ESG | Feature
policy. “Engagement is going to be more effective if you know what your stance is, so you know what you need to insist on.” Her colleague, investment consultant Tim Manuel adds: “What are you engaging on if you don’t have an ESG policy?”
COME TOGETHER Collaboration is an option to get compa- nies to listen, especially larger companies in the FTSE 100 where it is difficult to build a sizeable stake. Climate Action 100+ is an engagement group backed by investors globally to ensure the world’s largest greenhouse gas emitters take action on climate change. Other groups include ShareAction, a char- ity that promotes responsible investment. “We work with other shareholders to
duce distribution control systems. “A collaborative approach is needed as a number of different people have to be involved to achieve results,” Brett says. Collaborative action does not necessarily mean that you are positioned against man- agement, Burger says. “We have worked hard with management for them to recom- mend shareholders to support the share- holder resolution that we are co-filing [at BP’s AGM this year], so they will recom- mend voting in favour of it. “I don’t remember seeing a shareholder resolution on a US company AGM agenda where management has recommended that shareholders you support it,” he adds. Increased collaboration is not the result of just the will to work together. The regulator has made it easier for investors to work
Collaboration is essential in getting
companies to listen. David Czupryna, Candriam
increase our influence,” Czupryna says. “Collaboration is essential in getting com- panies to listen.” Indeed, Candriam joined 10 new collabora- tive initiatives in 2018, which included Cli- mate Transition for Oil and Gas, Plastic Solutions Investor Alliance and the UK Living Wage Engagement Campaign. One of BNP Paribas AM’s collaboration successes involved a rouge pharmaceutical company. Three years ago, the bank discov- ered that products made by four of its port- folio companies were being used to exe- cute prisoners in the US. After holding discussions, one company was not as open to change as the others were. In response, BNP Paribas AM formed a pressure group with other shareholders and the Dutch government (because of where the company was based). The strategy worked and the pharmaceutical agreed to intro-
together by clarifying the takeover rules a few years ago to allow collaborative engagement where investors would not be acting in concert. “That was a key decision that enabled a lot of this action to start happening,” Brett says. “Before then investors would have been concerned about being caught out by the rules. “Certain topics are now seen as fair game on what they can work on collaboratively, as long as they are not becoming insiders and are trying to influence strategy, they have more leeway now following the rul- ing,” he adds.
PLAYING THE LONG GAME Of course, institutional investors do not have the time or resources to engage with every company in its portfolio or to vote on every issue at AGMs. That could mean that
they have to consider thousands of issues across various companies every year. Then there is the time issue. Robeco’s van Lamoen advises investors to be patient as engagement dialogue can take years to make an impact. “Change does not happen overnight,” she adds. “If you have an engagement conversation today the com- pany does not typically change tomorrow.” Burger agrees that the time it takes before action stems from engagement is a “how long is a piece of string-type question”. “Generally, a couple of years are required for change to come through fully, so you need to be patient and persistent,” he adds. “That is one of the areas where we have struggled in terms of reporting and evi- dencing the success of our engagement,” he adds, pointing out that the firm reports each quarter on where it has engaged with companies, and what on, in terms of ESG.” Charles says that there is a lot of pressure on investment managers to report on their engagement policy, but there is still a long way to go. “This is still early days. Engage- ment reporting is still poor. Transparency is still poor. “Waking the corporate world up to the need and demand for transparency of what they are doing is still early days,” she adds. Manuel adds that the reporting on what managers are doing in terms of voting is better than it was, but this is just one part of engagement. “Where it is not as good is on the broader engagement that they are having with organisations outside of the voting cycle.” Charles adds that reporting on engage- ment and voting tends to be generic. “You don’t get down to the nitty gritty.” Part of the problem is that managers can participate in thousands of votes each year, which focus on administration issues, gov- ernance and some that involve ESG. “How can reporting in granular way on that much activity is quite a challenge,” Manuel says. To be a “good sparring partner” for a com- pany you need to do your homework, be constructive and don’t aim to make head- lines, says van Lamoen. “We are active not activists.”
Issue 83 | April 2019 | portfolio institutional | 27
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44
