Engagement Report 1H21
During 1H21 the Firm has fully revised the Responsible Investment Policy to incorporate ESG considerations into our investment process. A formal process of screening and exclusion, stewardship, engagement, and escalation has been established, in addition to the ESG scoring that has been basis of our ESG inclusion in previous years.
It is our first year reporting for UNPRI assessment, and we have become a supporter of the Task Force on Climate-related Financial Disclosure (“TCFD”).
For the first time we have produced a Climate Change Policy, articulating our long term climate target, and how we will assess climate-related risks and opportunities going forward. The process of setting short and medium terms climate targets, and reporting in line with TCFD, will involve understanding what needs to happen on the policy and technology fronts for hard-to-abate sectors, and the physical climate risks should these industries fail to transition.
As we interact more frequently with investees and other investors on stewardship and engagement matters, we hope to refine our sustainability targets over time.
Screening and exclusion
All current and prospective investments are now screened for breaches against minimum standards of business practice based on international norms, for controversial practices that have adverse impacts on society and the environment in line with established expectations for Responsible Business Conduct. The framework consists of the Principles of the UN Global Compact, the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles for Business and Human Rights, and is embedded in the Sustainable Development Goals.
The revised Exclusion Policy includes verified failures of the above, and other controversial practices. In particular we will engage coal producer and coal-fired power to have a 2040 coal exit plan (2030 in OECD).
Our proxy voting policy has been updated to reflect best practice in sustainability, to bring it in line with the ESG factors we consider in our internal ESG scoring, to apply responsible investment considerations consistently in our investment process. Considerations include matters such as board diversity, equal pay, transparency on compliance with labour and human rights, tenure of directorships, changes to the articles, and excessive compensation. We will also encourage companies to report in accordance with the TCFD framework, including setting a Science Based Target, identifying risks related to climate change, and considering mitigation measures.
Our engagement and escalation process has now been formalised, with clearer objectives, and escalation process and time frame clearly set out.
Current engagements are as follows:
Screening: 4 current holdings have been identified to be in significant breach of norms, and we have commenced verification of the scope of impact, and engagement and with investees to ascertain the level of remediation undertaken, in the 6-month grace period before possible divestment.
Coal Exit: we are in the process of identifying coal-related holdings, and will be engaging with companies on coal exit by 2040 (2030 in OECD). We courage coal phase out rather than an outright sale of assets, and plans that ensure fair outcomes for all workers and communities.
Collective engagement: as signatory to Climate Action 100+ we will be participating in coal phase out, energy transition and target setting issues with particular investees. We have also signed up to the Workforce Disclosure Initiative (“WDI”) which aims to improve corporate transparency and accountability on workforce issues. We will be writing to holdings on the WDI target list to encourage them to complete the survey.
We have also engaged AU Optronics on behalf of ShareAction’s Investor Decarbonisation Initiative. Topics of discussion include company’s climate ambition, use of renewables, and Taiwan’s energy policy.
As a result of the increased engagements and no. of ongoing initiatives, the ESG Committee has decided to meet on a monthly basis from May onwards, and will report on engagement and voting activity on a semi-annual basis.