The majority of our engagement activities are conducted by an individual analyst or PM with company boards or management teams to understand their ESG strategy.   We engage with companies to obtain clarity on their ESG approach, to discuss the various data providers and reporting metrics, to provide insight into what investors are looking for, and obtain information on a myriad of specific topics pertaining to environmental, social and governance cosiderations.  This engagment is conducted by our analysts with oversight from our Head of ESG. The discussions are catalogued.  We consider our engagement efforts regarding GRESB participation to be collaborative.  As members of GRESB, we engage with companies who do not complete the annual GRESB assessment to understand their efforts in the area of ESG.  Through the engagement, which is written and at times followed up with verbal conversations, we encourage these companies to complete the GRESB survey, as well as to obtain information which our analysts use to underwrite the companies' efforts.  For the past 6 years our firm has encouraged companies to submit responses to the annual GRESB assessment.  In 2019, CBRE Clarion was awarded the GRESB Investor of the Year for North America award.  This award was given to us for our leadership in educating companies on the importance of reporting ESG factors within our industry.

CBRE Clarion prioritizes our individual engagement efforts by the significance of the company within the real estate sector and, by extension, our clients' portfolios.  Overall, our engagement efforts are established to complete the following objectives: 1.) In the area of proxy voting, to discuss items that come up for vote, many times in the area of governance or if there are environmental or social items; 2.) to fill in gaps where our external data sources may have conflicting information or incomplete information; 3.) to understand overall ESG strategy for companies in sectors where there is minimal disclosure, such as companies who own net lease or storage assets, for example; 4.) to influence companies with historically poor governance.  While we have not had situations where companies are in breach of international norms, we would engage with companies if that situation occurred.  In our collaborative engagement, we target large companies first who do not complete the GRESB assessment or do not have ESG related information in their public documents.  We encourage firms to particiate in GRESB since GRESB specifically serves the real asset industry, whereas other data sources cover multiple industries.  We believe that more participation in GRESB would allow the companies themselves to improve via a higher level of discipline with regard to ESG.  We also believe it would make GRESB more viable as a datasource overall if there was more coverage across the real asset sector. CBRE Clarion was named the 2019 GRESB Investor Member of the Year for North America for our continued success in promoting GRESB and attracting new companies to complete the assessment.

Portfolio managers and analysts frequently engage with portfolio companies on a variety of issues. For 2019, we logged engagements with 154 companies related to ESG issues.  The total market capitalization of all companies with which we engaged is over $1.1 Trillion. The goals of engagement are driven by the relevant analyst with the following objectives in mind: 1.) In the area of proxy voting, to discuss items that come up for vote, many times in the area of governance or if there are environmental or social items; 2.) to fill in gaps where our external data sources may have conflicting information or incomplete information; 3.) to understand overall ESG strategy for companies in sectors where there is minimal disclosure, such as companies who own net lease or storage assets, for example; 4.) to influence companies with historically poor governance.  Environmental issues addressed include the adherence to local protocols for evaluating the environmental performance of buildings as well as more general topics relating to energy conservation and efficiency.  Social issues addressed include community-support initiatives and charitable efforts, as well as building designs intended to focus on the well-being of tenant employees (e.g., WELL certification).  Governance items we engage on include specific items such as board independence and structure, ownership, proxy access, takeover defenses and executive compensation.   

We continued our efforts to support GRESB by engaging with the largest 28 non-participating companies in 2019 to emphasize the importance of the survey, encourage participation going forward, and to underwrite the companies' ESG efforts.

Clarion analysts follow up on the topics of our engagement with the companies.  If the conversation was tied to governance, we look to the proxy to see if possible changes which were discussed were made.  If not we will follow up with the managment team or Board.  If it was related to a particular item up for vote, we will follow up to see how the item was voted, if it passed or failed, and discuss with the company accordingly.  On other considerations pertaining to environmental and social matters, we will look to public filings to see if any changes were made, or will follow up with the company directly.

When our engagements are unsuccessful we have the ability to vote with our feet (sell the shares), which we have done.  We can vote against certain directors or we can sell the stock. If it is a stock we currently do not hold we can choose not to invest in the company.  

CBRE Clarion's Head of ESG works with the analysts in conducting engagement and making proxy voting decisions.  The Head of ESG is responsible for aggregating such information and enabling analysts to understand the ESG issues.  CBRE Clarion's Analytics team and Quantitative Investment Research team are instrumental in aggregating ESG information so that it is useful to the Investment team.  Engagement activities are tracked on our shared network drive for all members of the team to access.  We also use email to communicate engagement outcomes.  Our proxy voting reports are shared among our investment team and the voting record is accessible to members of the investment team.  We also interact with our clients on the subject of engagement and voting.  We have certain clients who are interested in ESG and how we are engaging with companies.  We provide summaries in the client's quarterly letter surrounding our engagement with companies within their portfolio.

A log of individual engagement activity is maintained to track engagements between our analyst teams and the companies they cover.  Log entries include the following information: company, analyst, issue type (E, S or G), issue description and action taken.  Senior members of the investment team (those participating in CBRE Clarion’s Responsible Investment Management Committee) are responsible for coordinating the logging of engagement activity and providing feedback to the analyst team on the engagement activities.  CBRE Clarion analysts meet with company management frequently and sometimes on an ad hoc basis.  Collaborative engagement is tracked by our analysts and is aggregated by our portfolio anayltics team.