Our main objective for our engagement activities is to motivate change within a company. Engagement efforts can only be successful when the company understands what it is you demand from it and why. Why is it relevant for the investor and why is it considered relevant for the company itself. These engagement efforts often take time. Companies do not change overnight. We generally stop our engagement efforts only when the company shows no responsiveness to our questions or when the company took all recommendations on board and successfully implemented them.
A large part of our dialogue with companies takes place as part of the research process and is focused on gaining insight in corporate ESG implementation processes, to assess compliance with our minimum standards. While doing this, we formulate our questions in such a way that we hope to inspire the companies to address our concerns if this is not already the case. As part of our monitoring process, we will also pose questions when a selected company becomes involved in controversies. When a company does not answer our questions, it may not be selected for investment.
The companies we target for further engagement are companies that are selected for sustainable investment by Triodos. These companies are already doing well. The ESG areas for improvement are therefore never strategic issues, otherwise the company would not have been selected for sustainable investment. Nevertheless, there are always areas for improvement and depending on the urgency and materiality of the topic for the company we will actively follow the progress made by the company.
When we engage with multiple companies on a particular issue outside the research process, we make an engagement plan that includes goals and deadlines. Progress is actively monitored and when sufficient companies take further steps towards sustainability, this may lead to a strengthening of our minimum standards.
For proxy voting we monitor systematically which resolutions have received considerable opposition from shareholders and we track how such resistance has changed company behavior.
Each engagement effort is registered and requires a specific action to be closed by the responsible researcher. Before an action is closed the researcher needs to log whether or not the engagement effort has been successful and if so, what change is made by the company.
Information provided refers to 2017. Please note that, as of April 2018, Triodos Investment Management will bring the asset management of its SRI funds in-house. As of that month, a team of investment analysts will integrate the ESG and the financial performance in their analysis of companies, resulting in the definition of the investment universe. Related organisational changes are being implemented and expected to be fully in place by the end of 2018. See LEA 01.6.