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Mellon Investments Corporation

PRI reporting framework 2019

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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]


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

specify

          Prior vote decision
        
Collaborative engagements

Collaborative engagements

03.3. Additional information. [Optional]

Please note that collaborative engagements in response to ESG impacts which have already taken place are implemented in limited circumstances.

The Committee established a Tier 1 and Tier 2 voting structure to focus on the proxies of BNY Mellon complex-wide holdings with significant economic value or a large percentage ownership among the Member Firms (any BNY Mellon boutique that has adopted the BNY Mellon Proxy Voting Policy) that may be referred to the Committee if the voting guidelines so require. Tier 1 proposals pertain to the proxies of companies with market capitalizations of at least $10 billion or those companies in which the Member Firms' aggregate ownership represents at least 2% of the issuer's voting securities. Tier 2 proposals pertain to the proxies of all other issuers. By aggregating its voting strength across the BNY Mellon complex, the Committee generally seeks to engage Tier 1 issuers by requesting governance, leadership, efficiency/risk matters, environmental or social, and executive compensation practices that support increasing shareholder value.

Members of the Committee and/or the Team responsible for supporting the Committee's work seek to engage with Tier 1 issuers at least once per year, including meetings either prior to and/or after an issuer's annual meeting, to discuss, among other matters, proxy proposals, proxy voting results, executive compensation, shareholder resolutions and corporate governance.

The Committee completes a comprehensive review of the voting guidelines annually to refine its voting instructions to Institutional Shareholder Services ("ISS"), the vendor retained to provide services related to proxy voting (such as research, analysis, voting services, proxy vote tracking, recordkeeping and reporting). In 2018, the application of these guidelines resulted in many of the proxies of Tier 2 issuers being auto-voted by ISS.  Further, this implementation has facilitated limited referrals of Tier 2 issuers to the Committee for voting consideration where the ownership level and economic interest are de minimus relative to Tier 1 firm holdings. The Committee seeks to focus on the referred proxy proposals of Tier 2 issuers that require an analysis of such matters as the election of corporate directors, executive compensation, corporate transactions and shareholder proposals. Environmental- and social-related shareholder proposals are referred to the Committee regardless of tier.  In all cases, Mellon is responsible for voting the shares of its clients.

 


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]

Currently, the Team records and monitors all engagements with companies, including discussions regarding ESG-related matters. The Team works across the BNY Mellon complex, including Mellon to design specific ESG-related objectives to discuss during engagements with companies. These engagements are logged and monitored.

In addition, active equity analysts engage with senior corporate management, and hold approximately 800 in person meetings annually. The company-specific MSCI tear sheet is attached to each meeting’s calendar invitation. In this way, attendees have easy access to ESG information about the company prior to the meeting and can address, if appropriate, an ESG issues during the meeting. 

During 2017-2018, our active equity, oil and gas analyst undertook a letter campaign with many of the companies he covers to encourage the reporting of relevant ESG data in the company’s quarterly investor decks.. We initiated a similar project for utilities in the fourth quarter of 2018.


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]

Generally, Mellon is supportive of company management in which we direct our investment. Mellon considers both proxy voting and issuer engagement to be important components of our investment management responsibility as shareholders on behalf of our clients.

Often, our views will differ from those of management. In cases where the difference is accompanied by a failure to achieve our reasonable expectations for investor return, we will engage management in a dialogue on the subject. 

Typically, we seek to achieve our objectives in a confidential manner directly with the company board and management team. Most importantly, we view our dialogue as an opportunity to promote practices that align the interests of management and shareholders as the single most effective mechanism that increases transparency and economic returns to our investors. Secondarily, proxy advisory research data metrics are included as part of a larger and more comprehensive research report for most significant issuers held in our portfolios.

The practice of issuer engagement is expanding beyond large issuers, to mid and small capitalization companies. Primarily, Mellon applies BNY Mellon’s proprietary proxy voting policy and guidelines, with input from its active equity analysts, on most issuer proposals voted by the Committee. The efforts of the Committee are supported by the research and engagement activities of the Proxy Voting and Governance Research Team.

 


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]


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 Committee has retained the services of two independent proxy advisors ("Proxy Advisors") and an executive compensation data source (Equilar) to provide the Member Firms with comprehensive research, analysis, and voting recommendations. For items referred to it, the Committee may accept or reject any recommendation based on the research and analysis provided by its Proxy Advisors or on any independent research and analysis obtained or generated by the Committee. In all cases, Mellon is responsible for voting the shares of its clients.

Engagements conducted by active equity analysts are recorded in the shared research database.  Notes are pushed to the research team.  In this way, information on issues and responses is shared among active equity investment professionals.


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]

The Team logs all issuer engagements it conducts in a calendar year.  In 2018, the Committee and the Team conducted over 350 engagement meetings with issuer management/board teams.  Less formally, the Team participated in over 1,000 phone and professional seminars with our largest investment issuers during both the spring and fall proxy seasons each year.

 

 


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