Process and Methodology
1. Identifying companies with engagement potential
Engagement International identifies companies for engagement from assessing ESG engagement potential. A high engagement potential is concluded in case of the following:
- A violation of international norms and guidelines
- A large gap between a high ESG risk exposure and a low ESG management level
- A high exposure to climate change or other themes selected by investor clients
2. Meeting companies for dialogue
Engagement International applies the same engagement process across the different engagement services provided. After identifying an engagement case, the first step is to set up an engagement goal as a guidance for the engagement process and progress. The individual companies are invited for two engagement meetings per year (face to face or conference calls) to enter a dialogue on incidents, most material ESG issues and the company’s general sustainability management set up. The company presents its initiatives and considerations, and Engagement International recommends possible management improvements on behalf of all investor clients.
3. Assessing ESG management
The dialogue, available ESG research, and Engagement International’s milestone and rating system provide the basis for systematically assessing the company’s ESG management level and improvements. Engagement International’s engagement progress rating expresses how the ESG management level changes over time as well as the company’s response to engagement. Engagement International considers a company that demonstrates progress in resolving incidents and/or improving its management of ESG-related risks, and opportunities could serve as a positive investment case, with all other things being equal.
4. Driving engagement progress
Engagement International strives to conduct engagement in a constructive atmosphere. However, if a company repeatedly displays poor response to engagement efforts or shows no progress, it is considered to escalate engagement efforts going forward. Ten types of escalated engagement steps exist, and finally, exclusions will be recommended after a period of time agreed with the investor client.
After meetings, companies are provided with a draft engagement report for review before it is sent to investor clients. Engagement International’s standard biannual reporting includes (1) a Client Portfolio Report with an overview of all engagement cases, engagement activities and key performance indicators on all engaged companies and (2) a Company Engagement Reports on each company. Both reports are available for the client from client log-in (client log-in). Incident flagging and engagement key performance indicators can be imported in Excel form directly into clients’ financial systems.