EOS at Federated Hermes Outlines Its Engagement Priorities for 2024

EOS at Federated Hermes Limited (EOS), one of the world’s largest stewardship service providers representing client assets of US$1.4 trillion, has published its updated Engagement Plan.

The plan, which is based on the long-term objectives and priorities of clients, identifies the issues with greatest potential to deliver long-term sustainable wealth for investors, including through positive societal and environmental outcomes.

EOS also plans to intensify engagement on two rapidly evolving topics; halting and reversing biodiversity loss, and the responsible development and deployment of Artificial Intelligence (AI).

Board effectiveness

  • Aligning corporate behaviours with the long term interests of investors and as a result achieve stronger and more sustainable performance
  • Improving board functionality, composition and structure, alongside behavioural characteristics such as board dynamics and culture
  • Improving board diversity, including accelerating engagement on ethnic diversity issues that follow recent advances on gender diversity

Climate Change

  • Working with companies to adopt a strategy and greenhouse gas reduction targets aligned to the Paris Agreement, seeking to limit climate change to 1.5C, together with aligned financial accounts and political lobbying
  • Evaluate the credibility of company transition plans including their reliance on technologies
  • Engaging with companies in high methane emitting sector to deploy the best available technology to identify and mitigate methane emissions
  • Engage on physical climate risks and work towards a ‘just transition’ for employees and communities

Human and Labour Rights

  • Continued emphasis on supply chain rights where there is an elevated risk of forced labour, unsafe working conditions, and other adverse human rights impacts
  • Engage on the protection of indigenous and community rights, and human rights in high-risk regions such as disputed territories or areas of conflict
  • Focus on protection of digital rights in the virtual world, such as challenges to the right to data privacy and protection from unfair biases arising from the use of AI

Human Capital

  • Intensify engagement on upskilling workers, to advance productivity amid global unease about potential negative AI impacts on jobs and livelihoods and the cost of living crisis driving renewed interest in collective bargaining
  • Maintain focus on diversity, equity, inclusion and representation; asking companies to develop a strategy and action plan to achieve proportionate ethnic and gender representation at all levels

In addition to the four priority themes, EOS plans to deepen its engagements on biodiversity and artificial intelligence, two areas that have continued to rise up policy makers’ and company and investor agendas.

Engagement on biodiversity will focus on companies reducing their impacts on biodiversity across the value chain, following the mitigation hierarchy, and aiming for a net-positive impact on biodiversity as best practice.

EOS will also continue to engage on responsible development and deployment of AI, an area where the team is recognised for its leading expertise, having been one of the first players to publish a paper outlining Investors’ Expectations on Responsible Artificial Intelligence and Data Governance in 2018, followed by our Digital Rights Principles, published in 2022.

Ross Teverson, Regional Team Lead for Asia & GEMS, EOS at Federated Hermes said: “In addition to the core areas central to EOS’s Engagement Plan, we are also prioritising rising issues of concern across Asia and Global Emerging Markets. These include governance of nature and biodiversity considerations, and the responsible use of artificial intelligence. While we have been engaging companies on AI-related risks and opportunities for a number of years, with a focus on AI governance, we are broadening the scope of our engagement to ensure boards adequately assess and respond to regulatory and workforce-related issues.”