Our engagement approach

In support of our ‘focus on change’ investment philosophy, we engage actively and regularly with the companies in which we are, or may become, a shareholder. Our style of active engagement is designed to avoid, as much as possible, surprises that have the potential to change the fundamental standing, strategy or dynamics of the companies in which we invest. Our position as a leading asset manager allows us to build robust relationships with investee companies.

In our research and analysis of environmental, social and governance (ESG) issues, we identify any risks or opportunities we may wish to discuss with companies. We prioritise engagement with companies where there are serious concerns, where the company rates poorly on our sustainability rating tool and where we have a significant holding.

We set engagement objectives according to the circumstances of each company. The selection of investee companies and the results of our engagement are informed by and benefit our entire investment process. Our objectives may include the following: learning more about company strategy and performance; appraising company management; emphasising the importance of best practice on ESG issues and exchanging views.

We evaluate the success of many engagements at the time of the engagement. However, some engagements may require that a company take a number of actions and the outcome will not be immediate. In such cases, it may be appropriate to set an engagement mile stone, which allows us to assess what steps the company has taken throughout the engagement process. As a result of this process, we may meet with an investee company on a number of occasions on a particular issue.

Using external data providers and our own internal measurement system, we rate how companies approach ESG issues. We consider a company’s rating to enable the identification of both leaders and laggards within different sectors. This process is subject to on-going assessment and revision, as new sources of ESG data becomes available, and our internal processes evolve.

Below is an outline of our formal process which drives our engagement approach. Companies are identified using two broad areas including an example of company selection:

Structured Targets

  • Financial Exposure: Top holdings by value, in both equity and debt
  • Weight of Influence: Significant percentage of holdings
  • Client Drive: Commitment to individual client mandates and concerns, including those of our fund managers and analysts

Performance Based Targets

  • Thematic Engagement: Focus on change philosophy, identifying trends and engaging with companies exposed to those trends
  • Poor Performers: UN convention breaches, breaches of the Principles of the UN Global Compact, poor sustainability rating
  • Event Driven Engagement: Engagement based upon significant market and ESG events impacting upon investee companies
Example of criteria which lead to company engagement. As noted a company may be selected based on one or more criteria.
Overarching Criteria Structured Targets Performance Based Targets
Specific Engagement Criteria Total
financial
exposure
Total
weight of
influence
Client
Driven
Event
Driven
engagement
Reactive
Engagement
Thematic
Engagement
Example Investee Company X X X

Our approach to engagement is to use our expertise and influence to encourage standards of best practice in companies' management of environmental and social risks and opportunities. This often involves long term engagement with investee companies focusing upon safeguarding the long term value of our clients’ investments.