At the international business of Federated Hermes, we believe that stewardship is vital in achieving our purpose: generating Sustainable Wealth Creation.
EOS’s constructive engagements with corporate boards and executives on environmental, social and governance and strategic issues enable investors to be more active owners of their equity and fixed-income assets, supporting stronger financial performance and better outcomes for society. With almost half of its engagements now more than nine years in duration, EOS is committed to realising positive, enduring change.
EOS spearheads collaborative engagements with investors worldwide and its expertise has been called upon to help develop stewardship codes in developed and emerging markets.
Known as an industry leader in working with investors to change companies for good, from within, EOS continues to evolve best-practice stewardship.
EOS: at a glance
Our stewardship services
- Making recommendations that are, where practicable, engagement-led
- Involves communicating with company management and boards around the vote
- Takes account of regional differences, cultural norms and the relevant stage of the stewardship journey
- Monitoring clients’ portfolios to regularly identify companies that are in breach of, or near to breaching, international norms and conventions
- Engaging with legislators, regulators, industry bodies and other standard-setters
- Helping to shape capital markets and the environment in which companies and investors can operate more sustainably
- Joining forces with like-minded investors to make an impact, for example through Climate Action 100+
- Helping our clients to meet stewardship regulations
- Working with our clients to develop their responsible ownership policies
- Drawing on our extensive expertise and proprietary tools to advance their stewardship strategies
The EOS advantage
Evolution of EOS
Armed with a long-standing history of active ownership, we founded EOS in 2004. Its history is synonymous with the adoption and growth of responsible investment.
Agents of change
Key EOS engagements over the past 16 years
2008 – 2011
Germany’s first proxy fight
Our multi-year engagement with Infineon culminated in a 2010 proxy fight with the computer chipmaker – the first such battle at a blue-chip firm in Germany. Following an 88.6% fall in its stock price over 11 years, we led shareholder opposition to the nomination of a long-standing non-executive director as supervisory board chair. This contributed to his exit a year later and the election of a new independent chair.
Persistent AGM pressure
Following a compliance crisis, we engaged Siemens on strengthening its governance, and raised our concerns about the composition and effectiveness of its supervisory board. We spoke at seven of the company’s AGMs between 2007 and 2018 pressing for board refreshment, and in 2014 for timely succession planning for the chair. Over the period of our engagement the company has improved its corporate governance in many regards, including supervisory board composition by adding diversity and critically, expertise more relevant to the development of the business, such as in engineering, digitisation and software.
Following the spin-out of Siemens Energy AG in September 2020, we started engagement with the new entity, which became the focus of a Climate Action 100+ (CA100+) engagement. We attended the shareholder meeting in February 2021 and asked questions focused on measures to align the energy sector with the Paris Agreement and to address the climate emergency. We urged the company to set science-based targets that cover Scope 3 emissions. We also asked what processes the company has in place to ensure that the activities and positions of external membership bodies, are aligned with its own on climate change.
Siemens Energy AG announced its science-based target on 22 April 2021, in line with our engagement. This covers the company’s target to become climate-neutral by 2030 (Scopes 1 and 2). Following our request for targets to cover Scope 3 emissions, the company announced that by 2030 the greenhouse gas emissions of products in the gas and power segment (Scope 3) are to be cut by just under a third (27.5%) over a lifetime, versus 2019. In 2021 the Science-Based Targets initiative confirmed that Siemens Energy AG’s CO2 reductions contribute to limiting global warming to 1.5°C, in line with the Paris Agreement. EOS continues to lead the CA100+ engagement, focusing on transparency around lobbying practices.
Seeking a greener horizon
We have engaged with oil major BP on climate change for more than a decade. As part of Climate Action 100+, a collaborative engagement of more than 370 investors and their representatives seeking greenhouse gas emissions reductions from the world’s largest emitters, we co-lead the engagement with BP. In 2018, we intensified our engagement, as we were concerned about whether the company’s growth strategy was consistent with the Paris Agreement goals. We acknowledged BP as a relative leader on climate change at that time, with market leading targets to manage its operating emissions. However the company had not disclosed a plan to reduce emissions associated with its products – so-called ‘scope 3’ emissions. These are critical to the future of the industry and the energy transition.
To accelerate change, we led the drafting of a shareholder resolution calling on the company to set out its strategy consistent with the Paris goals. We worked collaboratively with BP to ensure the resolution was in the company’s long-term interests. The resolution gained management support and was co-filed by nearly 10% of the shareholder base, passing with a very large majority at the AGM in 2019.
In early 2020, the newly-appointed CEO, Bernard Looney, announced a new ambition for the company to transition to net zero by 2050 or sooner, supported by 10 underpinning corporate aims. This covered Scopes 1, 2 and 3 emissions – i.e. carbon in the company’s products.
The company has since laid out a detailed strategy by which it intends to transition the energy it produces from high carbon to low carbon, including short, medium and long-term targets on the journey to net zero. The company also has market-leading disclosures demonstrating how it evaluates new material capex investments for consistency with the Paris Agreement goals. EOS further intervened at the 2020 AGM, asking the company to reconsider its assumptions for Paris-consistent investment and its long-term oil-and-gas price assumptions, in light of the coronavirus pandemic. During its Q2 2021 results, BP reduced the long-term oil-and-gas price assumptions used in its financial statements, giving shareholders greater visibility about the firm’s climate-related risks. We continue to engage with BP to seek assurances that it has in place a rigorous investment process, with economic criteria consistent with the company’s purpose and a range of price scenarios including assumptions consistent with the Paris goals.
2010 – present
Engaging for workers’ wellbeing
Following a series of employee suicides, we engaged with Hon Hai about working conditions, human capital management and its governance. As part of this we visited the company’s facilities multiple times, spoke with employees, and raised concerns directly at the 2014 AGM. At the 2018 AGM we also engaged the Chair/CEO about succession planning, requesting separation of the CEO and Chair roles. He stepped down in 2019 and Hon Hai instituted a committee-style governance structure.
2010 – present
Catalysing renewal at the top
After several years of engaging with Microsoft, mainly on social issues, including co-hosting a meeting in Washington DC with the company on human rights, we switched our attention to governance. We called for Steve Ballmer to be replaced as CEO, as we were concerned about the strategy and culture under the long-serving CEO. We also asked that co-founder Bill Gates stand down as chair, because he was not independent, and was more focused on his foundation. Both of these requests had been met by Q1 2014, helping to pave the way for the company’s renewal under an independent chair and CEO. We also sought refreshment of the board, which the independent chair led skilfully after his appointment, completing our objective in Q3 2015.
The future of stewardship
Active stewardship must be at the heart of investment management firms’ activity and purpose.