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LGPS Central

PRI reporting framework 2020

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]

As a long-term investor and in order to protect and enhance shareholder value, LGPS Central aims to encourage best standards of corporate behaviour across ESG themes both at company level, sector level and whole-market level. We monitor investee companies where held in internally managed portfolios and expect our external fund managers to do the same. LPGS Central conducts top­-down and bottom­-up engagement. Top-­down engagement is where the we identify themes of economic significance and of likely relevance to a majority of stakeholders and pursue broad­-based engagement usually in collaboration with like­minded investors or through partnerships. Bottom-up engagement is where we identify specific, idiosyncratic issues at investee companies and enter a strategic dialogue with the company to improve any identified weaknesses. These processes apply to all major asset classes and are global in remit. We engage companies and standard setters on a range of issues including but not limited to governance, climate change, employment standards, tax practices, board composition, human rights, employment practices and human capital management, social risk, reputational risk. Unsatisfactory corporate responses could lead to escalation. 

Joining working groups, responding to consultations, dialogue with regulators and presenting at conferences are important features of LGPS Central's stewardship approach. Industry participation allows us to represent the interests of our clients to a broad audience and, through joint action, support investment outcomes over the long term. We seek participation including active contribution where this serves the long­-term interests of our Partner Funds. 

Our stewardship service provider EOS at Federated Hermes offers quarterly service review meetings and opportunities to feed into the engagement selection process as well as ad-hoc engagement progress discussions and direct participation in engagements where appropriate. We have in the course of 2019 taken part in two Client Advisory meetings where we discuss and influence the objectives for engagement and the engagement topics that will be given priority during revolving three-year cycles. We have also had discussions with our stewardship service provider on a set of Global Voting Principles and given input to those. We regularly discuss specific engagements to get support in our own direct dialogue with companies and/or to take part in engagements led by our service provider as appropriate.  


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 staff engagements

Individual / Internal staff engagements

Collaborative engagements

Collaborative engagements

Service-provider engagements

Service-provider engagements

specify

          Our service provider EOS at Federated Hermes further considers the additionality of its engagement, the feasibility of engagement and its potential impact (voting rights).
        

03.3. Additional information. [Optional]

With passive investments across several thousand companies, it is critical that we have a robust method for how to prioritise engagements. Supplementing our RI & Engagement Framework, we therefore have an Annual Stewardship Plan (ASP) which defines Stewardship Themes that will guide our engagements over 1-3-year periods. LGPS Central's Partner Funds ultimately decide where we should prioritise our engagement efforts. Stewardship Themes will be chosen based on three main identification criteria: 1) Economic relevance (investment risks/opportunities over the time horizon of our investments), 2) Ability to resource (taking into account in-house resources, Stewardship provider efforts and opportunities to collaborate with like-minded investors), and 3), Stakeholder relevance (which themes do our Partner Funds view of particular importance to their beneficiaries and broader stakeholder group). Our current Stewardship Themes encompass Climate Change, Plastic Pollution, Responsible Tax Behaviour and Tech and Disruptive Industries risks. While the ASP will be updated annually, we aim to pursue the same Stewardship Themes over longer time periods up to 3 years, and potentially, as in the case of Climate Change, beyond a 3-year horizon. 


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 staff engagements
Collaborative engagements
Service-provider engagements

04.2. Additional information. [Optional]

It is our aim to have clear objectives at the start of any engagement, whether individual or collaborative. In our Annual Stewardship Plan, we define measures of success for all engagements across our core Stewardship Themes. We report on progress against these measures of success to our Partner Funds on a quarterly basis. For Collaborative engagements, such as CA100+, clear engagement objectives have been set for the overall engagement project and for specific sectors. Progress is measured against these objectives both for individual companies and for sectors on a regular basis (at least biannually). 

Our service provider EOS at Federated Hermes conducts engagements using specific milestone-driven objectives for most companies in its engagement programme.


LEA 05. Process for identifying and prioritising collaborative engagement

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

05.3. Additional information. [Optional]

In our Annual Stewardship Plan, we define measures of success for all engagements across our core Stewardship Themes. We report on progress against these measures of success to our Partner Funds on a quarterly basis. For Collaborative engagements, such as CA100+, clear engagement objectives have been set for the overall engagement project and for specific sectors. Progress is measured against these objectives both for individual companies and for sectors on a regular basis (at least biannually). LGPS Central's approach to engagement is focused on outcomes, and as such we will seek to escalate an engagement where escalation is deemed to improve the chances of engagement success.

Our service provider EOS at Federated Hermes conducts engagements using specific milestone-driven objectives for most companies in its engagement programme and tracks progress against these milestones.

 


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.

          Additional meetings with the management; Escalate dialogue from executive to board; Attend/raise questions at the company AGM; Engage major proxy advisers.
        

06.3. Additional information. [Optional]

LGPS Central engages with companies on a range of issues including but not limited to governance, climate change, employment standards, tax practices, board composition, human rights, employment practices and human capital management, social risk, reputational risk. Unsatisfactory corporate responses could lead to escalation where escalation is deemed to improve the chances of engagement success. A decision to escalate, and the form or sequence of subsequent escalation is particular to the engagement in question. The most effective means of escalation varies from one engagement to another; hence we will resort to a wide range of escalation measures (as per above) across our engagements in the course of the reporting year. 


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


LEA 08. Tracking number of engagements

08.1. Indicate whether 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]


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