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State Street Global Advisors (SSGA)

PRI reporting framework 2017

You are in Direct - Listed Equity Active Ownership » Engagement » Process » Process for engagements run internally

Process for engagements run internally

LEA 03. Process for identifying and prioritising engagement activities

New selection options have been added to this indicator. Please review your prefilled responses carefully.

03.1. Indicate whether your organisation has a formal process for identifying and prioritising engagement activities carried out by internal staff.

03.2. Describe the criteria used to identify and prioritise engagement activities carried out by internal staff.

03.3. Additional information. [Optional]

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. 


LEA 04. Objectives for engagement activities

New selection options have been added to this indicator. Please review your prefilled responses carefully.

04.1. Indicate if you define specific objectives for your engagement activities.

04.2. Indicate if you monitor the actions that companies take following your engagements.

04.3. Indicate whether your organisation defines milestones and goals for engagement activities carried out by internal staff.

04.4. Indicate if you do any of the following to monitor and evaluate the progress of your engagement activities carried out by internal staff.

04.5. Additional information. [Optional]

The following methods represent how SSGA defines engagement methods:

Active:

SSGA uses screening tools designed to capture a mix of company specific data including governance and sustainability profiles to help us focus our voting and engagement activity. SSGA will actively seek direct dialogue with the board and management of companies we have identified through our screening processes. Such engagements may lead to further monitoring to ensure the company improves its governance or sustainability practices. In these cases, the engagement process represents the most meaningful opportunity for SSGA to protect long-term shareholder value from excessive risk due to poor governance and sustainability practices. On average 65-75% of annual company engagements are classified as active.

Reactive:

Members of SSGA’s Active Stewardship Team also engage with companies that wish to solicit our votes or seek feedback on corporate governance and sustainability issues as shareholders. These meetings are typically initiated by the company, who drive the meeting agenda.  On average 35-25% of annual company engagements are classified as reactive.

Measurement of Engagement:

Assessing the effectiveness of our issuer engagement process is often difficult. To limit the subjectivity of measuring our success we actively seek issuer feedback and monitor the actions issuers take post-engagement to identify tangible changes. By doing so, we are able to establish indicators to gauge how issuers respond to our concerns and to what degree these responses satisfy our requests. It is also important to note that successful engagement activity can be measured over differing time periods depending on the facts and circumstances involved. Engagements can last as short as a single meeting or span multiple years.

SSGA also tracks the impact of its proxy votes by reviewing changing trends in market practices on specific corporate governance or sustainability-related issues that are targeted for change through voting action.  Illustrative examples of successful engagement and voting actions are reported to clients on an annual basis in our Annual Stewardship Report. 


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