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SBI Funds Management Private Limited

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]

Individual / Internal staff engagements: The ESG Analysts and the relevant Portfolio Managers engage with the Companies having poor or low ESG disclosures to communicate the need for transparency around ESG initiatives, to hand-hold them in this process by providing them best practice documents and to enable them to improve over time.

Collaborative Engagements: SBIFMPL actively participates in the following initiatives where we collaborate with other institutional investors on ESG engagements with Companies:

  • Climate Action 100+
  • UNPRI's Investor Commitment to Support a Just Transition on Climate Change 
  • Investor Expectation Statement on Climate Change for Aerospace and Airline Industry
  • UN PRI’s Global Investor Statement on Deforestation and Forest Fires in the Amazon 

Service Provider Engagements: We take the service of one international and one domestic service provider for ESG based assessments of the companies under our coverage. While the international service providers have their own methodology and procedures, we have co-designed the domestic service provider’s questionnaire for circulation, clarified the intent of the engagement, put them in touch with the companies, set the timelines and the outcomes of the engagement and are following up on the engagement activities on a regular basis.

In case of international service provider, we do recommend them to reach out to companies that have not been approached for a feedback on their respective ESG ratings. This is done once it comes to light during our individual level engagements that such companies had no opportunity/avenue to provide their feedback/inputs to help improve ESG assessment. We also help connect the ESG service providers with relevant company managers and facilitate better information sharing. This becomes especially important as ESG related disclosures are at a nascent stage, though evolving at a rapid pace.


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

03.3. Additional information. [Optional]


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]

Engagements with investee companies are done with clear objectives. The meeting agendas and the subsequent Minutes of Meeting record these objectives and discussions around the objectives. Some of the common objectives under these engagements are:

  • Improving ESG based disclosures
  • Peer review of ESG practices and alignment with prevailing best practices
  • Specific ESG areas like carbon or air emissions etc. according to the specific issue identified with respect to a particular company.

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]

Internal Engagements are a continuous process. It is difficult to set a timeline to these engagements as we wish to keep engaging with investee companies in the long run and to keep providing them with every kind of support possible.


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]

SBIFMPL has an intervention plan for the investee companies in case the engagements are unfruitful. The decision for intervention shall be decided by the CIO (Stewardship Officer) on a case-to-case basis, based on all available facts of the investee company at that point of time.

  1. Engagement: Sending letters to individual investee companies, one-to-one meetings with the management team, engagement with specific teams etc. to resolve any concerns including steps to be taken to mitigate such concerns.
  2. Re-Engagement: In the event the management of the investee company fails to undertake constructive steps to resolve the concerns raised by SBIFMPL within a reasonable timeframe, the AMC shall take all reasonable steps to re-engage with the management to resolve its concerns.
  3. Collaboration: The AMC shall also consider collaboration with other institutional investors, professional associations like AMFI, regulators, and any other entities it deems necessary for a collective engagement or joint representation with the investee company.
  4. Escalation: In case there is no progress despite the above three steps, SBIFMPL may engage with the Board of the investee company (through a formal written communication) and elaborate on the concerns. Further, the AMC may take appropriate steps to resolve the concerns including exiting its investments.
  5. Voting: SBIFMPL will vote against or abstain from voting in case the governance practices of the investee company are improper.
  6. Legal Recourse: SBIFMPL may take a legal recourse against a company if deemed necessary instead of exiting its investment.
  7. Blanket Bans: SBIFMPL may consider extending a blanket ban on a section of companies or create a list of black-listed companies as required if there is no engagement or improvement from the companies’ side.

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

Service-provider engagements

07.2. Indicate the practices used to ensure that information and insights gained 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

Service-provider engagements

07.4. Additional information. [Optional]

The ESG engagements are included in investment decision making by the following ways:

  • Every company, while getting initiated in SBIFMPL's coverage is rated on ESG parameters using an internal tool. The resulting ESG score is compared against an internally set threshold. If the score is below the threshold, investment is not made in such a company. In any case, the ESG Initiation report is used by the financial analysts as a part of the investment decision making process
  • All emails and communications sent to the companies to discuss ESG matters are copied to the relevant financial analysts who engage with the companies on the financial side and are required to make investment decisions.
  • The ESG discussions are carried out with the companies in the presence of the financial analysts involved in the analysis of the company
  • Any follow-up requests, best practice documents or other resources when shared with the companies are also marked to the concerned financial analysts.
  • In case a company has not responded to an ESG related matter, the financial analysts help the ESG analysts to reach out to another resource/escalate the matter to relevant management personnel
  • Invitation for the ESG Review Meetings are sent to all financial analysts as well and healthy debates are encouraged over ESG issues within a company and the related investment decision
  • Particularly the proxy voting decisions are taken after intensive discussions with the financial analysts and the ESG team.
  • Similar process is followed in collaborative engagements too. In all our multi-investor engagements, the financial analysts, both from equities as well as fixed income are made part of the discussions
  • For service-provider engagements, all the ESG based reports are available to the financial analysts through the ESG team, the scores are shared with them in monthly ESG review meetings, and individual reports are shared with them on request

Until now, the clients/beneficiaries were not being informed about our engagement efforts or the results of the engagement on a regular basis. However, the regulator Securities and Exchange Board of India (SEBI) has mandated disclosure of engagement activities from April 2021. SBIFMPL has published its Stewardship Code in Feb 2020 and will publish all the details of our engagements on our website in March-April 2021. 


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]

  • The ESG team of SBIFMPL maintains an excel tracker of all ESG based internal engagements and updates the tracker post every meeting and engagement. The progress against this tracker is then shared in the monthly ESG Review Meeting. Any difficulties/challenges faced during the engagements are also discussed during these meetings
  • Collaborative engagements: In the manner described above, all collaborative engagements are also recorded and discussed in the ESG Review Meetings.
  • Service Provider Engagements: Since our international service provider works on a disclosure-based methodology, we are not privy to their engagement methodology and frequency of interactions with the individual companies. However, the domestic service provider works in conjunction with SBIFMPL to interact with the companies. Therefore, we are able to keep record of these engagements.

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