The joint CGI Russia / Korn Ferry research based on a standpoint of global investors with $12 trln. AUM highlights the main assessment criteria for BoDs of public companies and main trends for 2022.
In a business world being transformed by COVID-19, volatile operating environments, and heightened ESG (Environmental, Social, Governance) concern, the quality of Corporate Governance is critical. CGI Russia, in partnership with Korn Ferry, has conducted an independent study to find a correlation between the BoD effectiveness and business value based on data provided by portfolio managers of global investment funds with $12 trln. AUM. JP Morgan Asset Management , Amundi), BMO Global Asset Management), Axa Investment Management and other investment funds took part in the study..
Olga Pascault, Co-founder and Board Chair, CGI Russia, commented on the expediency of this study, pointing out that in 2022 the Board of Directors will face the daunting task of finding a balance between public and investor expectations for sustainability, long-term value, and the company’s short-term profit targets in the context of a transition to a more inclusive economic model. “Under these conditions, it is necessary to understand what qualities a BoD should demonstrate in order to increase the value of a company in an investment assessment and how exactly ESG factors affect its market position”, – Olga Pascault said.
Study highlights that effective corporate governance has a major company value impact. Premiums for strong corporate governance range from 10% to 50%. But discounts for weak corporate governance can reach 80%, with many investors excluding companies with weak corporate governance from investment consideration. The weighting of ESG factors averages 25%. Some portfolio managers noted that without an incorporated ESG strategy, a separate justification can be required for an investment.
“We have known for a long time that good corporate governance impacts the company’s capitalization. Yet it is only today that this premium is becoming too high to ignore” – commented Anton Storozhenko, Senior Client Partner, Practice Leader, Board Services, KornFerry .
The weighting of ESG factors averages 25%. Some portfolio managers noted that without an incorporated ESG strategy, a separate justification can be required for an investment.
“Today we see an expanding focus on responsible investment principles and the investors’ focus is also shifting to assessing non-financial performance, in particular climate governance issues. Investors increasingly prefer those companies in which BoDs and management are responsible for the analysis and minimization of environmental risks, where they pay attention to social initiatives and have strong and balanced corporate governance”, – said Elena Sapoznikova (Haykin), Co-founder and Member of the Management Board, CGI Russia.