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The International Corporate Governance Network has published a draft of its revised Global Governance Principles (the “GGP”) as part of a consultation with ICGN members on changes to the GGP. The ICGN is an investor-led NGO whose members are based in 50 countries throughout the world and are responsible for assets under management in excess of $54 trillion. Through the GGP, the ICGN seeks to promote consistent and effective standards of governance internationally. The GGP are primarily intended for use by publicly listed companies and large, unlisted companies which aspire to high standards of corporate governance.
In its commentary regarding the proposed changes to the GGP, the ICGN has highlighted that the key themes pervading these amendments include a greater emphasis on corporate purpose and ensuring that sustainability issues are a meaningful part of board oversight and the governance process. These themes are reflected in an increasing focus in the GGP on: (i) the effectiveness of the company’s policies and practices in relation to ESG factors; (ii) ensuring that boards address and report on systemic risks to their businesses, particularly those identified in the United Nations Sustainable Development Goals; and (iii) the use of globally recognised ESG reporting standards and frameworks that might allow for the consistency and comparability of ESG standards internationally. The specific amendments to the GGP include an explicit recognition of the relevance of ESG matters in directors’ fiduciary duty to promote the long-term success of their companies and the growing importance that climate change will have for future ESG reporting.
These proposals coincide with the ICGN’s recent announcement of its policy priorities for 2020-21, in which the ICGN has set out those projects that will be the focus of its policy committees in the year ahead. These substantiate the ICGN’s increasing focus on ESG matters and include: (i) a viewpoint on climate change as a systemic risk for investors; (ii) a comment letter to the CFA Institute on ESG disclosure standards in investment services; and (iii) a viewpoint on remuneration, ESG metrics and quantum.
These proposed changes to the GGP reflect growing interest from investor bodies in ESG factors since the publication of the current version of the GGP in 2017. It is also a reminder of increased momentum on the consolidation and standardisation of ESG governance and disclosure requirements, which we reported on in a recent article.
The ICGN’s consultation regarding the proposed changes to the GGP will close on 31 January 2021.
Written by Guy Francis and Pete Dunn
“Since the 2017 GGP were published there has been considerable societal change, including the disruptive effects of Covid-19 on public health and economic activity, ethnic and social tensions and the growing concerns about climate change. The role and purpose of the corporation has faced renewed scrutiny, and stakeholder capitalism has emerged as a challenge to the model of shareholder primacy that prevails in many markets.”
