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DNCA Finance

PRI reporting framework 2019

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

02.4. Additional information. [Optional]

We distinguish two different sorts of interactions with companies: company dialogue and company engagement. Our objectives is to hold 500 company meetings annually specifically targeted at ESG issues, both dialogue and engagement. The outcomes of our interactions with companies directly impact our ESG ratings (within the ABA tool). We consider company meetings as a crucial source of added-value to our ESG analysis.

- Company dialogue: as conviction-based stock-pickers, we believe there is paramount importance in meeting very regularly with the companies we invest in or we are considering investing in. This is the case for both financial and ESG issues. ESG meetings with companies give us the opportunity to challenge the management on its strategy and to what extent it is delivered in the best interests of all stakeholders. These meetings generally provide much better evidence on the level of integration of ESG issues, the corporate culture and the company’s ability to manage ESG risks than any corporate documentation. We have set ourselves the objective to meet at least once a year with all the companies in SRI portfolios, as we believe the insights we get out of company meetings are key to the quality and reactivity of our ESG research, which is conducted exclusively internally.

- Company engagement: as an active investor and in order to protect our clients’ investment value, we believe it is our responsibility, not only to select the best investments, but also to help our investee companies improve their performance, and to contribute to the general enhancement of market practices and transparency. We are in the process of formalizing our engagement policy, which will integrate the principles set out in our Responsible Investment policy and in our voting policy. Our engagement process will be based on a meticulous selection of engagement targets, the definition of engagement objectives, and a regular reporting on the progress and achievements of our engagement activities in an annual review. We are also in the process of joining several collaborative engagement initiatives, as we believe some systemic issues like climate change require a coordinated action to yield the best results.


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

03.3. Additional information. [Optional]

Built on the conviction that improving the practices of the companies we invest in helps protect the value of our clients’ investments, we have implemented a formal engagement approach aimed at influencing companies to take more account of ESG issues. More generally, we are convinced that it is part of our fiduciary duty not only to select the best investments but also to encourage best practices and greater transparency by companies and, more generally, by markets.
We distinguish two types of engagement:
- Reactive engagement, following a controversy or a particular incident
- Proactive engagement, to encourage companies to develop greater transparency and better management of their ESG issues.

Engagement targets are identified in different ways depending on whether the engagement is reactive or proactive.

  • Reactive engagement:

We monitor daily the news flow of the companies that we cover and analyse in detail the controversies that they face. This enables us to identify companies with which we would like to conduct reactive engagement. Therefore, we systematically ask for a meeting with companies facing controversies considered “serious”, meaning those identified as level 3 in our internal analysis tool.

  • Proactive engagement

Target companies for proactive engagement are identified based on several factors:
- The proportion of the company's equity that we own, which determines in part our power to influence
- The proportion of our total investments that the company represents for DNCA Finance, which determines the level of our risk exposure
- The presence of the company in our SRI funds, which justifies greater attention to ESG risks
- The company’s “Responsibility” rating, which can alert us to inadequate management of ESG risks
Each year, we select a list of at least 10 companies with which we would like to begin or continue engagement. In selecting the companies, priority is given to the following situations:
- We own more than 5% of the company’s equity
- Our investment in the company represents more than 1% of our total investments
- The company is included in our SRI funds and has a “Responsibility” rating of less than 5/10 and/or a rating in one of the four aspects of the “Responsibility” analysis (shareholder, environmental, social, societal) of less than 3/10 (if this aspect is considered material).


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

04.2. Additional information. [Optional]

The engagement approach is implemented in a similar way for reactive and proactive engagement. When a company has been identified in our list of targets, an engagement plan is drawn up by the ESG research team. This plan includes:
- Engagement objectives, which must be clear, precise and measurable
- Indicators to monitor the progress and success of the engagement, which must have a qualitative and a quantitative aspect
- The contacts targeted for this approach (top management, IR, HR manager, health and safety manager, environment manager, etc.)
- The estimated duration of the engagement approach (after which escalation procedures may be triggered).

Discussions with the company are then organised on the basis of this engagement plan.
The progress of the engagement approach is described according to its status (in progress / closed) and its change (positive / negative). The results of engagement discussions are systematically communicated to the asset managers concerned and specific reports are made to clients, in our quarterly newsletter and in our annual engagement report.
Escalation procedures can be triggered if the target company refuses to respond or does not put in place appropriate means to address the problems or weaknesses identified. These escalation procedures are determined on a case-by-case basis, in conjunction with the management teams.


LEA 05. Process for identifying and prioritising collaborative engagement

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

05.3. Additional information [Optional]

The engagement approach is implemented in a similar way for reactive and proactive engagement. When a company has been identifed in our list of targets, an engagement plan is drawn up by the ESG research team. This plan includes:
- Engagement objectives, which must be clear, precise and measurable
- Indicators to monitor the progress and success of the engagement, which must have a qualitative and a quantitative aspect
- The contacts targeted for this approach (top management, IR, HR manager, health and safety manager, environment manager, etc.)
- The estimated duration of the engagement approach (after which escalation procedures may be triggered)
Discussions with the company are then organised on the basis of this engagement plan.
The progress of the engagement approach is described according to its status (in progress / closed) and its change (positive / negative). The results of engagement discussions are systematically communicated to the asset managers concerned and specifc reports are made to clients, in our quarterly newsletter and in our annual engagement report.
Escalation procedures can be triggered if the target company refuses to respond or does not put in place appropriate means to address the problems or weaknesses identified. These escalation procedures are determined on a case-by-case basis, in conjunction with the management teams.


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]

Escalation procedures can be triggered if the target company refuses to respond or does not put in place appropriate means to address the problems or weaknesses identifed. These escalation procedures are determined on a case-by-case basis, in conjunction with the portfolio management teams. It can include voting against the nomination of directors, or when we believe the situation creates risks on the investment case, reducing our holding or totally divesting from the stock.


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

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

07.4. Additional information. [Optional]

The dialogue with the companies we invest in is an invaluable source of added value in our analysis, both financial and specifically ESG. We systematically record all engagement-related dialogue and actions in our proprietary tool ABA, so that we can adjust, where appropriate, the company’s “Responsibility” or “Transition” ratings and keep track of our regular exchanges with the management teams of the companies we invest in.

The results of engagement actions are integrated in our ESG analysis via our proprietary tool ABA and can in particular impact the company’s “Responsibility” rating. This rating, which is available to all asset managers, gives an indication about the company’s ESG risk level and has a direct impact on whether it is eligible to be included in the SRI funds.

The engagement results are systematically communicated to the management teams via ABA and directly by email to the asset managers concerned. Asset managers are systematically invited to take part in engagement meetings with the companies held in their portfolios.


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

08.2. Additional information. [OPTIONAL]

We have developed relevant tools to track and monitor all the engagement activities we take part in. Meetings with companies, being dialogue or engagement, are systematically recorded in our proprietary ABA tool and can impact the ESG rating of the company. We have developed additional tools to monitor the progress of our engagement initiatives (progress on the engagement plan and relevant KPIs).

We report comprehensively on all our engagement activities in our annual engagement report.


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