1. As discussed above, engagement objectives for companies are set by either qualifying as a Dutch holding; holdings falling within the ESG-risk themes as prioritized by our clients; or by presenting high material ESG-risks and/or are widely being recognized as Global Compact violators.
2. Based on research and specialist input, for each of these companies company best practices are being identified. Based on the established best practice gaps it is possible to develop engagement trajectories tailored to the needs of each individual company, set goals and define specific engagement topics. At the start of an engagement trajectory a starting point is defined by setting the lowest relevant milestone and ambitions are defined by setting the to-be achieved milestones, formulating the necessary in-between SMART-goals and choosing the required timeline. Milestones are general and similar for all types and themes of company engagement as they solely discuss the level of integration and mitigation of a certain ESG-risk:
1) no awareness;
4) programme, practice; and
The in-between SMART-goals define the steps required to move a company up from one milestones to another and are tailored to the specific risks and awareness trajectory of a company. When progress on engagement is slow it can be decided to start working in collaboration with peers or other parties and intensify the engagement frequency.
3. To stay up-to-date with changes in company conduct and practices, we monitor all company publications, receive third-party research from multiple providers, and actively engage with NGOs, academic and government representatives to receive sufficient variety in views.
4. Progress on company engagement is being reviewed on a quarterly basis. Every quarter is also is decided whether new companies with a sudden increase in material ESG-risks and/or Global Compact violator status should be added to the engagement list. Overall, on an ongoing basis it is decided which companies should be added or delisted from the engagement list:
- Added to the engagement list: companies that according to our engagement selection rules qualify within the MN engagement scope.
- Prolonged on the engagement list: companies that show sufficient commitment, are still within the set timeline, and are clearly in the middle of processes implementing change.
- Delisted from the engagement list: companies that have shown sufficient progress in conduct and have achieved desired milestone(s) within the set timeline.
- Delisted from the engagement list: after a minimum period of two years, companies that according to our engagement selection rules do not longer present material ESG-risks.
- Escalation – divestment nomination: after a minimum period of two years, companies that fail to show any willingness to engage, that fail to produce any improvements in conduct may be nominated to be delisted. The final decision is made by the management team of MN asset management (comprising the MN CEO and CIO).
5. MN registers all engagement activities in an internal database (CRM) that allows to log all points of contact and tracks company engagement progress overtime. This database caters for organising company engagement logs by ESG-themes, milestones, smart-goals, date, etc and for filing all evidence on company engagement (including emails, meeting notes, company communication, notes, research, progress analysis, yearly summaries etc). Insights on companies from the database are often shared with investment teams on request. In addition, there exist various ways of cooperation with the investments teams. Either for reasons of knowledge sharing on material ESG-risk topics retrieved from engagement (such as energy transition, freedom of association, annual bonus) or in preparation of voting and AGMs.
6. The engagement coordinator is responsible for the complete engagement value-chain, from design of policies to final output. Think quality of work, actual progress on company improvements realized and the availability of high quality information management support systems. Other responsibilities regard developing policies in coordination with client expectations, control of full execution of policies and quality of company contact, managing the team of engagement specialists, prioritization of engagement companies, quality of contact with companies and client company progress reports. MN’s overall engagement policy is being reviewed on a two-yearly basis which allows for improvement of processes, updates on standards and benchmarks and integration of lesson learned.