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Engagement International

Service Providers Framework 2020

You are in Strategy and Governance » Policy on ESG beliefs

Policy on ESG beliefs

SG 01. Responsible investment policy

01.1. Describe how your organisation’s philosophy incorporates environmental, social and governance factors, and the link to your business offerings.

As a signatory of the PRI, Engagement International believes in the importance and value of incorporating environmental, social and corporate governance (ESG) factors in investment decisions. Active ownership engagement and investment consulting services are the main responsible investment solutions that Engagement International is providing to pension funds, municipalities, foundations and other institutional investors. Internationally recognised guidelines and responsible investment practices, ESG and corporate sustainability standards are embedded in the underlying methodology to guide operational procedures as well as quality assurance of the deliverables to clients.

Engagement International is collaborating with MSCI ESG Research and developed various sets of ratings for evaluating a company’s management efforts on ESG incidents, material ESG issues, general sustainability and corporate governance setup, as well as selected E, S or G themes such as systemic matters like climate change and corporate tax. The purpose is to reflect a company’s current status of ESG risks & opportunities, as well as the management thereof, to measure how much and in which direction progress has been achieved since day one of the engagement. Based on a combination of ESG data, insights collected during the engagement dialogues together with the underlying proprietary milestone assessment’s KPIs, Engagement International provides the clients with clear and visible results of the engagements conducted on their behalf with portfolio companies around the world via face to face meetings, conference calls and emails. The created client portfolio reports together with the company engagement reports and investment signal reports indicate each client the extent to which a company in her/his portfolio is aligned with the client’s commitment to responsible investment.

Engagement International’s responsible investment consulting may cover all elements of full-service engagement: 1) helping clients with formulating a responsible investment policy and advising on the corresponding necessary set up, 2) providing due diligence of client portfolios twice a year, 3) conducting engagement dialogues (as outlined above), 4) engaging with the clients’ stakeholders such as beneficiaries, asset managers, media etc., and 5) assisting clients with their responsible investment related reporting obligations. Last but not least, in collaboration with the partner Minerva Analytics, Engagement International is also offering proxy voting services and voting recommendations for AGMs to clients as well as monitoring of the clients’ asset managers’ investment decisions and AGM voting behaviour. In addition to Engagement International’s main business activity of providing engagement services to institutional investors like just described, Engagement International also offers bespoke solutions, e.g. to support the clients’ own engagement efforts.

All services have in common that they enable the clients to become part of a solution to the world’s sustainability challenges instead of fuelling problems. This way, stewardship creates long-term financial value and a licence to operate among the clients’ stakeholders.

01.2. Indicate whether you have policies that formalise the incorporation of your ESG beliefs in your business offerings.

01.3. Indicate the components/types of your internal policy and provide the URL and/or an attachment of the document/s if they are publicly available.

Policy components/types

Public availability

Public availability

Public availability

Public availability

Public availability

01.4. Indicate how these are put into practice internally across the organisation.

01.5. Additional information [OPTIONAL]


SG 02. Norms used to develop policies

02.1. Indicate what frameworks and guidelines you have used to develop your organisation’s policies. Tick all that apply.

          OECD Responsible Business Conduct for Institutional Investors
        
          Danish Guidelines for Responsible Investments and Active Ownership
        
          Recommendations by the Task Force on Climate-related Financial Disclosures
        

02.2. Additional information. [OPTIONAL]


SG 03. Policy offerings to clients

03.1. Indicate whether you offer standard, off the shelf, policies to clients as part of your product offerings, and/or whether you create tailored versions for individual clients.

Off the shelf
Tailored
Asset class-specific RI guidelines
Sector-specific RI guidelines
Screening/exclusions policy
Engagement policy
(Proxy) voting policy
RI guidelines set out within the Investment Policy Statement (IPS)
RI guidelines set out in a freestanding RI policy
Multi-year RI implementation project plan
Conflict of interest management policy
Stockbroker allocation policy
Securities lending policy
Other, please specify (1)
Other, please specify (2)
Other, please specify (3)
None of the above

03.2. Provide a brief description of the key elements, any variations, or exceptions applying to these policies.

Engagement International supports institutional investors to formulate and implement a formal policy on engagement and responsible investment, based on internationally recognised norms and guidelines such as the OECD Guidelines for Multinational Enterprises, the OECD Responsible Business Conduct for Institutional Investors, the UN Guiding Principles for Business and Human Rights, the PRI, the UN Global Compact, the Paris Agreement, the United Nation’s Sustainable Development Goals, the Danish Guidelines for Responsible Investments and Active Ownership, the European Shareholder Rights Directive, the Task Force on Climate-related Financial Disclosure (TCFD) as well as each client's own values and investment believes.

03.3. Additional information. [OPTIONAL]


SG 04. ESG/RI in business offerings

04.1. Briefly describe how you include ESG/RI factors as part of your business offerings.

Business area

Active Ownership Services

How you include ESG/RI factors

Engagement International serves institutional investors to be active responsible owners through corporate engagement dialogues with portfolio companies for encouraging these companies to improve managing their environmental, social and corporate governance (ESG) risks & opportunities. Data from MSCI ESG Research, direct input from company dialogues and public sources are used to assess the clients’ portfolio companies. Internationally recognised responsible investment practices as well as ESG and corporate sustainability standards are embedded in Engagement International’s proprietary company rating methodology, operational engagement procedures and quality assurance of client deliverables. The created client portfolio reports together with the company engagement reports and investment signal reports indicate each client the extent to which a company in her/his portfolio is aligned with the client’s commitment to responsible investment.

Investment Consultancy

How you include ESG/RI factors

Engagement International supports institutional investors with full-service engagement offerings as well as bespoke solutions e.g. to clients’ own ESG engagement efforts. 

The responsible investment consulting may cover: 1) helping clients with formulating a responsible investment and active ownership policy and advising on the corresponding set up, 2) providing ESG due diligence of client portfolios twice a year, 3) conducting ESG engagement dialogues (as outlined above), 4) engaging with the clients’ stakeholders such as beneficiaries, asset managers, media etc., and 5) assisting clients with their responsible investment related reporting obligations. Last but not least, in collaboration with the partner Minerva Analytics, Engagement International is offering ESG proxy voting services and voting recommendations for AGMs to clients as well as monitoring of the clients’ asset managers’ investment decisions and AGM voting behaviour.

Internationally recognised responsible investment practices as well as ESG and corporate sustainability standards are embedded in Engagement International’s consulting services, proprietary company rating methodology, operational engagement procedures and quality assurance of client deliverables.

04.2. Indicate the roles in your organisation, and indicate for each whether they have oversight and/or implementation responsibilities for ESG/RI within the organisation.

Roles present in your organisation
Oversight/accountability for ESG/RI
Implementation of ESG/RI
Board
Directors
Chief Executive Officer (CEO), Chief Financial Officer (CFO)
Chief Operating Officer (COO), Chief Information Officer (CIO)
Other chief-level staff
Other heads of department
Dedicated ESG/RI staff
Other role, specify (1)
Other role, specify (2)
Other role, specify (3)
None of the above

04.3. Indicate how you ensure ESG/RI expertise for the roles where there are RI oversight/accountability or implementation responsibilities.

04.4. Indicate whether your organisation has any ESG/RI linked incentives for its employees.

04.7. Additional information [OPTIONAL]

The Code of Ethics provides guidance for Engagement International’s team members on how to handle business activities in an appropriate manner to ensure sound corporate governance and professionalism throughout the organisation. At the operational level, Engagement International’s engagement methodology and underlying assessment frameworks structure how to incorporate ESG factors into each step of the offered solutions to clients, including the consulting and quality assurance processes. 


SG 05. Outsourcing of services

05.1. Indicate whether you outsource some of your services. Report percentage of services outsourced as percentage for that specific business area.

Business area

SG 06. Providing training/education

06.1. Indicate whether you provide training/educational services on ESG/RI. Tick all that apply.

06.4. Additional information. [OPTIONAL]


SG 07. Applying, advancing and promoting the PRI principles

07.1. Describe how your organisation applies, advances and promotes the PRI Principles.

Engagement International is a signatory of the PRI, fully adheres to the PRI Principles and recommends the PRI Principles to clients and prospects alike. Hence, engagement is considered as active ownership like stated under PRI Principle 2: institutional investors’ efforts to encourage companies they invest in to become more responsible in managing their material ESG (environmental, social and corporate governance) issues, risks and opportunities. 

In addition to regularly joining the PRI in Person events, regional PRI signatory gatherings, other conferences and webinars, Engagement International is participating in several stakeholder consultations to advance active ownership and public policy when it comes to responsible investment. 

Furthermore, best practice recommendations and information material developed by the PRI together with other signatories are often used as a point of reference during the engagement dialogues to showcase institutional investors’ expectations of companies’ ESG performance. Engagement International actively promotes the PRI Principles towards the clients’ portfolio companies during engagement dialogues, but also beyond that, for instance, towards the wider public and media.

07.2. Highlight whether there are any ways that your organisation would like to engage further with the PRI. [OPTIONAL]

Engagement International would be delighted to be represented in the PRI’s Stewardship Advisory Committee and also become associated to the coalition Climate Action 100+. Due to the fact that Engagement International is engaging with companies around the world on responsible tax, climate-related lobbying and lobbying transparency, it would be highly appreciated if Engagement International could participate in the PRI’s work on these subjects to share expertise and learn from peers while driving these important systemic engagement topics among the PRI signatory community. Last but not least, given that a part of Engagement International’s team is based in Brussels, it would be an interesting opportunity to support the PRI’s policy work on the EU’s sustainable finance agenda as well.


SG 08. Actions taken to promote responsible investment

08.1. Indicate which of the following actions your organisation has taken to promote responsible investments during the reporting year, independently of collaborative initiatives.

08.2. Additional information. [OPTIONAL]


SG 09. Long term trends

09.1. Indicate which of the following long-term trends are addressed in your product outputs.

09.2. Explain how this long-term trend affects your product outputs.

The Paris Agreement demonstrates clear global consensus and commitment to limiting temperature rise to avoid irreversible damage by climate change. To transition into this low-carbon future, systemic changes to our way of energy production and consumption are required. One way of how Engagement International is offering institutional investors to support this, is to engage with those 100 listed companies around the world, which contribute the most to climate change in terms of potential emissions from fossil fuel reserves and current scope 1 and 2 CO2 emissions. This product is called Climate Top 100 and has served our clients since 2016, but meanwhile Engagement International also offers alternative engagement services with the focus on reducing portfolio companies’ carbon emissions (please see https://engage-int.com/solutions/).

          Mitigating global inequality via responsible corporate tax
        

09.2. Explain how this long-term trend affects your product outputs.

Another example of where Engagement International’s products & services help institutional investors addressing systemic global problems is the engagement work on corporate tax. When multinational companies apply aggressive tax strategies, it can lead to severe adverse impacts on several countries’ achievement of the United Nation’s Sustainable Development Goals (UN SDGs). Focusing on companies involved in controversial corporate tax practices, the engagement goal is to encourage them to adopt responsible tax strategies, in line with international guidelines and industry best practices, to ensure that effective governance structures and management measures are in place. The business case for institutional investors to engage with companies on aggressive tax planning is well documented in the PRI’s engagement guidance. Aggressive tax planning can pose earnings risks, governance problems, reputational risks and brand value damage to listed companies. On an international scale, this can also lead to macroeconomic and societal distortions. 

Last but not least, Engagement International also offers tailored E, S, G engagements for institutional investors to encourage their portfolio companies to address ESG controversies appropriately. Seeking improvements in the general sustainability management as well as enhancing the corporate approach towards the UN SDGs are covered by this type of engagement.


SG 10. Interaction with asset owners

10.1. Indicate whether you interact with asset owner clients.

10.2. Indicate the typical frequency and type of interactions with your asset owner clients.

Type of interaction

Frequency

Frequency

10.3. Additional information. [OPTIONAL]


SG 11. Aligning approach with investor goals

11.1. Describe how you typically align your organisation’s philosophy and approach to ESG/RI with your investor clients’ goals.

Typically, Engagement International shares with clients the commitment to internationally recognised responsible investment practices, ESG and corporate sustainability standards in general. This forms the basis of collaboration for the offered engagement solutions. In occasions, where a client faces a unique challenge, Engagement International would develop tailored engagement services and bespoke responsible investment solutions to meet the client’s needs.

11.2. Additional information. [OPTIONAL]


SG 12. ESG recommendations not aligned with investor goals

12.1. Describe what steps you take, if any, when your ESG recommendations are not in line with your investor clients’ goals.

All of Engagement International’s ESG recommendations are based on thorough analysis and robust methodology reflecting input data from MSCI ESG Research, public sources as well as company engagement dialogues. By providing timely and sufficient explanations to clients about the ESG recommendations (e.g. data sources, assessment rationale), mutual understanding and assisting the clients’ informed decision making is promoted. Where recommendations might not be in line with the client’s goals, Engagement International would seek dialogue, however, in acceptance that the ultimate di/investment decision is made by the client.

12.2. Additional information. [OPTIONAL]


SG 13. Seeking feedback from clients

13.1. Indicate whether you seek feedback from clients on your RI/ESG services and product offerings

13.2. Describe how you use this feedback in your RI/ESG services and product offerings.

Engagement International collects feedback from clients and other stakeholders via formal and informal dialogues about the offered responsible investment and ESG services, both, before, during and after the collaboration. The feedback will inform regular thorough internal review processes to consider open innovation projects or adjustments to, for example, the methodology or any operational procedures of the offered engagement solutions.


SG 14. Managing conflicts of interest

14.1. Indicate whether your organisation has a policy for managing potential conflicts of interest.

14.2. Describe how you manage potential conflicts of interest.

The fact that Engagement International is not involved in any own investment activities enables Engagement International to be independent and professionally represent the clients’ interests during engagement dialogues with their portfolio companies. The most common forms of conflicts of interest when it comes to stewardship are herewith avoided. On top of that, the existing Code of Ethics provides guidance on how all parts of Engagement International handle situations where conflicts of interests could occur in daily operations (please see https://engage-int.com/wp-content/uploads/2020/03/EI-Code-of-Ethics_201905.pdf). Before joining the company, everybody is made aware of this Code and all employees have direct access to the senior management and the board members should matters of concern outside of the scope of the Code of Ethics arise.

14.3. Describe how you ensure that company employees do not derive any personal gain from the use of information collected during your work process.

Our preparedness regarding this is described in our Code of Ethics (see website).

14.4. Additional information. [OPTIONAL]


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