Investors: We can help with your tax engagement and risk management

A company’s tax practices are an essential indicator of its governance and the risk of its operations. For a number of years, we’ve been working with institutional investors, asset managers and analysts to help them integrate assessment of tax conduct into their portfolio risk management, and even helping them engage with companies.

Major ongoing work with Shareholders for Change

This year, we are delighted to be working with Shareholders for Change on a major analysis and engagement programme that has the tax practices of Euro Stoxx 50 companies as its focus. The Euro Stoxx 50 is the standard eurozone equity benchmark, and captures the 50 largest companies in the Eurozone across 20 ‘super-sectors’.

Shareholders for Change are a group of around 20 institutional investors from across Europe who have between them have some €50bn in assets under management. The Euro Stoxx 50 engagement programme is being led by members Ecofi and Sanso Longchamp AM, but has the support of the whole Shareholders for Change network.

Shareholders for Change have utilised a well-devised set of key performance indicators to assess tax conduct and financial risk arisings across the Euro Stoxx 50. Subsequently, they have identified twelve companies that appear to have above-average tax risk exposure and have initiated an engagement programme to explore this. The Fair Tax Foundation are supporting Shareholders for Change with both their analysis and engagement, and the underlying KPIs have been heavily influenced by our Fair Tax Mark methodologies. To the best of our knowledge, Shareholders for Change’s work is the most systematic piece of investor engagement on corporate tax conduct ever undertaken in Europe, perhaps globally. For this they deserve a round of applause.

Key performance indicators for responsible corporate tax practices

The Fair Tax Foundation are a nonprofit comprised of chartered accountants and tax professionals. Since 2014, we have helped companies identify and embody what good corporate tax practices look like.

After increasing enquiries from investors, in 2024 we released a working paper, Key Performance Indicators of responsible corporate tax conduct – and their green and red flags, which was subsequently adopted by the Dutch Association of Investors for Sustainable Development.

Since then, we have worked with asset managers and engagement groups to develop and refine the indicators. We will be releasing an updated paper in due course.

The Fair Tax Mark

The Fair Tax Foundation also assess and award companies with the Fair Tax Mark – a label indicating a business demonstrates responsible and transparent tax practices.

To date, more than 275 businesses of all sizes across the world have achieved the Fair Tax Mark.

Several investment firms, and financial services firms with investment capabilities, hold the Fair Tax Mark. Of these, some, such as Triodos Bank; Ethical Investors and Ethical Screening; and Epworth Investment Management, apply Fair Tax Mark principles to their investment considerations.

For example, in 2024 Epworth Investment Management 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 certified business MJ Gleeson came on board after a previous engagement from Epworth as one of their investors.

Institutional investors use the Fair Tax Mark

Investors also use the Fair Tax Mark for analysis and engagement. UK pension scheme Nest are prompting companies apply for Fair Tax Mark accreditation, and a group of eleven asset owners take Fair Tax Mark accreditation into account when considering remuneration in their Fair Reward Framework.

If you would like to contact us about how we could work together, please email [email protected]

Examples of how we could help include:

• Presenting and discussing our working paper on key tax performance indicators
• Analysing your holdings’ tax practices ahead of engagements
• Training or general consultancy advice on tax conduct and transparency

Timeline of some of our work with investors