SSGA holds over 9,000 listed equities across its global portfolios. Therefore, the success of our engagement strategy is built upon our ability to prioritize and allocate resources to focus on companies and issues that potentially will have the greatest impact on shareholder returns. To support this process SSGA has developed proprietary in-house screening tools to help identify companies for active engagement based upon various financial and ESG indicators.
Factors considered in developing the target list include:
- Size of absolute and relative holdings;
- Companies with poor long-term financial performance within their sector;
- Companies identified through ESG screening tools as lagging market and industry standards;
- Outstanding concerns from prior engagement; and
- Priority themes and sectors based on an assessment of emerging ESG risks.
The intensity and type of engagement with a company is determined by SSGA’s relative and absolute holdings in that company. In addition, we also build in geographic diversity in our engagement efforts to reflect the level of economic exposure to various markets. Finally, we also consider the engagement culture in a market or geographic region when developing our engagement target list and approach.
In addition to ESG screens, on an annual basis SSGA develops an Annual Stewardship Program based on a series of strategic priorities that are designed to enhance the quality and define the scope of our stewardship activities for the year. Identifying our stewardship priorities allows us to plan and actively focus our engagement efforts on sector-specific or thematic ESG issues that are important to our clients. We develop our priorities based on several factors including client feedback received in the past year, emerging ESG trends, and developing macroeconomic conditions and regulation.
In the Annual Stewardship Program, we also identify two or three ‘deep dive’ sectors a year. This allows SSGA to proactively monitor and engage with companies on matters such as long-term strategy, performance and ESG issues. Moreover, reviewing our global holdings within a sector gives SSGA the ability to identify business and ESG trends impacting all of our holdings, which strengthens our ability to provide inputs to the board and the management when they seek feedback or direction from large institutional investors. The insights we gain from our sector engagements are shared with clients through presentations and are reported in our Annual Stewardship Report.