European Insights

Share:

ESG and Shareholder Value

03 September, 2019

Perhaps indicative of the growing interest in the subject matter, last week saw widespread media coverage of an announcement by one of the largest U.S. business groups, The Business Roundtable. This collective, which represents 181 companies including Apple, Goldman Sachs, and Coca-Cola, has broken with decades of precedent by re-issuing its Statement of Corporate Purpose, but eliminating the founding principle of shareholder primacy. The statement now delivers five principles as commitments to the stakeholders in member companies:

  • Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
    Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
  • Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
  • Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
  • Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

Shareholder primacy has been a staple of business practice and education since Milton Friedman's 1970 article in the New York Times Magazine promoted the concept that the sole purpose of business was to maximise profits for shareholders. Accordingly, this shift by leaders of the U.S. business community carries weight, even if it merely speaks to a view held by a number of industry leaders. How (or perhaps if) companies will implement this approach remains to be seen.
Regardless of the scale of any corporate adoption, there have been a few leading examples that have rejected a profit maximisation philosophy, some even accelerating this progress in more recent times. One of these is Unilever, which has repeatedly demonstrated this through social and environmental programmes, and most recently has taken the almost unheard of step of ensuring that its products have an individual purpose beyond driving corporate profits. These have historically ranged from the prevention of infectious diseases, all the way to combatting climate change.

As set out in our recent paper 'ESG andShareholder Value' - our investment team recognises how investors, through the appropriate application of certain ESG factors, can help to ensure not only a more balanced and long-term approach to business, but also that investors can seek long-term value through their investments.

Back to articles

WANT TIMELY NEWS AND UPDATES STRAIGHT TO YOUR INBOX?

Subscribe to our newsletter here

 

European Equity Strategies

Learn more
This has been provided by RBC Global Asset Management (RBC GAM) for informational purposes only and may not be reproduced, distributed or published without the written consent of RBC Global Asset Management Inc. (RBC GAM Inc.). In Canada, this website is provided by RBC GAM Inc. (including Phillips, Hager & North Investment Management). In the United States, this website is provided by RBC Global Asset Management (U.S.) Inc., a federally registered investment adviser. In Europe, this website is provided by RBC Global Asset Management (UK) Limited, which is authorised and regulated by the UK Financial Conduct Authority. In Asia, this website is provided by RBC Global Asset Management (Asia) Limited, to professional, institutional investors and wholesale clients only and not to the retail public.  RBC Global Asset Management (Asia) Limited is registered with the Securities and Futures Commission (SFC) in Hong Kong.  Any funds/ strategies referenced in this website are not registered in, nor may be sold, issued or  offered in Hong Kong, China, Singapore, Korea or Taiwan and this website does not contemplate the marketing, offer, issue or sale of any funds/strategies in these jurisdictions.
RBC GAM is the asset management division of Royal Bank of Canada (RBC) which includes RBC GAM Inc., RBC Global Asset Management (U.S.) Inc., RBC Global Asset Management (UK) Limited, RBC Global Asset Management (Asia) Limited, and BlueBay Asset Management LLP, which are separate, but affiliated subsidiaries of RBC. 
This website has not been reviewed by, and is not registered with any securities or other regulatory authority, and may, where appropriate, be distributed by the above-listed entities in their respective jurisdictions. Additional information about RBC GAM may be found at www.rbcgam.com.

This website is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. The investment process as described in this website may change over time. The characteristics set forth in this website are intended as a general illustration of some of the criteria considered in selecting securities for client portfolios. Not all investments in a client portfolio will meet such criteria. RBC GAM takes reasonable steps to provide up-to-date, accurate and reliable information, and believes the information to be so when printed. RBC GAM reserves the right at any time and without notice to change, amend or cease publication of the information. 
Any investment and economic outlook information contained in this website has been compiled by RBC GAM from various sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no responsibility for any errors or omissions. 

All opinions and estimates contained in this website constitute RBC GAM›s judgment as of the indicated date of the information, are subject to change without notice and are provided in good faith but without legal responsibility. Interest rates and market conditions are subject to change. 
Return estimates are for illustrative purposes only and are not a prediction of returns. Actual returns may be higher or lower than those shown and may vary substantially over shorter time periods. It is not possible to invest directly in an unmanaged index.
A note on forward-looking statements 

This website may contain forward-looking statements about future performance, strategies or prospects, and possible future action. The words “may,” “could,” “should,” “would,” “suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties about general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.
® / TM Trademark(s) of Royal Bank of Canada. Used under licence. 
© RBC Global Asset Management Inc. 2019