Stewardship

EOS at Federated Hermes – changing companies for good, from within

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EOS at Federated Hermes (EOS) is a pioneer of effective stewardship and a world-leading provider. Founded in 2004 on a legacy dating back to 1983, EOS advises on more than $1.3tn in assets under advice to deliver corporate engagement and proxy voting services.

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.

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EOS: at a glance

$ 0 tn
in assets under advice
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companies engaged in 2020
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voting recommendations for meetings made in 2020
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number of discussions held with regulators and stakeholders in 2020
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Team members with diverse industry experience
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Languages spoken
Source: Federated Hermes as at 31 December 2020.

Our stewardship services

Engagement

We engage with companies that form part of the public equity and corporate fixed income holdings of our clients to seek positive change for our clients, the companies and the societies in which they operate.
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Voting
  • 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
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Screening
  • Monitoring clients’ portfolios to regularly identify companies that are in breach of, or near to breaching, international norms and conventions
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Public Policy
  • 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+
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Advisory
  • 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

The benefits

EOS is a leading stewardship service provider.

  • Enables institutional shareholders around the world to meet their fiduciary responsibilities and become active owners of their assets
  • Helps to build a global financial system that delivers improved long-term returns for investors and more sustainable outcomes for society

Client focus

EOS works on behalf of pension funds and other large, institutional investors.

  • EOS has significant leverage, representing assets under advice of $1.3tn as of 31 December 2020
  • The team’s experience, languages and cultural understanding equip them with the credibility to access and maintain constructive relationships with company boards

Relationships & access

EOS pools the priorities of like-minded investors.

  • Consultations and feedback from clients help to determine the priorities of EOS’s Engagement Plan

Tailored engagement

EOS develops engagement strategies specific to each company informed by its deep understanding across sectors, themes and markets.

  • Addresses the most material ESG risks and opportunities through long-term, objectives-driven and continuous dialogue at the board and senior executive level

Meet our stewardship experts

Our investment, stewardship and advocacy experts are industry leaders in practice and philosophy.
Hans-Christoph Hirt
Head of EOS
Dr Hans-Christoph Hirt is an executive director and board member at EOS and as head of the organisation leads a multi-national team ensuring the sustainable success of the business.
Bruce Duguid
Head of Stewardship
Lisa Lange
Engagement, EOS
Hannah Shoesmith
Engagement, EOS
Jaime Gornszteijn
Engager

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.

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1St Michael was a brand owned and used by Marks & Spencer from 1927-2000.

The late Ralph Quartano, our first CEO, argues publicly: “It is important that St Michael is on the side of the angels1” and stop extending special loans to its directors.

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We campaign for FTSE 100 companies to:


  • End long-term rolling contracts for directors
  • Split CEO and chair roles

The initiative, later adopted by the UK Corporate Governance Code, was led by the late Alistair Ross Goobey, our CEO from 1993-2001

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Our first team dedicated to engaging companies on corporate governance is established. It grows to focus on companies in the UK, Europe and Japan

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We coin the term ‘engagement’ to define our long-term, collaborative work with companies to improve their ESG and strategic performance
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EOS at Federated Hermes, our stewardship services team, is established
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  • We lead the drafting of the PRI and become a founding signatory
  • We hold our first AGM intervention outside the UK at Volkswagen
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1Our confidential conference, with high calibre guest speakers, in which our clients come together to discuss and increase knowledge and best practice thinking about stewardship and engagement as a collective group. Clients have the ability to shape our strategy by providing input to our Engagement Plan.

We hold our first Client Advisory Council1

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First Dutch and Australian clients
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  • We lead the first proxy fight at a DAX-30 company in Germany
  • We sign the UK Stewardship Code
  • We relaunch our Responsible Ownership Principles
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  • We co-convene asset owners and companies in development of the first Remuneration Principles
  • Our AUA reaches $163bn
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  • We hold our first AGM intervention in Asia at Hon Hai Precision Industry
  • We provide input into the Japanese and Malaysian Stewardship Codes
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  • We join the Aiming for A coalition on climate change
  • Our AGM intervention and successful engagement leads to management changes at Deutsche Bank
  • First US client
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  • We work as a member of the drafting committee for the Brazilian Stewardship Code
  • We attend the Paris Agreement ratification - the first legally binding global climate deal
  • We publish “Remuneration Principles: Clarifying Expectations”
  • We are involved in successful shareholder resolutions at mining companies as part of the Aiming for A coalition
  • First Japanese and Swedish clients
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2 Our confidential conference, with high calibre guest speakers, in which our clients come together to discuss and increase knowledge and best practice thinking about stewardship and engagement as a collective group. Clients have the ability to shape our strategy by providing input to our Engagement Plan.
  • First Belgian client
  • Our AUA reaches $496bn
  • Federated Investors acquires a 60% stake in Hermes Investment Management
  • Academic research on EOS data shows that successful engagement leads to reductions in downside risk2
  • Leading or co-leading engagements on the most companies in the Climate Action 100+ initiative
  • Our team expands in North America
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  • Partnership with ACSI, a highly regarded stewardship provider for Australian asset owners
  • EU Shareholder Rights Directive II comes into effect
  • Co-author of “Stewardship: the 2020 vision”, with Saker Nusseibeh, CBE, CEO – International, at Federated Hermes and the Responsibility Office
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  • Our stewardship team expands to include 14 nationalities, 16 languages, and diverse industry and academic experience
  • Our AUA reaches $1.2tn as of 30 September 2020

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.

2006 – present

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.
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2009 – present

Seeking a greener horizon

Our engagement with BP prior to the Deepwater Horizon drill rig explosion found that its health and safety function was becoming excessively decentralised. Following the disaster, we intensified our efforts to improve BP’s risk management processes and emergency response plans, and engaged across the oil and gas industry to test the robustness of risk oversight structures. We also engage with BP on climate change. 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 2019 BP supported a shareholder resolution that we had developed, which called on the company to set out a strategy consistent with the goals of the Paris Agreement.

We also participated in another collaborative engagement with a group of institutional investors, which sought an alignment of BP’s accounting assumptions with the goals of the Paris Agreement. We raised questions on behalf of our clients and as the co-lead for Climate Action 100+ at BP’s annual general meeting, asking the company to reconsider its assumptions for Paris-consistent investment and for it to review its long-term oil-and-gas price assumptions in light of the coronavirus pandemic. We also indicated our support for calls that BP ensure its accounts take the Paris Agreement fully into consideration.

Following these requests, BP recently reduced the long-term oil-and-gas price assumptions used in its financial statements, incurring substantial estimated impairments of $13-17.5bn, equivalent to 13%-17% of its 2019 net assets. This move not only offers shareholders greater visibility about the firm’s climate-related risks, but also gives investors greater confidence that BP can deliver on its Paris Agreement-related commitments.

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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.

Watch our video: our vision for how stewardship can create change

Want to find out more about our stewardship services?