ESG Engagement - driving change, driving shareholder value

ESG Engagement - the best recent papers

As the call for better stewardship of assets grows louder, there is an increasing onus on asset managers and owners to engage meaningfully with company management on ESG issues. There is plenty of evidence that such engagement can not only drive better outcomes for society, but can also help to create long-term shareholder value.

We highlight below some of the best content from recent months, providing evidence and examples of how and why investors can - and should - step up their engagement with the companies in their investment portfolios.

How ESG Engagement Creates Value for Investors and Companies (PRI, 2018)

This report details the results of research, commissioned by the UN's PRI (Principles for Responsible Investment) to examine the mechanisms by which engagement with company management by institutional investors creates shareholder value.

Engagement: advancing the human capital agenda (Hermes IM, Apr 2019)

There are many areas of a company's business in which investors can engage with management. Hermes explains how and why it is beginning a dialogue on the issue of how companies treat their employees - reflecting the fact that the satisfaction and well-being of employees is one of the drivers of business success.

The EU Taxonomy: Sustainability Metric of the 21st Century (BNP Paribas AM, May 2019)

How should investors determine which issues to engage on? The proposed EU taxonomy will be helpful in this regard, providing a classification of all activities that can be considered environmentally sustainable.

The hard truths about corporate governance (Capital Group, 2018)

For compliance reasons, this paper is only accessible in certain geographies

In this seven-page report, Hermes' Portfolio Manager Steve Watson examines the role of shareholders, governance practices and board diversity, particularly in Asia.

Engagement: The ESG X-Factor (Fidelity International blog, Jun 2018)

For compliance reasons, this paper is only accessible in certain geographies

Fidelity explains that Engagement - which requires a vision of the future - is a key distinguishing feature between active and passive products.

Voting the Votes: Materiality and Shareholder Proposals One Year On (Neuberger Berman, 2018)

For compliance reasons, this paper is only accessible in certain geographies

in 2018, Neuberger Berman made an undertaking to integrate SASB guidance on materiality into the determination of how they cast their proxy votes on behalf of investors. Drawing from that experience, this paper describes how an evaluation based on materiality can help in determining how to vote on shareholder proposals.

ESG Engagement for Fixed Income Investors: Managing Risks, Enhancing Returns (PRI, 2018)

How should fixed income investors tackle the integration of ESG factors? This UNPRI report provides a helpful framework.

Investment Governance for Fiduciaries (CFA Institute Research Foundation, 2019)

This detailed, 190 page report examines how a framework for investment governance can be structured. It examines investment beliefs, investment objectives, the investment policy statement, the many paths to implementation and portfolio construction, and the process of monitoring, reporting and review that should follow.

Dam failure: risk management challenges in the global mining sector (Manulife AM, 2019)

For compliance reasons, this paper is only accessible in the EMEA region

Manulife uses the example of dams failures - and the materiality of dam structures - to illustrate how institutional investors can directly engage with company management to drive an industry towards greater sustainability, at the same time leading to financial reward for shareholders and investors.

Voice and exit: using engagement as a force for change (Aviva Investors blog, 2018)

For compliance reasons, this paper is only accessible in certain geographies

Aviva Investors argues that positive engagement with company management can be a more effective way of driving positive change than divesting from the company.

Shareholder Rights Directive: A step towards sustainable capitalism (Hermes, Feb 2019)

For compliance reasons, this paper is NOT accessible in the United States and Canada

Hermes argues that the Shareholder Rights Directive has profound implications for European institutional investors, and will accelerate a move towards a longer-term perspective of the investment process and investment stewardship. This report details the results of a survey to gauge awareness of, and compliance with the Directive - and reveals some stark results.

Experts on Climate Change (DWS AM, 2018)

For compliance reasons, this paper is only accessible in certain geographies

Climate change is one of defining issues of the 21st Century and one on which company engagement is particularly urgent. This detailed document from DWS provides an exhaustive summary of climate change issues, not just from a portfolio management perspective, but also examining issues of science, law, accounting and the perspectives of actuaries and investment consultants.