Asset manager engagement on corporate tax conduct grows

Asset manager engagement on responsible tax conduct is well and truly on the rise, with firms extending their programmes, digging deeper and filing shareholder resolutions. 

The importance of tax as an issue for ESG investors cannot be overstated. Vanderbilt Law Review recently dedicated a whole paper to it, The Missing “T” in ESG,  which spells out the paradox of low taxpaying companies that are highly sought by ESG investors exacerbating the very societal and environmental issues those investors seek to assess.  

But while the paper comprehensively outlines the shortcomings of ratings agencies and large asset managers in this space, and proposes solutions, we’re optimistic about the work being done by investors in their due diligence, ESG analyses and stewardship activities. 

Fair Tax Mark business Epworth Investment Management, for example, have recently broadened their tax engagement programme to European-headquartered companies as a result of the Fair Tax Foundation’s international expansion. In the firm’s Q1 update they said they had written to seven European-headquartered companies on the topic of tax transparency, in addition to engaging UK companies.  

Fair Tax Mark accredited business MJ Gleeson came on board after a previous engagement from Epworth as one of their investors.  

Firms already engaging their holdings on tax issues embraced the release of our corporate tax conduct KPI paper back in February and provided excellent feedback. The paper, Key Performance Indicators of responsible corporate tax conduct – and their green and red flags, identified five areas of responsible corporate tax conduct and what behaviours in each of them would flag concerns or best practice. As the report notes, institutional investors are also encouraging businesses to embrace responsible tax conduct and tax transparency. UK pension scheme Nest are prompting companies apply for Fair Tax Mark accreditation, and a group of 11 asset owners take Fair Tax Mark accreditation into account when considering remuneration in their Fair Reward Framework



We’ve had several conversations, presentations and learning sessions with investors and engagement teams since the KPI paper’s release that are very encouraging. Some teams are incorporating elements of the paper into internal engagement tools.  

Shareholder resolutions will of course continue to be an important tool for asset managers as we come towards the end of AGM season. The number of shareholder resolutions singling out tax risks at the world’s largest companies doubled to six in 2023 from the previous year, according to Bloomberg. By March of this year, four such proposals had already been filed. 

Responsible tax conduct is often a sign of good governance in other areas, and, ultimately, of good business. With asset managers and institutional investors alive to this reality, we’re excited to see increased engagement with companies in this space. 


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