Company engagement: Taiwan Semiconductor Manufacturing
This quarter, we escalated our engagement with Taiwan Semiconductor Manufacturing (TSMC) on board gender diversity. We contacted TSMC in 2021 as part of our targeted outreach to 24 key companies with insufficient board diversity. Following our initial letter to the Chair, we received a response highlighting the company’s awareness of investors’ focus on gender diversity, and indicating that diversity of the Board was a key consideration when evaluating director candidates.
However, following the company’s 2022 AGM, there was no measurable improvement, with only one female board director in place. Furthermore, this director had already served on the board for eleven years, potentially setting off alarm bells around independence given her length of tenure. We therefore wrote to the Chair in July 2022, strongly expressing our concerns and communicating that we would like to see progress before the next director elections.
The Board Chair responded that TSMC “…will take these into consideration for our planning for the upcoming 2024 Board elections.”. We will continue to actively monitor their performance in this area.
Company engagement: Amazon.com
As one of the largest listed companies in the world, Amazon is surprisingly difficult to engage with. Despite several efforts to correspond with the board, both bilaterally and part of broader investor coalitions, we have even found it difficult to gain access to the board and have only been able to speak with Investor Relations. This is troubling because we have identified several areas of concern that we believe the board needs to hear from shareholders on.
Following several months’ worth of email exchanges, and our focused voting at Amazon’s AGM in May this year[1], we had a call with Investor Relations in July. We had six items on the agenda:
- Data privacy & security
- Worker safety and labour rights
- Tax transparency
- Circular economy and pollution
- Competition/Fair play
- Auditor rotation
On two of them, data privacy & security and fair play, the company was reluctant to provide comments because of ongoing investigations by the European competition authorities. On the last item on our list, we received pushback: Amazon is not planning auditor rotation in the near future. However, we did have a meaningful discussion on items 2, 3 and 4.
On worker safety, we raised concerns about the gaps in Amazon’s Safety Report and our views about the need for more comprehensive safety indicators including injury rates by type of jobs and geography. There are advanced safety measures in place, such as safety vests that are embedded with intelligent chips, and AI-based camera technologies. If these prove effective, Amazon and its shareholders should benefit from enhanced disclosure. We also suggested increasing transparency around employee satisfaction rates and the effects of grievance mechanisms that are in place. We also articulated our opinion that protecting the rights of freedom of association and collective bargaining would present an opportunity for better management of human- and labour-rights-related risks.
On the subject of tax transparency, we discussed the consequences of 2021’s regulatory changes, including a new agreement on adhering to the OECD framework for global tax reform, which will involve a minimum 15% tax rate for Multinational Enterprises (MNEs) from 2023 and a new EU directive requiring all large MNEs to publish country-by-country reporting (CbCR). We also discussed the 2022 Amazon shareholder resolution which requested that Amazon publish a tax transparency report aligned with the Global Reporting Initiative standard. We supported it, and we are engaging with other investors as part of the PRI Tax Reference Group. Amazon seems to be receptive to the idea of CbCR, yet reluctant to commit to adopting a formal global standard.
On item 4, circular economy and pollution, we discussed the steps Amazon has taken to bring down plastics usage in packaging. We asked for better disclosure on how much plastic is still being used, the extent of the reduction in absolute terms, and what percentage of plastics gets recycled after use. This would give investors a chance to quantify progress towards Amazon’s goal of making all of its packaging recyclable. At the 2022 AGM, Sarasin supported a shareholder resolution which requested that Amazon report on efforts to reduce plastic use, which received 49% of votes. We are particularly interested in seeing better quantitative disclosures related to these efforts.
Company engagement: Weyehaeuser's net zero strategy
Following a long-standing engagement with Weyerhaeuser, one of the world’s largest timberland management company, over recent months we have seen the firm announce a 2040 Net Zero commitment and receive Science-based Targets Initiative (SBTi)-approval for its medium-term emission targets. Weyerhaeuser has also demonstrably pivoted its business strategy to focus on monetising the value it brings to society through both the forest-based carbon sequestration it is able to deliver, but also its provision of a low-carbon construction material.
This marks a shift from the board’s historical reluctance to emphasise these environmental benefits, relegating them to its ‘corporate responsibility’ activities, rather than a future value driver. With this shift, and following a meeting with the CEO and CFO in our offices this quarter, we have upgraded their climate change rating internally, classifying them as a 1.5°C-aligned business. Please see our assessment summarised in the table below.
| NZAM criteria | Comment |
|---|---|
| Climate/NZ commitment by 2050 | Yes – Net Zero by 2040 published on Climate Pledge website Jan 2022 . This currently excludes carbon sinks due to accounting complexities, but they estimate these make them net negative today (Carbon Record: company removed net 14 million metric tons of CO2e from the atmosphere between 2020 and 2021). |
| Medium and short-term targets – SBTi-alignment | Yes – Reduce scope 1 and 2 emissions by 42% and scope 3 emissions by 25% per tonne of production by 2030 . SBTi-approved as 1.5°C aligned |
| Governance and Risks disclosure – TCFD & climate accounting | Partial – TCFD reports have been published since 2019. Weyerhaeuser now includes scope 3 emissions targets for 2030. Financial statements lack any reference to how climate considerations have been included. |
| Credible transition plan | Yes – Carbon emission reduction goals embedded in new strategy published in Sept 2021, which underlines a new Natural Climate Solutions Business led by former CFO |
| Capex alignment | Yes – Natural Climate Solutions business now a core part of strategy with associated capex |
Looking forward, we will continue to monitor and support Weyerhaeuser’s delivery of its strategy, press for improved climate-related accounting disclosures and seek better disclosure on its physical risks, which could have a profound impact on the business.
[1] At the 2022 AGM, to highlight its concerns with Amazon’s ESG performance, Sarasin voted Against three Amazon’s directors based on remuneration, audit and independence concerns and Against auditor EY and executive compensation. We supported 7 out of 14 SHRs and Abstained on one.
[2] https://www.weyerhaeuser.com/sustainability/3by30/climate-change-solutions/; https://www.theclimatepledge.com/us/en/Signatories/weyerhaeuser
[3] https://investor.weyerhaeuser.com/2021-12-20-Weyerhaeuser-Receives-Highest-Designation-for-Its-Greenhouse-Gas-Reduction-Targets
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