a new provision in the Swiss Code of Obligations that entered into force in January 2021 requires companies based in Switzerland to respect a gender quota of at least 30% within their board of directors by 2026 and of 20% within the executive management by 2031. However, today only 48 of the 217 SPI companies have at least 30% women on their board of directors and 115 at least 20% women. More disturbing: 61 SPI companies still have no women on their boards.

As announced last year, and while continuing to constructively engage companies to improve the diversity of their management bodies, Ethos will recommend from 2022 to oppose the re-election of the chairperson of the nomination committees – or the chairperson of the board of directors if such a committee does not exist – at companies which will not have at least 20% of women on their board of directors without satisfactory explanation. This requirement will be raised to 30% by 2026 when the transition period for the implementation of the new provision of the Code of Obligations has expired.

Finally, to take into account the increased expectations of investors on sustainability, a new criterion has been added to allow Ethos to oppose the re-election of the chairperson of the sustainability committee (or of the board if the board has not implemented such a committee) for companies with high CO2 emissions that have not implemented a satisfactory climate strategy.

Ethos proxy voting guidelines 2022

Main changes compared to the 2021 edition (in French)

Main changes compared to the 2021 edition (in German)

Corporate Governance
General meetings