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Wellington Management Company LLP

PRI reporting framework 2018

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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]

The prioritization of our engagement activity can come from any part of the ESG Research team’s process – ratings and research, portfolio reviews with portfolio managers, or proxy voting.

As one component of the firm’s research process, companies are assigned an ESG rating using a proprietary, systematic process that uses third-party inputs and considers industry, home market, and company size in defining the peer universe. Each rating reflects a peer-relative assessment, thus comparison versus peers is most meaningful. Importantly, the rating is not a buy or sell signal but rather helps to flag companies and provides a starting point for deeper analysis. Because ESG ratings for a given peer group are assigned based on a normal distribution, the ratings naturally identify positive and negative outliers which may warrant further research and engagement. We may choose to engage with a negative outlier company to ensure that the rating is capturing the company’s full scope of procedures and disclosures, to provide direct feedback to the company on a particular issue, or to check in on the company’s progress since we last spoke. We may choose to engage with a positive outlier to hear about emerging best practices in a particular industry, which helps us provide better feedback to other companies in the sector when we engage on the same topic.

Another source of prioritization comes from the portfolio review process. An ESG analyst performs portfolio reviews with portfolio managers to identify holdings with the greatest ESG risks and opportunities. These conversations often lead the portfolio manager to provide feedback about the companies which s/he would like the ESG Research team to engage with and potentially influence behavior.

In certain instances, the ESG Research team will engage with companies prior to an annual general meeting in the event that the company did not receive strong support from shareholders in the prior year. In particular, the team seeks to understand whether the board has been receptive to shareholder feedback and made substantial changes to improve the proposal.


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 during and following your engagements activities carried out by internal staff.

04.3. Indicate if you do any of the following to monitor and evaluate the progress of your engagement activities carried out by internal staff.

04.4. Additional information. [Optional]


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