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Engagement International

Service Providers Framework 2020

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Engagement

AOS 04. Prioritizing engagement topics

04.1. Describe how you select priority engagement topics to raise with companies and how you involve your clients in this process.

          As a point of departure, Engagement International helps each client with formulating an engagement policy that corresponds to the client’s individual values as well as international guidelines such as the UN Global Compact, OECD Guidelines for Multinational Enterprises, OECD Responsible Business Conduct for Institutional Investors, UN Guiding Principles on Business and Human Rights, PRI etc.. 
Subsequently, the client portfolio due diligence screening undertaken by Engagement International reflects the defined engagement policy and leads to identifying companies with engagement potential. In terms of content, potential engagement cases and topics flagged to the clients may cover companies that are, for instance: 
° violating those norms that are laid out in the defined engagement policy, and/or causing adverse impacts to other international guidelines, for instance conflicting with the United Nation’s Sustainable Development Goals, the Paris Agreement, or the Task Force on Climate-related Financial Disclosures, 
° highly exposed to certain specific environmental, social and/or corporate governance (ESG) risks, and/or are attested a particularly low level of ESG risk & opportunity management. 
When it comes to selecting the prioritisation of portfolio companies and topics for engagement, the client is given the ultimate choice. Here, the client may also decide whether she/he prefers to engage in collaboration together with other institutional investors among Engagement International’s clients. This way, Engagement International gets mandated to engage with the client’s prioritized portfolio companies on the client’s preferred topics. 
Two prominent examples of Engagement International’s work on behalf of institutional investors during the latest PRI reporting period, are the engagements with those companies in the world which are contributing the most to climate change due to carbon emissions originating from fossil fuels, as well as the engagements with companies that are involved in controversial tax practices. 
Beyond full-service engagements, Engagement International also offers bespoke engagement solutions to those clients, who need tailored support e.g. in their own engagement activities.
        

04.2. Describe how you define the objectives and milestones of the engagements and how you involve your clients in this process.

          After the initial engagement policy formulation for the client in the beginning of the collaboration, following the client’s selection of flagged portfolio companies and topics for engagement (as described in the previous paragraph), Engagement International is defining clear engagement goals for each engagement case it is mandated with by the institutional investor. 
Before each of the engagement dialogues, Engagement International thoroughly assesses the company’s ESG performance according to a structured underlying methodology. Engagement International developed various sets of sound KPIs and ratings for evaluating a company’s ESG risks & opportunities and ESG management efforts to reflect a company’s current status and to measure how much and in which direction it has progressed since day one of the engagement. The engagement progress is tracked along a set of 5 to 10 milestones, and after each bi-annual engagement dialogue Engagement International is adjusting the recommendations given to the company for improvement accordingly. The calculated investment signal, which accounts for a company’s ESG risks & opportunities, ESG management level and engagement progress, indicates each client the extent to which a company in her/his portfolio is aligned with the client’s commitment to responsible investment. 
This way, Engagement International provides clients with clear and visible results of the engagements conducted on their behalf with portfolio companies around the world.
        

04.3. Additional information [OPTIONAL]

          
        

AOS 05. Channels of engagement

05.1. 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

          Company stakeholders such as public authorities, NGO’s, unions etc.
        

Frequency

05.2. Describe your typical execution method.

          Based on the formulated engagement goal and the selected engagement topics and portfolio companies in alignment with the client’s responsible investment objectives, Engagement International thoroughly assesses the companies, creates a meeting agenda, and invites the selected companies via email to two engagements per year (either face-to-face meetings, conference calls, or email dialogues if the first options are not feasible). During these constructive conversations, the company representatives usually respond to the raised agenda questions and present initiatives to tackle their material E, S, G issues upon which Engagement International recommends possible E, S, G management opportunities on behalf of the institutional investor/s. After each engagement dialogue, the companies are provided with a draft of their company engagement report for review before it is made available to Engagement International’s clients. If companies repeatedly display no response or poor engagement progress, escalation steps apply. Engagement International’s bi-annual reporting to clients includes client portfolio reports together with investment signals and company engagement reports.
        

05.3. Additional information [OPTIONAL]

          
        

AOS 06. Accessing the appropriate teams when engaging with companies

06.1. Indicate from the options below the employee at the companies you typically engage with.

Employee level

Frequency

Frequency

Frequency

Frequency

Frequency

Frequency

Frequency

06.2. Describe how you ensure the client’s rationale and engagement objectives are being communicated clearly to the company at the beginning and during the dialogue phase.

          Based on the formulated engagement goal, the selected engagement topics and portfolio companies in alignment with the client’s responsible investment objectives, Engagement International thoroughly assesses the companies’ ESG performance, creates a meeting agenda, and invites the selected companies via email to two engagements per year (either face-to-face meetings, conference calls, or email dialogues). Before the engagement dialogue, the companies are provided with the agenda, where the client’s ESG concerns are already visible for the company to prepare the meeting. Engagement International provides the opportunity that, if desired, the client may participate in the engagement dialogue with her/his portfolio company. During these constructive conversations, the company representatives usually respond to the raised agenda questions and present initiatives to tackle their material E, S, G issues upon which Engagement International recommends possible E, S, G management opportunities on behalf of the institutional investor/s. After each engagement dialogue, the companies are provided with a draft of their company engagement report, which explicitly includes several recommendations to the company on behalf of the investors in written form, for review before it is made available to Engagement International’s clients.
        

06.3. Describe the escalation strategies you take (or suggest that your clients take) when the engagement objectives are not achieved.

          If necessary, Engagement International’s applies 10 escalation steps such as: 
requesting an engagement dialogue with C-suite member/s, 
a formal letter to the chairman of the board, 
a formal letter to the CEO, 
collaboration with other institutional investors and networks like the PRI, CA100+, IIGCC,
submitting a shareholder proposal for the AGM agenda,
proxy voting against management, 
outreach to industry analysts and media, 
engaging with other company stakeholders like NGOs, unions, academics, 
public divestment warning,
divestment.
        

06.4. Additional information [OPTIONAL]

          
        

AOS 07. Monitoring engagements

07.1. Indicate how you monitor the progress of engagements.

07.2. Describe how you typically decide what recommendations for next steps to give to clients.

Based on the set engagement goal, Engagement International strictly follows the protocol of tracking the engagement progress according to the proprietary milestone system and investment signal together with the standard engagement escalation steps outlined in the previous paragraphs above. Controversial cases are discussed in a team before the recommendations to the client are defined.

07.3. Additional information [OPTIONAL]

          
        

AOS 08. Defining and measuring success

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

          Engagement success is realized when Engagement International has achieved encouraging a company to live up to the defined ESG engagement goal so that a positive engagement progress towards the overall engagement outcome can be registered.
        

08.2. Describe how you measure success when evaluating/reviewing these engagements.

          The point of departure for measuring engagement success is the engagement goal, with which Engagement International is mandated by each client. 
Before each of the engagement dialogues with a client’s portfolio company, Engagement International thoroughly assesses the company’s ESG performance according to the underlying structured proprietary methodology. Engagement International developed various sets of sound KPIs and ratings for evaluating a company’s ESG risks & opportunities and ESG management efforts to reflect a company’s current status and to measure how much and in which direction it has progressed since day one of the engagement. The engagement progress is tracked along a set of 5 to 10 milestones and after each bi-annual engagement dialogue, Engagement International is adjusting the recommendations given to the company for improvement accordingly. 
For example, when engaging with companies that contribute the most to climate change due to their CO2 emissions from fossil fuels (Climate Top 100), the engagement progress is mapped with the help of the following 10 milestones, each on a five-scale (A-E): recognition of climate-related risks & opportunities, commitment to the Paris Agreement, climate targets, climate change strategy, carbon emissions management, climate change adaptation, climate change-related governance, business & financial integration of climate matters, transparency, and performance.
In the end, the calculated investment signal, which accounts for a company’s ESG risks & opportunities, ESG management level and engagement progress, indicates each client the extent to which a company in her/his portfolio is aligned with the client’s commitment to responsible investment. This way, Engagement International provides clients with clear and visible results of the engagements conducted on their behalf with portfolio companies around the world.
        

08.3. Additional information [OPTIONAL]

          
        

AOS 09. Companies changing practices/behavior following engagement (Private)


AOS 10. Engaging with policy makers and industry bodies

10.1. Indicate whether your organisation engaged with public policy makers and industry bodies on ESG engagement topics or regulatory/policy issues that could advance ESG engagement in the reporting year.

10.2. Describe what ESG factors and/or regulatory/policy issues have informed your decisions to engage with policy makers and industry bodies. Provide examples.

          The Non-Financial Reporting Directive at EU level is an important policy file as it bears the opportunity to improve corporate reporting practices that lead to more transparency about the ESG performance towards investors, which Engagement International fully supports. Therefore, Engagement International shared expertise and insights with stakeholders such as the Alliance for Corporate Transparency and EFRAG.
Furthermore, Engagement International shared feedback with the PRI’s EU policy team on the upcoming new sustainable finance policy agenda after the change of the European Commission’s mandate. 
Last but not least, Engagement International was participating in the PRI’s consultation on Active Ownership 2.0 to enhance professional best practices together with other PRI signatories when it comes to stewardship and engaging on systemic subjects such as corporate tax and climate change-related lobbying.
        

10.3. Additional information [OPTIONAL]

          
        

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