Our engagement work can be divided into the following types:
1. Engagement with smaller companies
We focus on smaller companies to strengthen governance structures, introduce sustainability policies, processes and disclosures, for companies to manage effectively their most material ESG-risks. Impax has developed a proprietary cost-effective framework to advice companies on how to develop robust, material and cost-effective sustainability reporting.
2. Longer-term strategic engagement priorities
Every year we assess and state the engagement priorities for the next 12 months, based on market developments and emerging ESG and sustainability issues that we have identified and that are relevant and material for our companies. We then identify the companies most exposed to the issues in question and focus our engagement on those companies. While we assess these priorities every year, they may not change annually; they are often of long-term nature.
3. Collaborative engagement
We regularly engage on ESG issues, specific sectors and companies together with other investors and partners with or without a lead or coordination from responsible investment organisations. These are collaborative engagements where outreach may particularly benefit from a larger group of shareholder involvement or in cases where an issue is being escalated.
4. Pre- or post AGM engagement
We engage with many of our companies either before or after AGM and proxy voting. It is predominantly related to governance and issues such as election of directors, board structures and management remuneration. Where we vote against an AGM resolution, we aim at informing the company before the AGM, or at least after the AGM.
5. Company due diligence & monitoring
As part of our 10-step company analysis, we often engage with companies to find information and clarification regarding specific governance issues, environmental and/or social risks that have not been clearly addressed, explained or disclosed by the company. This is part of our on-going monitoring of our companies.
Company monitoring and escalation
The Impax investment team has established internal processes and uses various external research tools to monitor our investee companies regarding their financial, operational, strategic, sustainability and governance developments that highlight possible areas of concerns and priorities for engagement.
Where material concerns or anomalies at an investee company have been confirmed, the Impax investment team will intervene and escalate matters in order to mitigate risks and preserve shareholder value.
We will immediately contact the investee company management team and where relevant and possible members of the company board. Typically, we would request a conference call with the management team, to discuss the concern in detail. We would also contact the company’s brokers for information.
If the investee company is unresponsive to engagement or we view, upon clarification with the management team, that the company is taking an approach that is significantly increasing shareholder risks and the company is unwilling to consider less risky approaches, we would escalate our activities as follows:
- Intervene or engage together with other institutions on the issue
- Feeding back to company’s advisors especially regarding voting matters
- Highlighting the issue and/or joint-engaging regarding the issue through institutional platforms like the UN PRI
- Filing or co-filing resolutions at General Meetings
We believe that we can be more constructive and ultimately in the long-term more influential with our investee companies, if we maintain good relations and where possible interact and engage directly with the company on specific concerns. Public statements or filing resolutions would be last resort activities in exceptional circumstances.
Ultimately, if the interventions were not successful and we consider that the risk profile of the company has significantly deteriorated or company strategy or governance structures have altered, to a degree where the return outlook and the company strategy and quality no longer meet our expectations, the company would be excluded from our investable universe and/or sold.