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Some Brazilian companies are beginning to pave the path for establishing meaningful climate initiatives that go beyond greenwashing and hold leadership accountable. We expect increased shareholder scrutiny on whether companies are setting suitable environmental targets and commitments, especially concerning the Amazon rainforest. In 2022, we may also see more shareholder proposals linking compensation to climate goals, thereby requiring increased climate-impact disclosures. The Brazilian Securities and Exchange Commission (CVM) is also expected to encourage further transparency on ESG-related disclosures. Finally, there is an increased demand for boards to be more conversant and knowledgeable on ESG efforts.

The S of ESG has taken notable strides compared to last year, and media attention is helping fuel the narrative and shape the reforms demanded of the corporate sector.

We anticipate the topic will garner more shareholder attention, due to the ongoing economic inequality that exists throughout the region. Boards will face more pressure this year to ensure they are effectively overseeing risk from a reputational, social, and health perspective to ensure the well-being of employees, customers, and other stakeholders. While this topic was already on the minds of some directors, the impact of COVID over the past two years has highlighted the issue for almost everyone. Regarding their role in creating access, opportunity, and support for their employees, companies should expect additional scrutiny. This will include efforts around education, diversity, and inclusion, pay equity, and other social programs to uplift disadvantaged communities.

Enhancing board composition and diversity.

Also tied to the “S,” investors are increasingly concerned with the quality of board composition and diversity. Boards can expect more scrutiny and investor stewardship regarding the professionalization of directors, independence, overboarding, excessive tenure, diversity, and the nomination process itself. More boards will embark on developing a skills matrix to objectively assess the competency of directors. Shareholders dissatisfied with traditional board-recruitment efforts are expected to fuel more external searches to increase director independence.

In recent years, calls for diversity have heavily emphasized gender. Brazilian companies will find that global investors are less patient with slow efforts towards achieving gender parity. Beginning February 1, 2022, ISS will recommend negative votes against boards that lack at least one woman. However, there has been a new focus on ethnic diversity as well. Boards should aim for more-expansive director criteria in order to expand the candidate pool, and the long-term board pipeline must be improved.

Push for improved overall stewardship.

With AMEC (Association of Capital Market Investors) pushing for enhanced board responsibility when engaging with investors, we anticipate Brazil’s stewardship culture to continue advancing alongside improved governance and risk oversight. Boards should begin considering their shareholder engagement strategy and process early, which may proactively help avoid proxy fights. COVID/disaster preparedness, risk oversight, board composition, and ESG could be themes that shape the 2022 shareholder-engagement agenda.

Evolving public company governance.

Following recent trends, 2021 has witnessed a high number of IPOs in Brazil, but many of these newly public entities lack strong governance structures. Given the prospect of Brazilian companies listing abroad, there has been hesitation to implement certain governance practices that may cause them to list elsewhere. Regulatory bodies have generally taken a hands-off approach, with lax listing requirements and enforcement actions.

With the approval of super-voting shares, global investors maintain a pessimistic outlook on the “ultimate departure” from one-share-one-vote. Novo Mercado’s requirements for an annual board evaluation will lead to an uptick in governance exercises. However, there are concerns that these assessments will simply “check the box.” Advanced boards will use the evaluation process as an opportunity to move the needle on individual director performance and overall board culture.

European Union

The launch of EU Taxonomy focused on environmental reporting, and more to come.

Adopted in July 2021, the European Commission’s sustainable finance strategy incorporated a range of measures to tackle environmental challenges and increase investment in a sustainable economy, supporting its “Green Deal.” Of these, the EU Taxonomy, a classification system for sustainable economic activities, has now taken effect. Financial entities can now file a report based on the technical screening criteria. Beginning January 2022, companies and investors under the scope of the Corporate Sustainability Reporting Directive (CSRD) face mandatory disclosure obligations for climate-change mitigation and adaptation objectives. Criteria for other environmental goals will follow, and an extension beyond environmental aspects into other social and governance factors is expected and underway.

As is the case in other jurisdictions, mandatory disclosure will be a floor, and some stakeholders—particularly large investors—will demand more. During our interviews, we heard that some investors are in the process of developing their own rating systems for non-financial reporting.

Rising ESG activism and link to remuneration.

Investors are increasingly active in ESG (particularly in “E”) as European shareholders have realized it is possible to bring shareholder resolutions. There is also an intention to tie ESG into executive remuneration. However, it is challenging for companies to find the right KPIs as these metrics are less detailed than the financial targets and may not be variable enough. Whilst Norway’s corporate governance code puts sustainability on boards’ agenda, their recommendation for remuneration is to keep it simple and easy to understand, with performance-related remuneration subject to an absolute limit. Germany and Spain recommend ESG remuneration criteria and France is probably the most advanced given the French government has included this in the corporate governance code.

Director diversity and capacity will be scrutinized.

The focus on board diversity will continue as companies in several markets, including Spain and the Netherlands, work to reach mandatory targets for the representation of women. The new Danish corporate governance recommendations clarify diversity in relation to “age, gender or education, and business background.” However, ethnic diversity remains much further behind on European boards due to the fact that in many countries it is not legal to collect ethnicity data.

Investor focus on director and board engagement remains strong, with overcommitment of directors remaining a particular concern. How overboarding policies will evolve in 2022 is not entirely clear, as some of the experts we interviewed suggest that a different approach—not a lower threshold—may eventually be required. What won’t change is investors ensuring that directors have the time and ability to successfully represent their interests in the boardroom.

Bumpy progress in implementing Shareholder Rights Directive II.

The Shareholder Rights Directive II (SRD II) implementation continues to be uneven. The directive aims to 1) increase asset owners’ and managers’ level and quality of engagement with their investee companies, 2) strengthen shareholder rights (including scrutiny of remuneration and related-party transactions), and 3) facilitate cross-border investment chain information (e.g., voting). Against the backdrop of the pandemic, with many under-prepared market participants, implementation has been patchy. Investors are particularly concerned about slow progress towards enhanced executive pay-disclosure requirements, which is contributing to an increase in votes against directors for compensation concerns. Further review of the directive by the European Commission is expected mid- 2022.

United Kingdom

Climate change remains a critical focus, with major new disclosure expectations.

The UK continues to see an increased focus on environmental issues—particularly the transition to net-zero—and investors reported a similar increased focus on climate issues in the voting season. Beginning April 2022, the UK’s largest companies and financial institutions must comply with mandatory disclosure of climate-related financial information, in line with TCFD recommendations. As the International Sustainability Standards Board (ISSB) is established, the UK will adopt and endorse its issued standards. At COP26, the UK government also announced a requirement for all listed companies in the UK to publish net-zero transition plans by 2023.

Social justice, equity, and inclusion are key.

Although the “E” of ESG came to the fore in 2021, the “S” remains important. Investor focus on the diversity of boards continues, with attention turning to accelerating diversity amongst key roles and amongst executive directors. The board’s role in overseeing diversity and inclusion is also coming under increased scrutiny.

The FTSE Women Leaders Review continues the work of the Hampton-Alexander Review in increasing the representation of women on board and leadership teams of FTSE 350 companies, with its first report due Q1 2022. The Parker Review will also report on the FTSE 100 companies’ progress in meeting their target of at least one board member from an ethnic minority background by the end of 2021, with momentum accelerated by the Black Lives Matter movement. Investors are already moving beyond these guidelines and will start voting against chairs of nomination committees where a board is not sufficiently diverse.

In early 2022, the UK’s Financial Conduct Authority (FCA) is expected to announce changes to listing requirements with the aim of promoting greater board diversity and inclusion. Proposals include greater transparency and reporting consistency on board-diversity targets and on actual board and executive-team composition by gender and ethnic background. Proposed board-diversity targets extend those of the Hampton-Alexander Review, instead of reflecting the Parker Review targets, which dictate that at least 40 percent of the board should be women (current target is 33 percent); one of the senior board positions (chair, SID, CEO, CFO) should be a woman; and one board member should be from a non-white ethnic minority background. Diversity policies should include board committees and consider broader aspects of diversity, such as sexual orientation, ability, and socio-economic background.

Don’t forget the “G.”

UK government proposals for “restoring trust in audit and corporate governance” (which includes the planned launch of the Audit, Reporting and Governance Authority (ARGA) by 2023) are likely to translate into draft legislation in 2022, with widespread reforms impacting listed and large private companies, directors, and auditors across reporting, regulation, audit, internal control, and assurance. This will also place greater emphasis on company directors’ and boards’ roles.

Remuneration remains a critically important governance issue for many investors. Investors took a firm line on remuneration (particularly bonus payments) within companies that received government support through the COVID-19 crisis, and they are expecting clear alignment between shareholders and senior management’s experience.


Rising support for the ESG agenda.

Concern about climate change continues to be at the forefront of many investors’ minds, with a notable number of activist campaigns in the first half of the year dealing with the subject matter—5 out of 55 ASX300 companies responded to activist shareholder resolutions, which featured climate change as a primary focus. In 2021, we also saw the first Australian company adopt a “say on climate” initiative. At a national level, the Australian federal government’s approach towards climate goals continues to progress at a more conservative pace and will continue that way in 2022.

Evolving opportunities and expectations for board diversity.

Board diversity will be of continued focus in Australia. As of November 2021, Australia’s target of all boards containing at least 30 percent women was comfortably achieved, as no boards in the ASX200 exclude women. Beyond gender, ASX boards continue to lag on cultural diversity, with 90 percent of ASX300 board members coming from an Anglo-Celtic background. However, in a study on director sentiment conducted by the Australian Institute of Company Directors, cultural diversity was ranked as the lowest priority of board focus, with only 36 percent of respondents agreeing that their boards were seeking to increase ethnic diversity.

The continued need for vigilance to geopolitical sensitivities.

The geopolitical landscape continues to shift in Australia. Australian company boards and executives must stay increasingly vigilant regarding geopolitical forces that continue to transform the international business landscape. Many are focusing this year on robust risk-assessment frameworks that consider geopolitical risks alongside other key domestic political-risk factors.


Efforts to strengthen Japanese corporate governance gains momentum.

In March 2021, a partial revision of the Japan Companies Act came into effect, and a revision of the Japan Code of Corporate Governance followed in June 2021. This corporate-governance shakeup was intended to support the upcoming reorganization of the Tokyo Stock Exchange (TSE) in April 2022. Under the reorganization, the TSE will realign its current four trading markets into three— Prime, Standard, and Growth. Companies are expected to announce which new markets they intend to be listed on and how they plan to meet the new listing requirements by the end of the year. Companies were given until the end of 2021 to indicate which new markets they intend to be listed on, and the allocations were announced by TSE on 11 January 2022. As these issuers transition to their respective markets, a key focus is to ensure that their corporate governance practices are aligned with the updated listing requirements.

Upping the ante on board independence.

The revised Companies Act officially mandates the appointment of outside directors for certain types of Japanese companies. Under the revised Code of Corporate Governance, the number of recommended independent directors has also been increased from at least two to at least one-third of the board for companies listed on the Prime segment of the reorganized TSE. As companies start increasing independent representation on boards this year, Japanese companies could soon encounter a shortfall of qualified independent directors.

Gender diversity is the first step towards parity.

The revised Code of Corporate Governance has been updated to focus on gender diversity, requiring companies to set and disclose measurable diversity targets. Representation of women across managerial positions in corporate Japan continues to be strikingly low for an advanced economy. The growing pressure this year for Japanese companies—both at home and abroad—to increase overall diversity, as well as the renewed goal to reach 30 percent gender diversity in leadership positions by 2030, should lead to Japanese companies inching towards parity.

Greater clarity on sustainability and ESG disclosures.

Revisions to the Code of Corporate Governance have reinforced sustainability-related principles and frameworks. Japan’s Financial Services Agency is further exploring replacing the “comply or explain” model with mandatory disclosures related to climate risk in accordance with recommendations of the Task Force on Climate-Related Financial Disclosures. These developments reflect the changing regulatory landscape in Japan to prioritize ESG disclosures. Promoting transparency and data availability regarding climate-related risks to help investors understand and assess companies’ exposure will only continue to grow in 2022.

Activism is on the rise.

Activist shareholders are conducting campaigns against a record number of Japanese companies. From 6 percent of global activist shareholder campaigns in 2015 to approximately 26 percent at present, Japan is now second only to the US for shareholder activism. Notably in 2021, there were several high-profile activist campaigns, including Toshiba Corp. The success of activist shareholders at Toshiba represents a potential “watershed moment”8 for activist shareholders in Japan and serves as a timely reminder for companies to ensure they are prepared to respond, should activist campaigns emerge in 2022 or beyond.

Singapore and Malaysia

A refreshed view on governance and stewardship.

In April 2021, The Malaysian Code of Corporate Governance was refreshed and launched. The update introduced new best practices and guidance on corporate governance for listed companies in Malaysia to help steer them towards higher standards in the years ahead. In Singapore, the Stewardship Principles for Responsible Investors is also looking to undergo a review in 2022, having been first introduced in 2016. The steering committee recognized that, in the time since, the world has shifted towards a more inclusive form of capitalism, necessitating greater scrutiny of the capital-markets impact beyond the broader economy, which may lead to changes for corporate boards in the near future.

Diversity continues to be at the forefront.

Following the code update, all boards in Malaysia must now achieve 30 percent diversity for representation of women on boards (as opposed to only the top 100 companies prior). Listed companies’ annual reports must also discuss gender diversity for senior management, as well as their boards. The Singapore Exchange has also moved to make the disclosure of listed companies’ board-diversity policies mandatory. Disclosures around this used to be on a “comply or explain” basis, but this approach was deemed ineffective, as evidenced in the 2021 Singapore Governance Transparency Index, where slightly under half of the 519 companies covered chose not to make such disclosures. Boards that have so far failed to disclose their information can expect increased pressure to do so in 2022.

A stricter view on independence and director selection.

Both Singapore and Malaysia have specified a two-tier vote for long-tenured independent directors. In Singapore, this will occur after a director has served more than nine years, but in Malaysia’s case they also will be implementing in its listing rules a hard limit of 12 years, beyond which a director can no longer be deemed independent. In addition, the revised 2021 Malaysian Corporate Governance Code explicitly states that the pool of board-director candidates should include those sourced independently.

Reporting on climate and broader sustainability issues is coming.

Following a consultation paper in August 2021, the Singapore Exchange will make climate reporting mandatory beginning in 2023, starting with industry sectors that are most likely to feel an immediate impact. The rest of the sectors will commence reporting on a “comply or explain” basis. In addition, listed companies must obtain internal assurance around their sustainability-reporting processes, and their directors are required to undergo one sustainability training to ensure adequate knowledge.


Rich Fields leads Russell Reynolds Associates’ Board Effectiveness practice. He is based in Boston.
Rusty O’Kelley III co-leads Russell Reynolds Associates’ Board and CEO Advisory Partners in the Americas. He is based in Stamford.
Laura Sanderson co-leads Russell Reynolds Associates’ Board and CEO Advisory Partners in Europe. She is based in London.
Helen Metcalfe is a member of Russell Reynolds Associates’ Board and CEO Advisory Partners. She is based in London.
Jacques Sarfatti is a member of Russell Reynolds Associates’ Board and CEO Advisory Partners. He is based in Sao Paulo.
Alvin Chiang is a member of Russell Reynolds Associates’ Board and CEO Advisory Partners. He is based in Singapore.
Jordan Frantz is a member of Russell Reynolds Associates’ Board and CEO Advisory Partners. He is based in Boston.
Melissa Martin is a member of Russell Reynolds Associates’ Board and CEO Advisory Partners. She is based in Washington, DC.
Jennifer Thevervelil is a member of Russell Reynolds Associates’ Board and CEO Advisory Partners. She is based in New York.
Susanne Suhonen is a member of Russell Reynolds Associates’ Board and CEO Advisory Partners. She is based in London.


1. https://www.blackrock.com/corporate/investorrelations/larry-fink-ceo-letter
2. https://about.vanguard.com/investment-stewardship/portfolio-company-resources/US_Proxy_Voting.pdf
3. https://www.ssga.com/us/en/institutional/ic/insights/ceo-letter-2022-proxy-voting-agenda
4. https://www.thestar.com/news/canada/2021/12/22/full-court-press-onclimate-in-mandate-letters-but-environmentalists-will-wait-and-see.html
5. Minister of Environment and Climate ChangeMandate Letter, December 16, 2021
6. https://www.blackrock.com/corporate/literature/factsheet/blk-responsible-investment-guidelines-us.pdfhttps://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-guidelines-canada.pdf
7. https://www.blackrock.com/corporate/investorrelations/larry-fink-ceo-letter
8. https://www.lazard.com/media/451807/lazards-h1-2021-review-of-shareholder-activism-vf.pdf

The article was first published here.

Photo by Sean Pollock on Unsplash.


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