A revised Shareholder Rights Directive can help companies align to a Net Zero economy
The Shareholder Rights Directive (SRD) could help investors to better shape corporate actions on climate issues. With the United Nations climate summit COP29 underscoring the urgency of addressing the fossil economy and taking climate risk into account, now is the time to ensure that companies transition to sustainable, net-zero aligned practices.
In this policy brief, Finance Watch makes concrete recommendations towards the revision of the Shareholder Rights Directive to better connect shareholder engagement with sustainability goals – such as the Paris Agreement. By empowering investors to actively influence corporate climate actions, we aim to facilitate a stable, market-wide transition to a net-zero economy.
Key policy recommendations
Finance Watch’s recommendations build on these foundations, clarifying shareholder rights, extending decision-making horizons, and supporting transparent, sustainable corporate governance:
- Binding Votes: Give shareholders a voice in deciding the direction of the company in a transitioning economy by giving them the right to vote on the company’s transition plan.
- Transparency in Transition Plans: Require asset managers and institutional investors to disclose how their engagement policies align with their transition plans and how their voting record fits into their transition plan targets.
- Reduced Shareholding Requirements: Lower the minimum holding requirements for adding items to the agenda of the annual general meeting and restrict the power of the Board of Directors to reject resolutions.
Finance Watch advocates making shareholder engagement more transparent and impactful by aligning SRD II with sustainability rules developed during the last political mandate. It is not about setting new targets, but about harmonising rules across Member States in view of a stronger Capital Markets Union, giving shareholders the tools to align businesses with the EU’s net zero targets and harmonising disclosures. Today, the current flexibility for designing engagement policies does not allow assessing shareholders’ contribution to the transition and pinpointing truly sustainable engagement.
Vincent Vandeloise
Senior Research and Advocacy Officer at Finance Watch
Towards more credible and transparent transition plans
Finance Watch’s proposals would give investors power to align businesses with the EU’s net zero targets. By empowering shareholders to influence sustainability in corporate governance, Europe’s markets can adapt to the realities of a net-zero world, supporting long-term stability and sustainable growth.
Explore our detailed proposals and see how revising the SRD can support sustainable growth, resilient economies, and a net-zero future.
Unlocking Transition Engagement for Shareholders: Recommendations to revisit the Shareholder Rights Directive
Policy Brief-SRD II-Final
