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Perpetual Investments

PRI reporting framework 2017

You are in Direct - Listed Equity Active Ownership » Engagement » Process


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.

03.3. Additional information. [Optional]

We continue to note this indicator is not helpful in communicating how Perpetual undertakes corporate engagement.

This indicator may be valid for a small fund manager or asset owner with limited ESG engagement resources (i.e. who needs to prioritise), or for a signatory with a separate ESG engagement team (i.e. with priorities that may differ from investment decision-makers as per below).

However, Perpetual's engagement activities (including ESG) are an integrated part of our large equity team's investment process. Having our investment decision-makers carry out engagement (where it is material and relevant to their analysis and investment decision-making), rather than by a separate ESG team, we strongly believe is more valid and effective. That is because the 'change message' is being communicated to the company by the same individuals who control our buy/sell/hold decision (i.e. whether to provide or withdraw capital to the company). Clearly this will increase the motivation of company Boards/management to consider change. In summary, we engage on a 'bottom-up', company-by-company basis as needed, rather than running 'top-down' ESG 'campaigns' on the same issue across multiple companies at the same time.

Therefore, for us it is unnecessary and impractical to institute 'a formal process for identifying and prioritising engagement activities' as per this question. This would mean in practise our equity professionals debating the worth of their respective proposed company engagements against other equity professionals' proposed engagements. We doubt any equity team would manage money in this way. At Perpetual, equity professionals are given trust to achieve their performance objectives via different approaches, not micro-managed in this way.

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.

other description

          Specific to the engagement, depending on complexity, importance, etc.

04.5. Additional information. [Optional]

While it might be considered best practise, setting up a rigorous engagement tracking process as encouraged here can be problematic, due to:

  • In our experience corporate engagement (on ESG or other matters) is an inexact science which can in some cases take years to bear fruit (if at all), so the frequent re-analysis of engagements above may not be productive. As already discussed in this module (LEA 03.3), this would represent more 'process' and we question the benefit to our clients of our equity professionals in particular spending time implementing a process to this degree, at the expense of focussing on clearly value-adding work. Some larger signatories with dedicated ESG teams may be able to achieve this level of process for their engagements, but we question to what end? Do they achieve better outcomes?
  • Engagements are often sensitive (e.g. Board changes) so external disclosure (especially public) of progress can in practise jeopardise outcomes - we do so occasionally but always think very carefully before going down this adversarial route (i.e. essentially putting public pressure on companies to encourage change). We often achieve better outcomes with a constructive confidential approach.
  • We are usually unaware if other shareholders are engaging (and if so to what degree) on the same issue, hence are often reluctant to claim sole credit for a positive engagement outcome merely to complete the engagement 'process'.


General processes for all three groups of engagers

LEA 09. Share insights from engagements with internal/external managers (Private)

LEA 10. Tracking number of engagements

10.1. Indicate if you track the number of engagements your organisation participates in.

Type of engagement
Tracking engagements

Individual / Internal staff engagements

10.2. Additional information. [OPTIONAL]

Perpetual's analysts and portfolio managers conduct and participate in hundreds of company meetings a year, with listed companies themselves, related peers/suppliers and other relevant groups, on a broad range of ESG and non-ESG issues, at a range of forums, individually and collectively, and for both information-gathering and engagement purposes. We typically do not 'segregate' meetings by the above aims, nor by issue categorization (ESG and non-ESG) as this would often be impractical. We believe it would be unworkable to impose a rigid, time-consuming process where it is mandatory for investment professionals to document every single company engagement point relating to every company. Analysts and portfolio managers share relevant, material ESG and other company information with the rest of the team via the IRN (Internal Research Note) and other systems/forums as needed. We see no value to our clients of tracking engagements in this manner.

We believe it is only reliable to highlight specific engagement examples and outcomes (see LEA 15) where we are confident we have had a degree of influence.