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2020 ESG trends to watch 

ESG themes are long-term, but some can emerge with sudden force. We are watching five trends we believe will unfold in 2020 to catapult ESG investing into the new decade.

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CEO Pay: Trick or Treat? 

Some large asset owners are increasingly coming to believe that many executive pay schemes don’t align the interests of CEOs and investors. There appears to be an increasing focus on pay plan simplicity and transparency.

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Uber vs. Lyft: Who’s at the wheel? 

Two companies, one highly disruptive business model, multiple big challenges looming. Few IPOs in recent memory have attracted more attention – or disappointed more decisively, initially – than the IPOs of ride-sharing groups Uber and Lyft. At the end of June 7, 2019, two months following its IPO, Lyft’s share price traded at 17.7% below its IPO price, while Uber’s ended that same day 1.9% lower. Could ESG considerations have played into investors’ thinking?

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Out of Whack: US CEO Pay and Long-Term Investment Returns 

Last year, we asked whether pay awards to U.S. chief executive officers reflected long-term shareholder returns, and found they did not. The bottom fifth of companies by equity incentive award outperformed the top fifth by nearly 39% on average on a 10-year cumulative basis.

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Are CEOs Paid for Performance? 

Has CEO pay reflected long-term stock performance? In a word, “no.”.
Companies that awarded their Chief Executive Officer (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S. companies from 2005 to 2015.

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OWNERSHIP FORMS AND GOVERNANCE CONTROL 

Just as the MSCI ACWI Index includes companies representative of a diversity of industries and equity markets, it also includes a diversity of ownership forms, ranging from fully controlled companies to those companies that are so widely held that their largest shareholder owns no more than 2% of shares.

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DO ENTRENCHED BOARDS HELP OR HURT STOCK PERFORMANCE? 

Do entrenched boards help or hurt stock performance of publicly held companies? We found that the involvement of entrenched boards, particularly at family-dominated firms, was a positive attribute over the five-year period ending March 2015, in both the U.S. and emerging markets.