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BlackRock

PRI reporting framework 2017

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

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.

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

other description

          a track record of underperformance on ESG and financial metrics compared to peers
        

03.3. Additional information. [Optional]

We screen a subset of our portfolios representing broad regional indexes across the globe in which we have significant shareholdings on a quarterly basis. The intent of this screen is to identify laggards in managing ESG considerations to drive proactive engagement where there is a clear nexus between the ESG matter and financial risk. We prioritize individual engagements based on the materiality of the issue under consideration and the size of our holding (or the value at risk).


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]

We assess the effectiveness of our engagements based on the achievement of our engagement goals, as amended once our understanding of the situation has developed. In setting our objectives, we work with portfolio managers and others internally and externally to build our knowledge of the issues, propose a sound course of action and define optimal outcomes (as perceived from the outside). Thus, the measures for each engagement will be different, and the course of each engagement is unique so not all options above apply to every engagement. Generally, we look to persuade the company that the status quo is not acceptable, put forward some ideas for addressing the issue and remain involved to encourage the delivery of fundamental change by management and the board. We are clear that we represent patient capital but that we are not infinitely patient and if we believe progress is not sufficient given the materiality of an issue we will escalate our engagement to a vote against management, possibly through opposing the re-election of the director/s we deem most accountable for the issue.  We remain open minded and adapt our position as we progress the engagement, where appropriate, based on information to hand and developments.


Process for engagements conducted via collaborations

LEA 05. Process for identifying and prioritising collaborative engagement

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

05.1. Indicate whether your organisation has a formal process for identifying and prioritising collaborative engagements

05.2. Describe the criteria used to identify and prioritise collaborative engagements

05.3. Additional information [Optional]

In our experience, collective engagement by shareholders can be very effective on policy related issues such as transparency and disclosure (i.e. board disclosure on diversity policies) or enhancements of shareholder rights. However, collective engagement focused on value-related matters, such as strategic direction or company leadership, can be much more difficult to achieve collectively. In practice, collective action is difficult to manage given that shareholders tend to have a range of perspectives. In BlackRock's experience, even where there is agreement that a problem exists, it can be very difficult to agree a single course of action or timeframe in which it ought to be taken. This diversity of opinion is not a flaw in the system, but a strength as it brings a range of alternative solutions to the situation. Nonetheless, it is not always possible to reach a consensus and in many collective engagements shareholders ultimately take their own stance directly to the company. This is further exacerbated in markets with dispersed ownership. For these reasons and given our prioritization of engagements that are closely tied to long-term value, we only occasionally engage companies in collaboration with other investors.


LEA 06. Objectives for engagement activities

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

06.1. Indicate if you define specific objectives for your engagement activities carried out collaboratively.

06.2. Indicate if you monitor the actions companies take following your collaborative engagements.

06.3. Indicate whether your organisation defines milestones and goals related to engagement activities carried out via collaborations.

06.5. Additional information. [Optional]

While our firm may not define the milestones and goals related to engagement activities carried out via collective engagement, we do track and monitor progress against defined milestones and goals in order to evaluate the progress of collaborative engagement activities when we are a participant.


General processes for all three groups of engagers

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

09.1. Indicate if insights gained from your engagements are shared with your internal or external investment managers.

Type of engagement

Insights shared

Individual/Internal staff engagements

Collaborative engagements

09.2. Additional information. [Optional]

Where an engagement shapes our thinking on the quality of management or board leadership, key factors in sustainable long-term value, we would ensure that portfolio managers are aware of our views.  That said, most engagement is about building mutual understanding with companies and providing feedback on routine matters.  It is also important to note that a significant number of the companies in which BlackRock invests are only held in index strategies so there is no active portfolio manager to debrief.   


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

Collaborative engagements

10.2. Additional information. [OPTIONAL]


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