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Fidelity International

PRI reporting framework 2017

You are in Direct - Listed Equity Active Ownership » Engagement

Engagement

Overview

LEA 01. Description of approach to engagement

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

01.1. Indicate whether your organisation has a formal engagement policy.

01.2. Indicate what your engagement policy covers:

01.3. Attach or provide a URL to your engagement policy. [Optional]

01.4. Provide a brief overview of your organization’s approach to engagement

We adopt a positive engagement approach whereby we discuss ESG issues with the management of the companies in which we invest, or are considering investing, on behalf of our clients. We believe it is an advantage to us and our clients to build positive relationships with our investee companies as this enhances our ability to introduce constructive change where required.

We use the information gathered both to inform our investment decisions and also to encourage the company’s management to improve procedures and policies.  We believe that this is the most effective way to improve corporate responsibility in our investee companies.

Although the investment team meets the companies on an ongoing basis, members of our ESG team also attend these company meetings when specific ESG issues are being addressed.  They work with the investment team to determine the objectives of the engagement, how best to achieve them and then will ultimately discuss the results of the engagement with the investment team and any additional information relevant to our investment decision.  Our ESG engagements are both proactive and reactive in nature and they are mostly are conducted with our current investee companies.

We provide our clients with engagement examples quarterly.

01.5. Additional information [optional]


LEA 02. Reasoning for interaction on ESG issues (Not Completed)


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.

03.3. Additional information. [Optional]

Fidelity's analysts will prepare an agenda prior to any company meetings. This agenda will identify and prioritise the issues they intend to discuss with the company. Our portfolio managers will review this agenda ahead of the meeting making any adjustments as required. This agenda then forms the backbone of our discussions with the company.

Members of our ESG team also attend company meetings when specific ESG issues need to be addressed. The specialists work with the portfolio managers and analysts to determine the objectives of the engagement, how best to achieve them and then will ultimately discuss the results of the engagement with the investment team and any additional information relevant to our investment decision.

Fidelity is generally supportive of the management of the companies in which we invest but we will nonetheless form our own views on the strategy and governance of a business. This forms part of our dialogue with companies. On occasion our views will differ from those of management and where this is accompanied by a failure to achieve our reasonable expectations for investor return we will consider promoting change. Our specific response will be determined on a case by case basis and we will weigh up the relative merit of intervention or a sale of the shares. Typically we will choose to intervene to promote change when the expected benefits of intervention (through increased returns to our investors) outweigh the anticipated cost.

We generally will not divest in a company due to ESG concerns, in the first instance we will engage with the company to try and get a better understanding of the issue, to get a view as to what the management is doing about and promote change when relevant and required.


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]

When our analysts or ESG team are engaging with a company, they will prepare an agenda with the items they wish to discuss with the company ahead of the meeting. This agenda is then shared with the portfolio managers/investment team and feedback is received.

After the company meeting, the analyst/investment team will then write up their notes from the meeting and again share these with the PM/investment team. Analysts will include these engagement notes in their reports that are published on our research management system which is visible to the whole investment team, including the portfolio managers, which then form part of the investment decision-making process.

Although we do not formally monitor the actions companies take following our engagements, we are always tracking the investment thesis of the company which forms part of our investment decisions.

Goals and objectives are identified ahead of the majority of our engagements, for example, when engaging in relation to voting activities we will flag concerns on proposals to our investee companies where we would be looking for them to make changes or improvements ahead of their next AGM and where no improvements have been made this would influence our voting behaviour at that company’s AGM the following year.

On occasion we will engage with a company to promote change ahead of a proxy vote.  If the company hasn't made the required changes we will often support the company but qualify it with them that if they don't change ahead of the next proxy vote, we will most like vote against the particular agenda item.  The ESG team will continue to engage with that company throughout the year and if the change still isn't forthcoming we will often vote against management.


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]

We maintain close relationships with a wide spectrum of investors as well as other agents of corporate change. Where legally permitted we are willing to consider collective engagement initiatives. Relevant factors in determining whether or not to participate in a collective engagement will include the identity of the other leading investors, the relative size of their investment and a determination of whether a collective approach is necessary in order to achieve a satisfactory outcome. We seek to identify issues, both governance and otherwise, which are relevant to the performance or valuation of the business in question. We would not normally intervene on an operational matter but as described under Principle 4 above, topics which can give rise to escalation and collective engagement include the need for management and/or Board change, strategy, capital structure, M & A, protection of shareholder rights, remuneration and other governance issues.

Fidelity is an active member of the UK Investor Forum and we maintain close links with other investors through organisations such as the Investor Association, the Corporate Governance Forum and numerous investor gatherings and conferences. There are collective meetings and calls with other investors several times a month at which company specific and wider governance issues are regularly discussed.


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.

06.4. Indicate if you do any of the following to monitor and evaluate the progress of your collaborative engagement activities.

06.5. Additional information. [Optional]

Although we do not formally monitor the actions companies take following our collective engagements, we are always tracking the investment thesis of the company which forms part of our investment decisions.

When we do participate in a collective engagement, we will follow the same process regarding our company engagements and draw up an agenda ahead of the meeting and send to the investment team for feedback. We will also report back to the investment team after the meeting with our relevant notes.

As part of our membership to the Investment Association, we often attend and participate in the collective engagements arranged by them with corporates.  We follow a similar process here as we do for our individual engagements with regard feedback to the investment team, but often the goals and objectives of these engagements are formalised by all investors attending that meeting.


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

Collaborative engagements

10.2. Additional information. [OPTIONAL]

Our Corporate Governance and ESG teams track the engagements they are involved in and this forms part of our reporting requirements. Our analysts and portfolio managers systematically track their engagements with companies but not specifically in relation to ESG factors.

During the year, we started to track our collaborative engagements seperately from our individual engagements.


Outputs and outcomes

LEA 11. Number of companies engaged with, intensity of engagement and effort (Private)


LEA 12. Engagement methods (Private)


LEA 13. Engagements on E, S and/or G issues (Not Applicable)


LEA 14. Companies changing practices / behaviour following engagement (Private)


LEA 15. Examples of ESG engagements (Private)


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