Terna | 2016

For the fifth year in a row, Etica Sgr attended and voted at Terna’s shareholders’ meeting, held in Rome on May 30th, 2016.

Etica Sgr thanked Terna’s Chairwoman and CEO for their commitment to maintaining an active dialogue with an investor (Etica Sgr) that is very attentive to sustainability issues relating to the company’s work.

While recognizing that it was already of very high quality to begin with, Etica Sgr was pleased with the improvements seen in the company’s corporate communications. This was also true for the information contained in Terna’s Sustainability Report, which was published before the date of the shareholders’ meeting, allowing shareholders to make detailed observations. Etica Sgr was also pleased to see that Terna had achieved ISO 50001:2011 certification (Energy Management Systems) for the entire Group; Etica Sgr took the opportunity to ask Terna to consider including an indicator of the percentage of energy from renewable sources among their KPIs and business objectives. This should also include sources of biomass, in order to encourage a “greener” management of the company’s supply chain.

In terms of corporate governance, Terna was asked whether it intends to establish a specific committee to oversee long-term sustainability issues and stakeholder relations, in accordance with the latest version of Borsa Italiana’s Corporate Governance Code.

Furthermore, Etica Sgr once again highlighted how the company’s relationship with local communities and its supply chain management are two important aspects in managing Terna’s reputational, legal and statutory risks. In that regard, having seen the company’s Sustainability Report, Etica Sgr asked for more detailed information on the social and environmental criteria that were taken into consideration for the selection of “Suppliers of significant sectors for ESG purposes”.

As for voting, Etica Sgr voted in favor of approving the company’s financial statements, as well as in favor of its dividend distribution proposal. Regarding the latter, Etica Sgr was pleased with the payout ratio, as it was with the fact that the dividend policy had been constant for the last 4 years and in line with what had been set forth in the respective strategic plans; Etica Sgr also praised the level of net financial debt (though it requested that this be gradually reduced over time) and the investments made in R&D.

In addition, Etica Sgr once again voted in favor of the Annual Remuneration Report, as it considered the document to be clear, detailed and comprehensive with respect to the characteristics Etica Sgr was looking for in its analysis.

Regarding the Long-Term Incentive Plan, Etica Sgr was pleased with some aspects (e.g. the three-year vesting period, the deferment of a significant portion of remuneration, the inclusion of a sustainability objective related to the company’s average position in the Dow Jones Sustainability Index, etc.). On the other hand, the available information did not make it possible to identify the exact number of managers who were to be beneficiaries of the plan (and thus, it is impossible to estimate the total cost that will be incurred when the plan is implemented); additionally, Etica Sgr observed that the plan leaves room for a certain degree of discretion in its implementation over time.

For these reasons, Etica Sgr decided to abstain from voting on this agenda item.

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