While the majority of engagement is private we also aim to participate in collaborative engagement where appropriate.
We monitor collaborative engagement programs - for example those run by the PRI or the Investment Association / Investor Forum and will look to prioritise those where we believe an issue is relevant and material. An issue where the impact on the potential value of an investment is large or where the timescale is short will be given high priority. We will also prioritise those collaborative engagements where we believe we can make a material contribution to the overall engagement - for example leveraging our extensive expertise and company relationships in Emerging Markets. In some cases, collaborative engagements provide an opportunity to learn and deepen our expertise on issues that we consider to be pertinent both regionally and globally.
Examples of the collaborative engagements we have selected to participate in:
Martin Currie was on the steering committee for the PRI collaborative engagement on fracking disclosure. The objective of this collaborative engagement was to improve disclosure and adoption of best practice in those companies involved in the fracking industry - notably community support, water quality and use, air emissions and the governance of procedures as the key areas of concern. We believe there is an investment opportunity from being a responsible company and adopting the best available technology and procedures. We believe the benefits may include a better reputation, sustainable earnings, greater productivity and efficiency and lower costs. We found an overall lack of disclosure in the industry around the related risks from fracking. In this case we have been able to leverage our Emerging Market and Energy sector expertise. This collaborative engagement has successfully concluded.
Martin Currie was also involved in the collaborative engagement on labour relations and led the engagement with one of the targeted companies. This engagement was aiming to improve company practices and enhance company disclosure regarding employee relations within the retail industry. This was an ideal opportunity to achieve some of the improvements desired and our excellent relationship with the company helped the process.
Martin Currie also participated in first the collaborative engagement on water risks in agricultural supply chains. We were interested in this as we believe it is likely to become an increasingly important area of focus for investors. This engagement targeted food, beverage, apparel, retail and agricultural companies based on their exposure to water risks. The aim was to gain an understanding of the degree to which companies are aware of the risks, understand to what extent the companies measure or assess water risks in their key agricultural supply chains, assess the material value of these risks, how the companies are responding and examine what information the companies disclose. Our significant experience in Emerging Markets and our broader engagement experience put us in a strong position to contribute to this engagement and we therefore led it with a number of targeted companies.
Martin Currie was also on the steering forum for the collaborative engagement on cybersecurity. Cybersecurity is an area where we see significant potential risks as well as opportunities and has come under increased scrutiny in the aftermath of recent high profile cases. This engagement will focus on the governance and disclosures around cybersecurity and the steering forum established the terms and target companies for the engagement. We are now leading the engagement with a number of the target companies.
Most recently Martin Currie has joined the collaborative engagement on corporate tax responsibility. Aggressive tax practices can present earnings, reputational and legal risks for investors’ portfolio companies. This engagement aims to make companies aware that investors are concerned about aggressive corporate tax practices, encourage the development of responsible corporate tax strategies and relevant implementation practices, improve company disclosure across policy, governance and financial reporting and identify existing best practices. We will be leading the engagement on a number of companies where we already have strong relationships.
Through FAIRR and ShareAction we are also supporting the collaborative engagement on Anti-microbial resistance as it pertains to factory farming and anti-biotic use in the food supply chain. According to estimates, approximately 50% of antibiotics used in the UK and 80% of antibiotics in the US are given to farm animals. This has been recognised by the World Health Organisation (WHO) as contributing to an emerging global threat of a post-antibiotic era, in which common infections and minor injuries can once again kill humans. Non-therapeutic use of antibiotics is particularly widespread in factory farms, where crowded conditions and build-ups of waste can make animals more prone to infection. A recent report commissioned by the UK Prime Minister found that drug resilient infections could kill an extra 10 million people every year by 2050, costing the world around US $100 trillion in lost output.
The key objective of the engagement is to build awareness of the issue and encourage the development of a comprehensive policy, with timelines identified, to phase out the prophylactic use of medically-important antibiotics across the global supply chains for a number of companies identified as having the most exposure to this issue.