7 January 2020: Writing for the Financial Services Faculty, Carlos Martin Tornero covers how social movements are reaching the boardroom.

The year 2020 might be seen, in retrospect, as the time when the causes of social and environmental movements resonated among institutional investors. 

Building upon the climate actions of Extinction Rebellion and against the backdrop of a pandemic highlighting the inescapable human dimension of our economies, some investors translated those issues into the language company boards can better understand. 

The killing of George Floyd exacerbated social issues like inequality and human rights and put the spotlight on the S of ESG factors, while NGOs active in the field of ESG investment upped the ante by engaging companies and filing shareholder proposals addressing environmental and social issues.

NGOs like As You Sow in the US, ShareAction in the UK and Follow This in Europe found allies in institutional investors and together framed the demands of social movements as financially material issues for companies. 

As such, 2020 saw a record of investor support for environmental shareholder proposals, with majority votes at S&P 500 companies such as Chevron or Procter & Gamble. 

Regulatory pressure has also been a contributing factor. In the European Union, legislators are working on EU laws that could introduce new directors’ duties aimed at monitoring the supply chain more closely. 

The reform might require companies to conduct due diligence on environmental and social issues, introducing a so-called duty of vigilance at board level. Disclosure requirements for companies are also evolving to embed in corporate reporting not only climate-related risks but social issues and more broadly the UN Sustainable Development Goals. 

The European Union and the trustees of the IFRS Foundation are looking into whether mandatory sustainability reporting standards should be introduced, thus covering the underlying issues brought up by social justice campaigners. 

You can read a full feature on the issues raised in this article here.