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Regnan Governance Research and Engagement Pty Ltd

Service Provider Reporting Framework 2017

You are in Stewardship Services » Engagement

Engagement

SS 02. Your definition of engagement activities

02.1. Provide a brief description of what your organisation defines and/or interprets as engagement activities.

          Regnan proactively contacts organisations that our has research identified as having unmitigated exposure to environmental, social and/or governance risks for long term investors, seeking specific changes.  

Regnan’s core focus for engagement is Australian listed companies (S&P/ASX200) however this extends to other organisations on an ad hoc basis, by request.
        

SS 03. Acquiring ESG data and information

03.1. Describe how and where you acquire your ESG data and information.

          Regnan has an in-house team whose focus is bottom-up proprietary research and analysis.  Information used in this process includes (but is not limited to) corporate filings, commercial and government databases, academic literature, media monitoring.  Where relevant, we also conduct investigative interviews with corporate representatives, other stakeholder groups and NGOs.
        

03.2. Describe how this information influences your product offerings and/or how you implement your services.

          One of Regnan’s core product offerings is the ESG research and analysis produced by this process.  

A second core product offering is the engagement and stewardship service which is based on risks identified by this process.
        

SS 04. Prioritizing engagement topics

04.1. Describe how you select priority engagement topics to raise with companies.

          The objective of Regnan’s engagement is to sustain and enhance value for clients. To this end, the three primary factors taken into account in determining engagement priorities are:  

1) The value at risk for the listed entity from that issue (and conversely the upside potential from change). The primary input to this assessment is Regnan’s research scores that focus on the gap between an entity’s exposure and its response to it. Scores are supplemented by analyst insight. 

2) The extent to which clients of our engagement service are exposed to the entity. Given that all of our engagement clients are large institutional investors, market capitalisation is used as a proxy for portfolio weight. 

3) The value of engagement activity in achieving change.  This includes considerations such as strength of business case, cost of access, capacity for change, and the additionality of Regnan’s contribution to achieving this change (when considering activity being undertaken by others).
        

04.2. Describe how you define the objective of the engagements and reach agreement on this with the client.

          Regnan formally proposes all new engagement activity to clients and seeks approval mandate prior to commencing engagement with stocks. Proposals present Regnan’s recommendations for ESG issue and stock specific engagements to clients, including priority tiers, rationales and behavioural change objectives.
        

SS 05. Engagement model and clients’ needs

05.1. Describe the processes that are in place to ensure that your engagement model takes into account the diversified needs of your clients.

          Our engagement model is built specifically to respond to client needs, and is offered as a standalone commercial service.  Ensuring client needs are met is therefore a core business activity.
        

05.2. Describe how you align your engagement strategy with your client's investment principles and policies.

          Our engagement strategy is offered as a standalone commercial service.  Ensuring alignment with client needs is therefore a core business activity rather than an activity requiring a separate process for “alignment”.
        

SS 06. Channels of engagement

06.1. Indicate what channels you use to engage. Tick all that apply and indicate the frequency with which you typically use the channels.

Engagement type

Frequency

Frequency

Frequency

Frequency

Frequency

          Investor roadshows
        

Frequency

          Materiality interviews and surveys
        

Frequency

06.2. Describe your typical execution method.

          Regnan's engagement process involves 
1. Detailed research to identify the issues and companies to be prioritised. 
2. Explicit setting of objectives for change for identified companies. 
3. Contact with the companies, as above. 
4. Follow-up correspondence, where appropriate to secure evidence of changes. 
5. Formal, regular reporting to clients on both activities and on progress against pre-set objectives.
        

SS 07. Accessing the appropriate teams when engaging with companies

07.1. Describe how you ensure that you have access to the appropriate teams and team members at the company you engage with.

          Regnan’s research and its value focus produces in content that is of interest to companies, and our views are often sought by companies, independent of our efforts to contact them.  

This is accompanied the relationships built with companies since the inception of the engagement service in 2002.
        

07.2. Indicate from the options below the employee at the company you typically engage with.

Employee level

Frequency

Frequency

Frequency

Frequency

Frequency

          Other executives, where they have greater responsibility for or exposure to specific topics of concern within the organisation.
        

Frequency

07.3. Describe how you ensure the client’s rationale and engagement objectives are being communicated clearly to the company.

          Regnan’s engagement service includes developing the rationale and specific change objectives on behalf of participating clients. Formal processes provide for clients to approve these and the implementation of the program proceeds on the agreed basis.
        

07.4. Describe how you adapt your engagement style to ensure you maintain a constructive relationship with the company that you are engaging with.

          Further information about engagement implementation is considered to be commercial in confidence.  We are happy to discuss this with clients, where desired.
        

SS 08. Monitoring engagements

08.1. Indicate your method for monitoring engagements over time.

08.2. Indicate whether you provide clients with recommendations for next steps.

08.3. Describe the format that you typically use to provide your recommendations to the clients.

          Clients receive detailed, written engagement proposals, which include relevant research summaries, and recommendations on behavioural change objectives.
        

SS 09. Identifying emerging ESG issues

09.1. Indicate whether you identify emerging ESG issues.

09.2. Describe how you identify emerging ESG issues.

          Regnan maintains a significant team of experienced research analysts who conduct continuous research on companies, existing issues, and emerging issues.
        

09.3. Describe some of the main ESG issues you have identified in this process.

          Regnan pioneered the understanding of ESG risks in the unconventional oil and gas sector. Thanks to Regnan’s in house expertise on energy and mining sector issues, combined with a proactive gathering of further intelligence through the engagement program, we were able to identify heightened risks relating to unresolved technical, regulatory, environmental and stakeholder issues that have been amplified by the sector’s rapid growth.  

Specifically, Regnan further developed its understanding of ESG risks within unconventional oil and gas (UOG) through: 

> Research – Building on prior research and engagement, Regnan invested in the development of a position paper on the topic, to frame a more constructive discussion with affected companies and to outline ESG risk management approaches. 

> In depth company engagement – Regnan consistently and repeatedly met with affected S&P/ASX200 stocks on ESG risks relating for nearly five years, discussing first hand company experience, especially relating to stakeholder issues.  

> Collaboration – Regnan  leveraged its existing relationships with investor networks (Australian Council of Superannuation Investors, Investor Group on Climate Change, Principles for Responsible Investment, and Responsible Investment Association of Australasia) to improve our collective impact by sharing knowledge.
        

SS 10. Defining and measuring success

10.1. Describe how you define success when evaluating/reviewing engagements on ESG factors.

          Regnan considers an engagement successful when the agreed change objectives have been met.
        

10.2. Describe how you measure success when evaluating/reviewing engagements on ESG factors.

          Regnan evaluates whether the agreed change objectives have been met.
        

10.3. Describe the actions you take (or recommend your client to take) if the engagement on ESG factors has not met the success criteria.

          When prioritised engagement fails to result in the necessary changes, an escalated process is proposed to clients.  This has included: 
• Discussing concerns with other investors, Regnan peers, substantial fund managers and relevant other stakeholders;  
• Providing guidance to clients on voting matters relevant to the engagement priorities;  
• Recommending that clients ensure that the unaddressed risks are adequately priced into investment decisions for the relevant stock/s;  
• Proposing a resolution at the company’s AGM or EGM;  
• Suggesting clients consider excising the stock from their portfolios.
        

SS 11. Companies changing practices/behavior following engagement

11.1. Indicate whether you track the number of cases during the reporting year in which a company changed its practices, or made a formal commitment to do so, following your organisation’s engagement activities.

11.2. Indicate the number of companies that changed or made a formal commitment to change in the reporting year following your organisation’s and/or your service provider's engagement activities.

33

11.3. Additional information. [OPTIONAL]

A total of 33 - or 80% - of companies engaged demonstrated progress consistent with Regnan engagement over the life of the engagement.


SS 12. Publishing engagement outcomes

12.1. Indicate whether you publish your engagement outcomes.

12.2. Indicate whether you enable your clients to publish your engagement outcomes.


SS 13. Engaging with policy makers and industry bodies

13.1. Indicate whether your organisation – individually or in collaboration with others - engaged with public policy makers and industry bodies on engagement topics in the reporting year.

13.2. Describe what ESG factors have informed your decisions to engage with policy makers and industry bodies. Provide examples.

          Engagement of this nature is typically via formal consultation to a government or semi-regulatory agency (e.g. stock exchange, OECD). Regnan may provide submissions to such consultations as well as support the development of industry wide submissions. 

Most recently topics have included climate change, unconventional oil and gas, foreign bribery. Public submissions are available on our website at http://www.regnan.com.au/public-submissions
        

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