Deelnemersdialoog

The Deelnemersdialoog (Member Dialogue) is a new way for Pensioenfonds Detailhandel to engage with its members, the ultimate asset owners. Around 50 members (“dialogue-makers”) participated, together representing the member base of Pensioenfonds Detailhandel on social, demographic, member status and attitudinal characteristics. This project was a collaboration between Pensioenfonds Detailhandel, Dr Emmeline Cooper (project design and management) and Professor Rob Bauer.

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Meten is nog geen weten
Written by Rob Bauer for Ondernemingsrecht 2024/35

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Conference Report - Enhancing sustainable business and corporate regulation in the EU (2024)
The Elverding Conference 2023 on Enhancing sustainable business and corporate regulation in the EU took place on 26 October 2023 at the Maastricht University Faculty of Law. It examined how effective ownership strategies could be used to promote business sustainability and how to align directors' duties and the social role of corporations. It also invited representatives from companies, the investor community, and civil society to identify and explore signals which might boost sustainable business practices and corporate regulation in the EU.

Corporate Sustainability and the Duty of Care of Directors
Written by Mieke Olaerts for Ondernemingsrecht 2023/38 

Article 25 of the proposed CSDDD requires directors to take into account the consequences of their decisions for sustainability matters. While the use of directors’ duties as a tool to promote sustainability has been proposed in the past, it has also been criticized. This debate will be explored in this article. It will be argued that even though the introduction of sustainability into directors’ duties will not solve all problems, it should not be overlooked as one of the tools to enhance long-term sustainable decision-making. It is not new since it builds upon the obligations contained in the recently adopted CSRD. Therefore, making this explicit in the duty of the board of directors does not change the content of their task. The fear of interference with directors’ duties at the national level should furthermore not be overstated as Article 25 leaves considerable freedom to Member States with regard to the implementation of this duty.

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Are companies prepared for the new, emerging standard in biodiversity reporting?
Written by Constantijn van Aartsen for the ECGI Blog: Special Issue on Biodiversity The new, emerging standard in biodiversity reporting (ecgi.global)

The interim draft standards for the CSRD require companies to disclose biodiversity risks, opportunities, dependencies, and impacts. This repeated terminology, suggests that influential players around the world are aligning on these four terms as an emerging standard for global biodiversity reporting.

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Climate Change, Firm Performance, and Investor Surprises
Written by Panratz, Bauer and Derwall (2023) and published in Management Science

We link records of firm performance, equity analyst forecast errors, and stock returns around companies’ earnings announcements to firm-specific measures of heat exposure for more than 17,000 firms in 93 countries from 1995 to 2019. We find that increased exposure to extremely high temperatures reduces firms’ revenues and operating income. A one-standard-deviation increase in the number of hot days decreases revenues (operating income) by 0.6% (1.8%) of the average quarterly revenue (operating income). Moreover, we provide evidence that increased heat exposure impacts negatively on firm financial performance relative to analyst predictions and on earnings announcement returns. These findings indicate that capital market participants do not fully anticipate the economic consequences of heat as a first order physical climate risk.

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Walk the green talk? A textual analysis of pension funds’ disclosures of sustainable investing
Written by Bauer, Broeders and Van Ool (2023) and published as a working paper with De Nederlandsche Bank

In this paper, we analyze the disclosures of sustainable investing by Dutch pension funds in their annual reports from 2016 to 2021. We introduce a novel textual analysis approach using state-of-the-art natural language processing (NLP) techniques to measure the awareness and implementation of sustainable investing, where we define awareness as the amount of attention paid to sustainable investing in the annual report. We exploit a proprietary dataset to analyze the relation between pension fund characteristics and sustainable investing. We find that a pension fund’s size increases both the awareness and the implementation of sustainable investing. Moreover, we analyze the role of signing the International Responsible Business Conduct (IRBC) initiative. Large pension funds, pension funds with more female trustees, or pension funds with a positive belief about the risk-return relation of sustainable investing are more likely to sign the IRBC initiative. Although signing this initiative increases the specificity of pension fund statements about sustainable investing, we do not find an effect on the implementation of sustainable investing.

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Measuring sustainable preferences of pension members: A methodological proposition and a case study of a UK pension fund
Written by Bauer, Ceccarelli, Gödker and Smeets (2023) for the Network for Studies on Pensions, Aging and Retirement (NETSPAR) 

In this report, we propose an approach to measure people’s true preferences for sustainable investing. We present an investment game with implications for participants in the real world - implemented with a survey-in-the-field experiment. This approach helps to mitigate concerns about an hypothetical bias that are common in surveys of stated (or reported) preferences. In a next step, we provide evidence from this experiment on the clients of a large pension fund in the UK and find a strong consistency between the underlying preferences in the investment game and stated preferences in the survey. Moreover, the observed preferences are robust to changes in context. When introducing a commonly used default option that could potentially shift people’s behavior, we do not find any effect on their choice. Understanding how to measure preferences for sustainable investing is particularly useful for Dutch pension fund decision-makers. Many of these funds have signed the Responsible Business Conduct Agreement on responsible investment (2018). In this agreement, pension funds make a pledge to identify their members’ preferences and priorities regarding sustainability. Funds responded by executing surveys and other instruments, many of which were prone to several biases that the survey literature has documented well. Our paper provides Dutch pension funds with an additional instrument to elicit sustainability preferences.

Event summary - Round table on company purpose and employee participation 17 May 2022
Company purpose statements have been receiving increasing attention over the past years from academics, business practitioners, and legislators. It is against the backdrop of these developments that the Elverding Chair of Maastricht University invited representatives from business leadership, works councils, labour unions, consultancies and employer groups to a round table to discuss several issues related to the corporate purpose such as: how can a good company purpose be formulated and implemented through sincere and effective employee participation.

The round table was organised by Elverding Chairholders Prof. Dr. Rob Bauer and Prof. Dr. Mieke Olaerts in collaboration with Prof. Dr. Harry Hummels and the Elverding Post-Doc Dr. Constantijn van Aartsen. The event was organised according to Chatham House Rules to promote an open discussion. In line with these Rules, the summary does not identify the opinions of individual speakers. It has been shared with participants to ensure that there are no objections.

List of roundtable participants: Arnoud van den Berg (President FrieslandCampina Trading), Edward Boeijenga (former Chair of Central Works Council, ING Bank), Justine Feitsma (Chair of CNV Youth and member of the CNV management board), Cinta Groos (Chair of Central Works Council, Tata Steel Netherlands), Maria van der Heijden (Director-Manager of MVO Netherlands, Co-founder Women on Wings), Kitty Jong (Vice-Chair of FNV), Anniek Mauser (Director Sustainability, Unilever Benelux), Martijn van Rensch (Partner at Deloitte, Deloitte Private Leader for Consulting), Jan-Willem Scheijgrond (Global Head of Government and Public Affairs, Royal Philips), Ben Tax (Managing Director, Rijk Zwaan), Noortje Verwiel (Employee Happiness, Lightyear), Marlies Van Wijhe (CEO, Royal Van Wijhe Verf). 

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Sustainability embedding practices in Dutch listed companies

Written by Van Aartsen, Bauer, Bauer, Olaerts (2022) and published in VBA Journaal, vol. 37, no. 149, pp. 32-38.

This article summarises the findings of our 2021 Report on the Sustainability Embedding Practices of Dutch listed companies, together with some further insights for (institutional) investors.

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Eliciting Pension Beneficiaries’ Sustainability Preferences

Written by Bauer and Smeets (2022) as a Book Chapter in Pension Funds Sustainable Investments (edited by Professor Olivia Mitchell, Wharton), Oxford University Press, (2022).

We explore whether beneficiaries of pension plans should have a voice in the fund’s sustainable investments. We hypothesize that the answer to this question depends on a fund’s legal and societal contexts, benchmarking pressure, and fund-specific factors such as the fund’s size and the board’s composition.

We uncover heterogeneity in the degree to which beneficiaries are involved in decision-making. Some pension funds have started a dialogue with their participants, mainly using survey instruments. We provide an example of a fund that gave its participants a real vote, while avoiding the pitfalls that come with hypothetical surveys on individual preferences.

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A Review of the Active Management of Norway's Government Pension Fund Global

Written by Bauer, Christiansen and Doskeland (2022):

A key part of the feedback to the Norwegian Ministry of Finance was: “We urge the MoF to provide clarity in the mandate on the objectives and prioritization of active ownership strategies, as well as on what parts of this prioritization are NBIM’s purview versus which are prescribed in the mandate.”

Sustainability Embedding Practices in Dutch Listed Companies

Written by Bauer, Bauer, Olaerts and Van Aartsen (2021) as a Report commissioned by Eumedion Corporate Governance Forum.

This research report examines why and how sustainability is being embedded by Dutch listed companies. It paints a picture of the state of the art in company sustainability embedding for 2020 and has a special focus on the roles of the management and supervisory boards given their prominence in many strategic decisions on sustainability. Using desk research and interview findings, we shed light on the main drivers and motivations for why company leadership sets goals and targets for sustainability embedding. We also examine how companies integrate sustainability into their purpose statements and strategies; how they organise their governance structures to implement and oversee the sustainability embedding process; and how they manage their supply chain, sustainability reporting, employees, and culture as a response to the growing societal demand for transparency in sustainability embedding.

Based on these findings, we also provide four recommendations to advise how companies can further improve their sustainability embedding. Our research design uses both desk research and interviews to examine a sample of 35 Dutch companies listed on the Amsterdam Stock Exchange and which are constituents of the AEX, AMX, and AScX indices. For the desk research, we reviewed the 2020 annual reports and the latest information and documents from company websites. For the interviews, we conducted 88 interviews with 97 interviewees including 14 CEOs, five CFOs, 19 supervisory board members and 31 sustainability managers. 

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Get Real! Individuals Prefer More Sustainable Investments

Written by Bauer, Ruof and Smeets (2021) and published in the Review of Financial Studies.

The United Nations’ Sustainable Development Goals (SDGs) have created societal and political pressure for pension funds to address sustainable investing. We run two field surveys (n = 1,669, n = 3,186) with a pension fund that grants its members a real vote on its sustainable-investment policy. Two-thirds of participants are willing to expand the fund’s engagement with companies based on selected SDGs, even when they expect engagement to hurt financial performance. Support remains strong after the fund implements the choice. A key reason is participants’ strong social preferences.

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Insider Ownership, Governance Mechanisms, and Corporate Bond Pricing Around the World

Written by Bauer, Derwall and Pankratz (2021) and published in the Journal of International Money and Finance.

We investigate the effect of insider ownership on corporate bond yield spreads from 2003 to 2014 using a sample of 10,460 bonds issued by 1,222 non-financial firms from 44 countries. Using this sample, we find on average that greater insider ownership is associated with a higher yield spread. We consider consumption of private benefits as an economic channel through which insider ownership hurts bondholders.

Using a global index of shareholder rights, we observe that the positive association between insider ownership and the spread decreases for firms with relatively stronger shareholder rights in which consumption of private benefits is less likely to occur. Furthermore, we report that in firms with more insider ownership the probability of related-party transactions is larger whereas their accounting return on assets is weaker, ceteris paribus. Taken together, the results indicate that bondholders anticipate that greater insider ownership facilitates consumption of private benefits, with implications for the valuation of corporate debt.

De Raad van Commissarissen in moeilijke tijden

Written by Olaerts (2020) and published in Tijdschrift voor Ondernemingsbestuur, 2020/5.

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Van het Concern

Written by Bartman, Dorresteijn and Olaerts (2020), Kluwer.

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Groups of companies - A comparative law overview

Written by Olaerts (2020) as a book chapter: National report on the Netherlands, Springer 2020.

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A journey into causes of corporate misbehaviour: Why corporate legal disciplines and regulation need to be structurally reformed

Written by Van Aartsen (2020), PhD defended at Maastricht University on 14 October 2020.

This book shows that the scientific foundation of corporate law, corporate governance and corporate social responsibility are suboptimal and unable to provide effective solutions to social, environmental, and other harms caused by corporate activities. These disciplines are based on a narrow range of assumptions about individuals, corporations, markets, and society, and are unable to adopt more than a partial understanding of corporate problems. These shortcomings lead to systemic problems in both science and practice.