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Regnan Governance Research and Engagement Pty Ltd

Service Providers Framework 2020

You are in Active Ownership Services » Engagement

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.

          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:  

•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. 
•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. 
•The value of engagement activity in achieving change. This includes considerations such as strength of business case, 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 objectives and milestones of the engagements and how you involve your clients in this process.

          Regnan formally proposes all new engagement activity to clients and seeks approval of the 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.
        

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

Frequency

          Investor roadshows
        

Frequency

          Materiality interviews and surveys including via third parties (e.g. assurance providers)
        

Frequency

05.2. 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.Monitoring of company public disclosures for evidence of the changes sought.
6.Formal, regular reporting to clients on both activities and progress against pre-set objectives.
        

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

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

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.

          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. Engagements are typically attended by two or more team members working to an agreed set of meeting objectives and are lead by senior team members with significant experience in engagement as well as familiarity with client priorities and engagement objectives.
        

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

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

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.

Monthly client reporting summarises engagements undertaken on behalf of clients and communicates next steps. Given that engagement is undertaken to seek action consistent with pre-agreed change objectives, we would typically decide recommendations for next steps according to the degree to which we are satisfied that the agreed change objectives have been met.

Other factors may include:

  • Whether there have been agreed next steps with the company during our engagement (for instance the company may request more information from us, suggest we meet with a technical expert within the business etc.)
  • The timing and extent to which the issues discussed may be relevant to client voting.
  • The degree to which a company is significant to an individual client (for instance poses a reputational risk because of the client’s member base and/or may be a significant holding within a client’s portfolio). In some instances this has led to clients exiting a stock.

07.3. Additional information [OPTIONAL]

          Regnan looks for progress in public documentation, not just from private assurances from companies concerned.
        

AOS 08. Defining and measuring success

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

          Regnan considers an engagement successful when the issue of concern that led to engagement being prioritised is considered to be addressed. We draw on Regnan's in house research to make this assessment. This may be evident through documented change objectives being met, but achievement of change objectives is not, in itself, the key performance criterion.

We look for publicly available evidence of changes, rather than relying on private assurances.
        

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

          Regnan evaluates whether progress is evident in relation to the issue of concern that led to engagement being prioritised (including whether the issue is fully addressed, at which point the engagement will be considered complete). We also seek to capture positive changes in areas addressed in engagement beyond the core documented priorities. 

We also evaluate engagements on a range of other activity and quality measures, such as frequency of engagement and diligence of follow up on next steps.
        

08.3. Additional information [OPTIONAL]

          
        

AOS 09. Companies changing practices/behavior following engagement

09.1. Indicate the number of companies with which you engaged during the reporting year.

54

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

09.3. Indicate the percentage of companies that changed or made a formal commitment to change in the reporting year following your organisation’s engagement activities.

72 %

09.4. Additional information. [OPTIONAL]

Of current engagements, 88% have demonstrated progress over the last two years.

 


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.

          A range of ESG factors have informed our engagement with policy makers and industry bodies. Most typically we engage where the underlying issues are systemic and where either the current policy environment may deter actions to address ESG issues or conversely where policy signals may promote action, for instance with respect to disclosure. In recent years, climate change-related issues have been the most prominent. 

In some cases, this is done in collaboration with other ESG/RI groups such as the Responsible Investment Association Australasia and the Investor Group on Climate Change (Australia).

During the last 12 months, we provided a submission to the Australian Prudential Regulatory Authority’s (APRA) draft standard on remuneration. We noted a number of areas where further clarity would assist in effective implementation and highlighted potential risks from requirements for greater components of at risk remuneration to be linked to non-financial indicators. These comments were designed to identify areas for increased vigilance rather than opposing the inclusion of non-financial measures per se.
        

10.3. Additional information [OPTIONAL]

          
        

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