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Pendal

PRI reporting framework 2019

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You are in Direct - Listed Equity Active Ownership » Engagement

Engagement

LEA 02. Reasoning for interaction on ESG issues

Indicate the method of engagement, giving reasons for the interaction.

Type of engagement

Reason for interaction

Individual / Internal staff engagements
Collaborative engagements
Service provider engagements

02.2. Indicate whether your organisation plays a role in the engagement process that your service provider conducts.

02.3. Indicate the role(s) you play in engagements that your service provider conducts on your behalf.

02.4. Additional information. [Optional]

In addition to our direct engagement program, we also subscribe to Regnan's engagement service to complement our own active ownership practices. Pendal uses Regnan's engagement platform to provide an enhanced focus and independent perspective on ESG issues. We consider this to be an important complement to our own practice.

Pendal Australia's engagement program also involves supporting client education of company specific and/or ESG thematic issues as well as broader collaborative initiatives. For example we have proactively invited clients to meet with our respective company investment analysts, Portfolio Managers and Head of RI to discuss company / sector or ESG thematic specific issues. The clients who have participated in this offer have provided very positive feedback that the meetings with Pendal were a key contributor to a productive and informed discussion during their own direct and/or collaborative company engagements.

Regnan's engagement program involves a client approval process which provides the opportunity to discuss and provide feedback on each of the items above. Engagement plans are developed with client input on the companies selected, relative priorities within the program and change objectives. In addition to monthly reporting, quarterly meetings are offered to discuss recent and upcoming engagements, including frequency/intensity and next steps for engagement.


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 engagements.

Indicate the criteria used to identify and prioritise engagements for each type of engagement.
Type of engagement
Criteria used to identify/prioritise engagements
Individual / Internal engagements

Internal / Individual engagements

Collaborative engagements

Collaborative engagements

Service Provider engagements

Service Provider engagements

03.3. Additional information. [Optional]

In addition to our direct engagement program, we also subscribe to Regnan's engagement service to complement our own active ownership practices. 

Regnan prioritises engagement via a formal process that involves internal prioritisation, which we as a client approve in consultation with them. Its prioritisation process is based on three primary factors:
1. The value at risk for the company from E S and G issues (and conversely to the upside potential from change) based on in-house research focused on the gap between a company's ESG exposure and its response to it.
2. The extent to which clients are exposed to the company, using a combination of client data where available and market capitalisation as a proxy for portfolio weight.
3. The additionality of impact when engaging on an issue that already receives widespread attention.

Where sensitivities arise, for instance due to contentious proxy voting matters or divestment pressures, elements of the existing plan may be elevated in relative priority, or additional companies may be added. In these instances, additional information may also be provided to assist us in preparing for meeting, and/or responses to, interested parties.

Regnan also conducts bespoke engagements at the request of its clients to address any ESG issue that is not currently within Regnan's core engagement program and/or is with a company outside the scope of the current engagement program.


LEA 04. Objectives for engagement activities

New selection options have been added to this indicator. Please review your prefilled responses carefully.
Indicate whether you define specific objectives for your organisation’s engagement activities.
Individual / Internal engagements
Collaborative engagements
Service provider engagements

04.2. Additional information. [Optional]

Objectives are typically set for both internal and collaborative engagements (with the most common exceptions being for company roundtable briefings).

Objectives are set for all Regnan engagements both at a high level (within in the engagement plan) and at an engagement level, with objectives tailored for specific meetings/letters.  

 


LEA 05. Process for identifying and prioritising collaborative engagement

Indicate if you monitor and/or review engagement outcomes.
Individual / Internal engagements
Collaborative engagements
Service provider engagements
Indicate if you do any of the following to monitor and review the progress of engagement activities.
Individual / Internal staff engagements
Collaborative engagements
Service provider engagements

05.3. Additional information [Optional]

Our participation in collaborative engagements, for instance Climate Action 100+ (CA100+), typically define measures of success and explore options for escalation on an as needs basis.

Regnan, plans next steps at the end of each engagement based on an assessment of progress against change objectives. Disclosures are also formally reviewed twice a year for public (verifiable) evidence of progress against objectives reported publicly at an aggregate level each year. Revisions are made throughout the program, consistent with current progress (or lack thereof). The overall program is formally reviewed and mandates re-issued for client review/approval approximately every two years.


LEA 06. Role in engagement process

06.1. Indicate whether your organisation has an escalation strategy when engagements are unsuccessful.

06.2. Indicate the escalation strategies used at your organisation following unsuccessful engagements.

06.3. Additional information. [Optional]

Pendal Australia routinely meets with the senior executives of our investee companies as part of our monitoring and engagement practices. Decisions about whether or not to escalate are made on a case-by-case basis, taking into account our view on the materiality (the degree to which such issues may impact the risk/return characteristics of an investment and align with client interests). 

Triggers for escalation can include: 

  • Material concern over executive compensation, in particular where we do not believe remuneration structures are appropriate or well aligned to the company’s strategy; 
  • Concerns over management failure in relation to strategy; 
  • Lack of responsiveness in relation to board composition (typically where we feel boards are not sufficiently independent, or do not have the right diversity of skills, background and experience); or 
  • Where a company is subject to legal fines or censure, allegations of corruption, or where an environmental issue arises. 

In circumstances where we raise a concern and it is not adequately dealt with, we may:

  • Seek further meetings with the company’s chairman or other independent director(s).
  • Discuss the concerns across our investment team and with Regnan.
  • Share our concerns with clients and other relevant stakeholders.
  • Use our proxy votes to influence management.
  • Ensure that the unaddressed risks are adequately priced into investment decisions. 
  • Decide to sell down or sell out of a security completely if a company does not adequately address our concerns, if we feel that is in the best interests of our clients.

An outline of our Engagement Policy can be found on our website at: https://www.pendalgroup.com/wp-content/uploads/2018/09/Principles-of-Internal-Governance-and-Asset-Stewardship.pdf


LEA 07. Share insights from engagements with internal/external managers

07.1. Indicate whether insights gained from your organisation's engagements are shared with investment decision-makers.

Type of engagement

Insights shared

Individual / Internal staff engagements

Collaborative engagements

Service provider engagements

07.2. Indicate the practices used to ensure information and insights collected through engagements are shared with investment decision-makers.

07.3. Indicate whether insights gained from your organisation’s engagements are shared with your clients/beneficiaries.

Type of engagement

Insights shared

Individual/Internal staff engagements

Collaborative engagements

Service provider engagements

07.4. Additional information. [Optional]

Information derived from our engagements (whether they be individual/ internal staff engagements, collaborative engagements or service provider engagements) are all shared with internal investment managers where relevant to investments.

Engagement information may become part of our valuation of a business, feed into our portfolio construction process and influence our proxy voting decisions. However, not all engagement activities will always influence investment decision-making, only where it is material to the investment outcomes of the fund and in alignment with portfolios objectives (both value and values as relevant). 


LEA 08. Tracking number of engagements

08.1. Indicate if you track the number of your engagement activities.

Type of engagement
Tracking engagements

Individual / Internal staff engagements

Collaborative engagements

Service provider engagements

08.2. Additional information. [OPTIONAL]

Our internal International Equity team tracks their engagements in full (note they run a concentrated global share portfolio). Our Australian Equity team conducts many engagements covering financial and ESG objectives, however, for tracking purposes the team only includes engagements deemed to be material to investment outcomes in the team database.

Regnan undertakes comprehensive monitoring of all company engagements and provides monthly and annual reports on progress. Regnan's approach integrates information collected by its in-house ESG research capability with its engagement program to constantly monitor stocks for progress on ESG issues. Detailed tracking is undertaken on the number of engagements; method of engagement; level within the organisation at which the engagement occurred; topics discussed; and detailed summaries of discussions held, together with observations of progress, including publicly available materials/statements.

 


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