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CCLA

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]

We prioritise engagement with companies on ESG issues for one of three reasons: 

First, our approach to ESG integration in stock selection requires companies to meet rigourous minimum standards. Whilst this assessment is based upon publicly available information we recognise that some companies' ESG practice is sometimes better than what they publish. For this reason, we often seek to engage as part of our due diligence process. Where we learn further information about companies' approach to managing ESG risks we encourage them to better disclose this information. For instance, we engaged intensively with AIA about their approach to responsible investment prior to purchasing the company.

Second, we engage with existing portfolio holdings where we have identified concerns about their management of ESG risk. This engagement is targeted upon specific concerns and progress is closely measured and factored into our ongoing assessment of companies. For example, we are currently engaging with, French luxury goods manufacturer, LVMH about the composition of their audit committee.

Finally, we engage with companies on issues that may not neccessarily be financially material but are either a client priority or are key to helping promote sustianable development. An example of this is our work to encourage companies to find, report and fix instances of modern slavery in their supply chain.


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]

Our engagement, whether collective or individual, is prioritised based upon:

- The risk that it poses to the value of our clients' investments: to do this, we use our analysis of companies and several external data sources to identify and categorise ESG risks.

- Our clients' ethical investment priorities: these are discerned through either regular client consultations (that take place every three years) or, for our Church of England clients, through the policies developed by the Church's Ethical Investment Advisory Group.

- Breaches of International Norms, other controversies or negative events conducted by an investee company: this is informed by data from an external party and, due to the severity of the issues under consideration, can lead to divestment.

- The size of our holding: we pay particular attention to companies that make up more than 1% of the value of our main multi-asset investment funds

 - Follow up from a voting decision: We seek to inform all investee companies of our decision to vote against management on any issue prior to the meeting. This can lead to, subsequent, substantial engagement on the issue

All engagement progress is monitored and influences our ongoing investment decisions.


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]


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]


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]

We are prepared to escalate our engagement when we consider that progress is not being made. In the first instance we will seek additional meetings with company management, before considering speaking publicly or seeking to file a shareholder resolution. This is supplemented by our approach to proxy voting, that files dissenting votes as a matter of course, when engagement is not progressing. In extremis, when in the interests of our clients, poor responses to engagement can, and have, resulted in divestment. 

We publish information about the progress and escalation of engagement in our annual Responsible Investment Report. This is available at: https://www.ccla.co.uk/sites/default/files/CCLA_Stewardship%20Report_Aug%202018_Digital%20ready_singles_V5%20%281%29.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

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]

We recognise that stewardship is an integral part of investment management. For this reason, our stewardship priorities are set in conjunction with portfolio managers and analysts and they are involved in (or updated on) all discussions with companies.

Engagement progress is systematically shared in a number of ways:

First, during the reporting year we developed a new 'CRM system' for storing details of engagement and the progress that it has made. To enable proper sharing, this is available to all members of the investment and ethical and responsible investment teams.

Second, we have regular formal and informal meetings (including the bi-annual ethical and responsible investment committee) between stewardship specialists and investment managers. These set priorities and monitor engagement progress. 

Finally, within our new corporate governance rating system we award (or detract) companies points based upon the progress and quality of engagement. This can lead to a company recieving a score that mandates divestment.


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]

 

 


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