This report shows public data only. Is this your organisation? If so, login here to view your full report.

Federated Hermes, Inc. (formerly Federated Investors, Inc.)

PRI reporting framework 2020

You are in Direct - Listed Equity Active Ownership » Outputs and outcomes

Outputs and outcomes

LEA 09. Number of companies engaged with, intensity of engagement and effort

Indicate the proportion of companies in your listed equities portfolio with which your organisation engaged during the reporting year.
We did not complete any engagements in the reporting year.

Number of companies engaged

(avoid double counting, see explanatory notes)

Proportion of companies engaged with, out of total listed equities portfolio

Individual / Internal staff engagements

1345
58

Collaborative engagements

200
9

09.2. Indicate the breakdown of engagements conducted within the reporting year by the number of interactions (including interactions made on your behalf).

No. of interactions with a company
% of engagements
One interaction
2 to 3 interactions
More than 3 interactions
Total
100%

09.3. Indicate the percentage of your collaborative engagements in which you were the leading organisation during the reporting year.

Type of engagement

% leading role
  Collaborative engagements

09.5. Additional information. [Optional]

Individual/staff engagement numbers reflect our investment teams' engagements with investee companies. Our portfolio managers meet with most of their holdings throughout the year during which ESG issues are routinely discussed alongside strategic and financial matters.  Our ESG Engagement Analytics support our investment teams by providing at the portfolio level a measure of engagement coverage by EOS at Federated Hermes (EOS), our engagement and stewardship division; specific E, S, and G themes which are a focus of engagement coverage; and an indicator of ESG momentum by investee companies by looking at achievement of engagement objectives, or milestones.  This helps ensure that discussions with investee companies are directed towards those companies in the portfolios where there may be the most significant ESG risks and where most value is at risk.  

Our collaborative engagements for our equity portfolios during the reporting year were conducted through EOS. EOS reports that individual versus collaborative engagements are difficult to track, thus we have halved the number of companies in our portfolios in which collaborative engagements have been conducted on their behalf. 

 

 

 

 


LEA 10. Engagement methods

10.1. Indicate which of the following your engagement involved.

10.2. Additional information. [Optional]

EOS escalates the intensity of an engagement activity over time, depending on the nature of the challenges each company faces and the attitude of the board towards our dialogue, and as a result a company's intensity tiering may change. Some engagements may involve just one or two meetings; others are more complex and will entail multiple meetings with management and board members over several years. Such activity often requires persistence. Our long-term perspective enables us to persist with these difficult and time consuming engagements.

Our engagements with companies may involve at various junctures:

  • meetings with executive and non-executive directors;
  • meetings with other company representatives;
  • discussions with other shareholders of the company;
  • participation in collaborative investor initiatives;
  • discussions with other relevant stakeholders such as industry representatives, the regulator, customer groups, etc; and,
  • attendance at and/or submission of shareholder resolutions at shareholder meetings.

With all engagements, we seek to build a strong relationship with the company and are willing to be patient, remaining focused on the achievement of goals that are directed towards long-term success.


LEA 11. Examples of ESG engagements

11.1. Provide examples of the engagements that your organisation or your service provider carried out during the reporting year.

ESG Topic
Other governance
Conducted by
Objectives

We wanted to understand the board's processes for evaluating outside commitments of board members for a U.S. bio-pharmaceutical company.

Scope and Process

We discussed the particular board member, his contributions to this board as well as his many commitments on other public company boards. 

Outcomes
ESG Topic
General ESG
Conducted by
Objectives

We wanted to understand the approach taken by the board of this French company to overseeing social and environmental risks.

Scope and Process

We discussed how these risks were addressed by the full board.  We suggested that a board committee be formed to focus on management of social and environmental risks.  

Outcomes
ESG Topic
Shareholder rights
Conducted by
Objectives

We wanted to gain an understanding of why certain governance structures were in place and what might trigger their replacement by structures that more closely approximate best practice.

Scope and Process

We discussed the reason why this pharmaceutical company, that was two years past its IPO, had a classified board, plurality voting standard for director elections, and a supermajority voting standard for bylaw changes.  The company explained that, as a new company with limited revenues, it still felt vulnerable to a takeover by a hostile party focused more on its cash balance than its future business prospects.  They assured us, that once they had a successful commercial product, they would begin dismantling the governance structures.

Outcomes
ESG Topic
Sustainability reporting
Conducted by
Objectives

We wanted to gain an understanding of this manufacturing company's plans, if any, to improve their sustainability report.

Scope and Process

We discussed the current sustainability report and its importance to investors.  We explained that investors wanted hard facts and statistics to back up the claims of the company that they were indeed operating in a sustainable manner.  We suggested using the SASB standards to help them focus on the most material subjects.  Since this is only the company's second annual sustainability report, they appreciated the advice.

Outcomes
ESG Topic
Executive Remuneration
Conducted by
Objectives

We wanted to clarify our understanding of proposed changes to this Dutch pharmaceutical company's equity award plan.

Scope and Process

We discussed proposed changes to their equity award plan.  This was well in advance of the shareholders meeting, so the discussion covered various alternatives.  We shared with them our view that one of the alternatives appeared to best balance the investor desire to avoid dilution with the company's desire to motivate employees.

Outcomes
ESG Topic
Executive Remuneration
Conducted by
Objectives

We wanted to better understand how the remuneration committee of this Danish pharmaceutical company approached the establishment of pay levels for its executives.

Scope and Process

We discussed the apparent disconnect between the pay levels at this company and their European peers.  The discussion covered the construction of the peer group they used for compensation benchmarking and the peer groups used by the proxy advisors and ESG rating services.  The company's challenge is that they have to recruit in the US for executive talent where pay levels are higher than in Europe.  We encouraged them to engage with the proxy advisors and ESG rating services and explain why the company's peer group was more sensible.

Outcomes
ESG Topic
Sustainability reporting
Conducted by
Objectives

We wanted to better understand the board's oversight of environmental and social risks faced by this US medical devices company.

Scope and Process

The company does not have an ESG disclosure document for shareholders.  We told them shareholders are beginning to expect these disclosures regardless of industry.  We encouraged them to work on the publication of such a document that would emphasize facts and statistics.  They told us they would work on this document.

Outcomes
ESG Topic
Conducted by
Objectives

EOS engages on critical human rights issues including eradicating forced labor in supply chains.  Many companies rely on global supply chains to access labor in low-cost regions, but the fragmented and opaque nature of these chains heightens the risk of human rights abuses.  Traditional, announced audits may not uncover issues - more robust due diligence is needed.  EOS engages with companies across five key areas: forced labor and modern slavery, child labor, living wages and purchasing practices, worker voice and gender-specific issues.

Scope and Process

EOS engaged with a Malaysian palm oil company over several years following NGO and media reports in 2012 of poor labor conditions in the company's plantations in Liberia and its suppliers in Indonesia.  2013 saw further allegations of poor labor conditions in its supply chain and EOS urged it to provide clarity on how it was investigating and assessing the steps taken to avoid similar issues in the future.  EOS continued to raise these concerns in further calls and correspondence over several years, during which the company appeared to be responding positively to consider improved disclosure and stakeholder outreach.  During a call in in 2017 the company committed to disclose its migrant worker management process in its sustainability report -- a significant improvement on transparency.  In 2018 EOS asked the company to align its labor standards program and move to industry best practices by reporting inline with the UN.

Outcomes
ESG Topic
Climate Change
Conducted by
Objectives

EOS has pressed companies to set science-based targets, conduct climate-risk stress tests, and make enhanced disclosures.  It has also asked companies to link executive pay to the achievement of climate change outcomes, and to ensure they do not lobby policymakers or regulators to hinder the achievement of the Paris Agreement goals.  In 2019, EOS participated in collaborative investor initiative Climate Action 100+ which targets over 100 of the world's largest corporate greenhouse gas emitters.  The aim is to curb emissions with the ultimate goal of helping limit global warming to less than two degrees Celsius, consistent with the Paris agreement.

Scope and Process

EOS took an active role as lead or co-lead engager for 27 companies in this initiative which has attracted over 370 investors with over $35 trillion under management.  In 2019 EOS attended six annual shareholder meetings to promote action on the climate change crisis - a mining company, an oil major, a utility and three car manufacturers.

Outcomes

11.2. Additional information. [Optional]


Top