Engagement is a long game, but it is going to become increasingly shorter and that’s partly due to reputational issues quickly percolating through social media. So we have to be careful of compa- nies that are issuing dual shareholder structures. Thompson: We tend to be pretty good at the gov- ernance part. When I first started in the City 30-odd years ago, the ‘G’ bit was all the focus. Dhillon: On the ‘S’ bit, when we mention cyber security people think of data privacy. That is some- thing that’s going to be increasingly brought to the fore. Data privacy has been written about within Sili- con Valley for a decade. One could have got ahead of the curve on this by being part of the right con- versations. Williams: Also on the social side, at ShareAction we have something called the Workforce Disclosure Initiative, in which there has been a lot of interest. It has 13 investors with more than £13trn of assets under management. There has been so much interest in getting com- panies to disclose data, particularly in their supply chain. Multi-national companies sometimes may not know what’s going on in their supply chain, so they are grateful to us for setting it up because that’s


given them the opportunity to investigate what’s going on. We send a comprehensive survey out to companies that cover health and safety, turnover, gender, train- ing, areas where up until now the data has been poor. There has been a lot of interest in that initiative and it’s going from strength to strength because there was such poor human capital data and that is a risk. So you can get a lot of people onboard in a neglected area. Varco: The investment community in the US is ahead of Europe on gender and diversity. We hired a senior director to look at those metrics in managers and their underlying holdings. Ward: Those metrics are not necessarily driving diversity though, are they? Varco: No, that’s the challenge. Ward: It is interesting to get feedback from the beneficiaries as to where their interests and concerns are. Climate change dominates and executive remuneration is regularly on the list of enquiries, but last year was the first time I had a stakeholder enquiry about how we look at sexual harassment in terms of engagement. Williams: At LAPFF’s conference last year a worker from Tesla talked about the company’s working conditions. It was quite shocking; he was almost killed. Investors have become much more interested in those areas. Ward: When I do trustees’ training, they usually ask me what the perfect company is. My reply is always: “I’m still trying to find one.” This is said with a smile, but the serious point is that managing these issues are a complex set of challenges for companies. McAllister: Nothing is black and white. Mining for cobalt is where the best money is to be made in the electric vehicle value chain, but you are getting into child labour in the Democratic Republic of the Congo (DRC). Then you are weighing up the net impact of helping to reduce air pollution versus child labour. These are difficult decisions and it’s where engagement can make a real difference. It is far better to own and engage and change than to walk away. We met a company in the electric vehicle value chain and it has since changed its incentives for mine


May–June 2019 portfolio institutional roundtable: ESG 15


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