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Local Pensions Partnership

PRI reporting framework 2020

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Outputs and outcomes

LEA 09. Number of companies engaged with, intensity of engagement and effort (Not Applicable)


LEA 10. Engagement methods

10.1. Indicate which of the following your engagement involved.

10.2. Additional information. [Optional]

A range of engagement approaches are used across our internal and external mandates. Depending on circumstances this may include seeking a direct dialogue with a company (through a meeting with a Board member, management or other representative) an approach through written correspondence, using shareholder voting at company meetings, or participating in a collaboration alongside other investors.

The form of engagement used will depend on a number of factors including, but not limited to, the position size and engagement objective. We seek to use (and we expect managers acting on our behalf to use) the most appropriate and effective route to achieve the targeted outcome.


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
General ESG
Conducted by
Objectives

A delegate manager has sought to engage on escalating ESG issues for a company providing healthcare facilities, seeking to influence the company to address these constructively.

Scope and Process

The ESG risks (particularly social) naturally associated with the healthcare sector and governance risks arising from the company's structure (controlling shareholder) were initially felt to be satisfactorily mitigated through a strong management record and positive value drivers for the business.

Over the course of ownership, the company began to face progressive problems. News reports highlighted poor patient treatment, which led the manager to engage seeking reassurances and initially it was possible take comfort from the company's response.

The company was placed under monitoring which increasingly confirmed the management team's execution of the business strategy was failing to live up to expectations. The presence of a controlling shareholder also meant the company's response to the manager's engagement efforts became increasingly less satisfactory and less fruitful.

Failure to make sufficient progress with engagement objectives targeting material risks for long term shareholders has ultimately led the manager to exit their position.

Outcomes
ESG Topic
Executive Remuneration
Conducted by
Objectives

A delegate manager has sought to Influence an investee company (US : Information Technology) to recognise and address extensive use of stock options in its executive compensation framework. 

Scope and Process

The manager has progressed a multi-year engagement to address governance concerns related to remuneration. The engagement is a strong example of objective-led actions with a clear path of escalation.  

Actions taken to date include expressing concern through multi year votes against AGM say-on-pay resolutions, follow up by letter, several conversations with the Chair of the Compensation Committee.

Due to a lack of progress on the issues raised, in 2019 the manager voted against all members of the Compensation Committee at the AGM (as pre-communicated to the company).

The engagement is ongoing.

Outcomes
ESG Topic
Other governance
Conducted by
Objectives

A delegate manager has progressed a multi-year thematic engagement on culture and risk in the banking sector.

Actions have sought to increase transparency around risk governance and management approach, with a particular focus on better disclosure around incentive structures for top executives/sales staff, and operational risk management. 

 

Scope and Process

In 2019, the manager held a call with the Global Head of Financial Crime Compliance at one of the commercial banks targeted under the engagement theme

Following the remediation of shortcomings which led to severe breaches, the manager now considers the bank's internal programmes sufficiently rigorous. Nevertheless, greater transparency continues to be sought around the process of internal review and assessment of relevant practices.

The engagement is ongoing.

 

 

Outcomes
ESG Topic
Climate Change
Conducted by
Objectives

To influence an oil and gas major (Exxon Mobil) to engage meaningfully with shareholders on climate change and evidence effective planning for the business impact of a global transition away from fossil fuels.

Detailed asks 

  • Engage with Climate Action 100+
  • disclose in annual reporting (from 2020) short, medium, and long- term emissions targets aligned with the emissions reduction goals of the Paris agreement (well below 2 degrees) 
Scope and Process

This engagement spanned 2018-2019 and was a collaboration which involved direct participation by LPPI, the support of a delegate manager, and partnership with other investor members of Climate Action100+.

LPPI took the following actions directly (having monitored Exxon's stance on climate change over a period of time and seen inadequate evidence of meaningful engagement with shareholder concerns).

  • co-filed a shareholder proposal (supporting CA100+ asks of the company communicated via lead investors New York State Common Retirement Fund and Church Commissioners for England)
  • signed an investor petition to the SEC when Exxon sought no-action relief, asking them to support investor dialogue via the proposal
  • directly communicated to the company (via our delegate manager) disappointment at the Board's action in seeking relief and failure to engage with CA100+
  • voted against the entire Exxon Board and supported all remaining climate resolutions at the 2019 AGM (following Exxon's exclusion of the shareholder proposal on emissions targets)

LPPI continued to review the company position post AGM but ultimately determined there was insufficient alignment between its stance and actions, LPPI policy aims on climate change mitigation, and the intent of the Paris Agreement.

Concluded that divestment was appropriate and liquidated stock in 2019.

Outcomes
ESG Topic
Labour practices and supply chain management
Conducted by
Objectives

A delegate manager has progressed a multi-year thematic engagement addressing low pay in the garment industry. 

Scope and Process

The objective of the engagement is to encourage, support, assess, and monitor investee companies regarding their commitment to pay a living wage to the workers in their supply chains.

The manager engaged with a US retailer assessed by a third party to be at the lower end of practice in this area during 2019.

Engagement is ongoing and is focussing on education and transparency. 

Outcomes

11.2. Additional information. [Optional]


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