Commentary

ICYMI, Benjamin Franklin May Need to Add a Caveat

As Amazon held our attention, AGMs saw mixed fortunes for ESG-related resolutions.

Whichever way you look at it, Amazon has been in the spotlight this week from an ESG perspective. The online retailer, frequently mired in controversy over its employment practices, came under further scrutiny when corporate filings revealed it paid no corporation tax in Europe in 2020 despite nearly €44 billion in revenues.

Amazon pointed to fine margins and €78 billion of infrastructure investment since 2010 to explain a €1.2 billion loss by its Luxembourg-based European operations. Tax credits related to accumulated losses mean the firm is unlikely to pay much tax in Europe in the next few years even if it does report a profit, thus bringing into question Benjamin Franklin’s maxim in the inevitability of death and taxes. Observers pointed to the fact that Luxembourg is still in dispute with the European Commission over €250 million in tax advantages. With a ruling pending next week, no wonder tax is rising up the investor and policy agenda.

Amazon has paid corporation tax at a rate of less than 10% – both globally and in the US – over the past decade. Despite this, outgoing boss Jeff Bezos has backed US President Joe Biden’s plan to raise US corporate tax rates from 21% to 28%. His views on a related proposal for a global minimum tax rate are not recorded, presumably due to his focus on the search for planet B.

Bezos’ evacuation, sorry, space vacation plans may or may not have been influenced by news of plans by the Brazilian government to allow further commercial exploitation of the region from which his company takes its name. Global investors and food retailers have voiced opposition to new measures which would further weaken the Amazon’s environmental protections, opening the door to increased deforestation.

The response suggests growing awareness of risks and responsibilities across supply chains. UK-based international retailer Tesco already refuses to stock Brazilian beef, and this week took further steps on sustainable and ethical sourcing, by setting targets to increase sales of healthier food and drink across its entire retail operations, following shareholder pressure. A wider initiative, announced this week by Norges Bank Investment Management and UNICEF, aims to encourage food retailers to take greater account of children’s nutrition needs.

The power of the investor was in evidence throughout the week. A flurry of stewardship reports from UK asset owners showed progress on decarbonisation, despite data challenges. Ahead of expected changes to US ESG-related disclosure rules, shareholders scored victories at AGMs held by General Electric and American Express, leading to greater disclosure on greenhouse gas emissions and diversity and inclusion respectively.

But it was not all one-way traffic. Whilst Allianz presented shareholders with a more restrictive policy on coal, Barclays AGM witnessed a thumping defeat for a resolution aimed at bringing the bank’s financing activities in line with the goals of the Paris Agreement.  After 17 investors worth US$4.3 trillion wrote to Barclays’ CEO Jes Staley, calling on the bank to tighten its policies on financing for coal and oil sands activity, only 14% of shareholders backed the resolution.

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