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ClearBridge Investments

PRI reporting framework 2019

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Outputs and outcomes

LEA 09. Number of companies engaged with, intensity of engagement and effort

Indicate the proportion of companies from your listed equities portfolio with which your organisation engaged with during the reporting year.
We did not complete any engagements in the reporting year.

Number of companies engaged

(avoid double counting, see explanatory notes)

Proportion of companies engaged with, out of total listed equities portfolio

Individual / Internal staff engagements

800
90

Collaborative engagements

100
10

09.2. Indicate the proportion breakdown of engagements conducted within the reporting year by the number of interactions (including interactions made on your behalf)

No. of interactions with a company
% of engagements
One interaction
2 to 3 interactions
More than 3 interactions
Total
100%

09.3. Indicate the percentage of your collaborative engagements for which you were a leading organisation during the reporting year.

Type of engagement

% Leading role

  Collaborative engagements

09.5. Additional information. [Optional]

Regarding the questions in this section, frankly, we had to read the question out loud a few times because we  were trying to be sure we were interpreting The Ask correctly. 


LEA 10. Engagement methods

10.1. Indicate which of the following your engagement involved.

10.2. Additional information. [Optional]

We thought the classifications of categories were too broad in a few cases (e.g., "Meetings or calls with CSR, IR or other management"). We always include IR in all of our engagements (so we answered "in all cases"), but we don't require the CSR person in the engagement because we are usually meeting with the C-Suite and we believe senior management (at the C-suite level) should have a strong knowledge about ESG issues within the business strategy and should be able to address any engagement issues raised at our meetings. If needed (for more details and time), we will request the CSR person for another meeting. For any changes requested or major issues, we believe the C-suite should be included in that discussion.

Also, the options of "in a minority" and "in a majority" of cases were pretty wide - we would say "in many cases" (more than minority and less than majority) for a few of the questions, i.e., "participation in roadshows."

 


LEA 11. Examples of ESG engagements

11.1. Provide examples of the engagements that your organisation or your service provider carried out during the reporting year.

ESG Topic
Sustainability reporting
Conducted by
Objectives

Cott operates home and office water and coffee delivery businesses across the U.S., Canada and Europe. During Cott’s Investor Day the ClearBridge consumer staples analyst spoke with Cott’s CFO. One topic broached during the discussion was the room for improving Cott’s ESG disclosure. For example, Cott’s distribution method prioritizes recyclability and reusability, using primarily large reusable water jugs (one jug can be used as much as roughly 2,000 individual water bottles). 

Scope and Process

Shortly after this conversation, Cott reached out to ClearBridge to ask our views on company disclosure best practices and areas where Cott could improve disclosure and its sustainability profile. We also discussed the possibility of Cott holding an ESG-focused investor day at our ClearBridge offices. Following our dialogue on this topic, Cott increased its emphasis on ESG in its third-quarter earnings call, making a point of describing its commitment to the environment and to sustainable business practices, and will devote a substantial portion of its March 2019 Investor Day to ESG and sustainability topics. We view such showcasing of sustainability practices as a good step toward more formal sustainability reporting, and a great complement to Cott’s considerable ESG activities already in place.

Outcomes
ESG Topic
Climate Change
Conducted by
Objectives

Home Depot is the largest home improvement supplies retailer in the U.S. As a top-20 shareholder and long-time owner of Home Depot, we have had discussions with the home improvement retailer spanning many years. Following a visit by their general counsel and an investor relations representative to our New York office in October, The ClearBridge consumer discretionary analyst held a call with Home Depot’s head of sustainability in December. 

Scope and Process

During the call, we discussed a scope 3 emissions review process Home Depot is developing to evaluate its potential role in reducing carbon emissions through sourcing products more conducive to a circular economy (in which products are designed to minimize waste and aid in resource regeneration). Part of that effort involved internal tracking of environmentally friendly items available in their stores since 2007. We were impressed with the ambition of Home Depot’s goal to reduce scope 3 emissions — which include all indirect emissions in a company’s value chain, including emissions from the supply chain and from product use. Home Depot requested further input from ClearBridge on its scope 3 emissions goals, developing a useful definition of a circular economy from an investor’s perspective, and other sustainability goals discussions. We plan to continue ESG discussions in the coming months for a scheduled meeting between ClearBridge and a member of The Home Depot’s Board of Directors.

Outcomes
ESG Topic
Sustainability reporting
Conducted by
Objectives

Trex is a manufacturer and marketer of wood alternative decking products made from recycled wood fibers and plastic waste for residential and commercial customers. ClearBridge is a long-term shareholder and top 5 owner of Trex and has maintained an ongoing ESG dialogue with the company, including discussing the potential publication of a sustainability report so investors could learn more about the company’s ESG initiatives. Sustainability has been a core part of the Trex business model and culture throughout its history. Until recently, however, the company had not seen the value in formally reporting its ESG accomplishments. In fact, the company had received poor ESG scores from several third-party organizations due to its lack of disclosure.

Scope and Process

In December 2018, ClearBridge portfolio analysts and PMs hosted a meeting in which Trex solicited our feedback on its inaugural sustainability report, including what to measure, what goals to establish, pitfalls to avoid and general best practices to implement. In the meeting with the TREX Financial Reporting Manager who is on the Sustainability Accounting Standards Board (SASB) Advisory Group for Building Products, and the Controller, we conveyed the benefits of improved reporting, both as an internal benchmarking mechanism and as a way to make investors more aware of Trex’s compelling ESG culture. Brad and Deborah explained that customers were using the company as an ESG example, which motivated Trex to start telling the story itself. In addition to including more detailed data on key recycling programs, ClearBridge recommended the company include data on energy and water management. We also detailed board member tenure and diversity as key governance issues. Our feedback affirmed the company’s own efforts and in January Trex published its 2018 Sustainability Report.

 

Outcomes
ESG Topic
Diversity
Conducted by
Objectives

In June 2018, the Director of Research and senior Industrials analyst hosted a meeting with 3M’s incoming CEO in our New York office that included several portfolio managers. Much of the conversation focused on management transition. 

Scope and Process

We asked what the new CEO intended to do differently than the current CEO. While not offering a material change in either strategy or organization, he stressed a focus on speed and rate of change: faster decision making, speed to market and enhanced flexibility, attributes he believed increasingly critical to 3M’s future success. We also discussed hiring and diversity, with the new CEO citing the need to accelerate its diversity programs. He further articulated the company’s recruiting efforts across race and gender as critical to its ability to maintain its current globally competitive position.

Outcomes

11.2. Additional information. [Optional]

We have over 60 company case study examples of engagements in 2018 like the ones above in our publications.


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