ESG Engagement
On top of legal compliance, companies are expected by investors, employees and other stakeholders to conduct their business with due care and in a responsible manner. Involvement in ESG-related controversies, such as environmental pollution, poor work health and safety and bribery, indicate inadequate ESG management. If not addressed properly, companies could potentially suffer from loss of man-hours, loss of business, penalty imposed by regulatory bodies, reputational damage etc.. This could hinder not only its short-term performance but also long-term growth, which makes it important for institutional investors to engage with such controversial companies to protect and promote shareholder value.
Types of controversies covered by ESG Engagement
- Violating international norms and conventions such as the UN Global Compact that sets the business standards regarding human rights, labour rights, the environment and anti-corruption
- Causing adverse impact to the environment, stakeholders and society at large defined by the OECD Guidelines for Multinational Enterprises, UN Guiding Principles on Business and Human Rights etc.
- Displaying a huge gap between a high level of ESG risk and & opportunity exposure and a low level of ESG management. A typical example would be a company involved in high-risk business activities such as offshore oil drilling and operating in an emerging market where local regulations and ESG standards may be less stringent.
Engagement goal
Resolve the concerned ESG incidents, address the adverse impact or reduce the gap between exposure and management levels in accordance with international norms and guidelines
Improve the company’s sustainability management of its most material E, S and G issues as well as the UN SDGs to enable continual improvement in sustainability performance and prevent future violations
Client Benefits
Mitigate business and investment risks associated with ESG controversies or incidents
Obtain independent engagement insight and overview of company progress in detailed company and portfolio reports to inform investment decisions and exercise oversight on asset managers
Improve portfolio companies’ ESG and UN SDG management by joining other institutional investors represented in dialogues led by Engagement International
Access world class ESG data provided by MSCI ESG Research, which forms the basis of the ESG due diligence process