The Guardians has a strong commitment to engagement: using our influence as a shareholder to encourage companies to manage and report on their environmental, social or governance (ESG) risks. We believe that by improving ESG performance a company can improve its long-term financial performance – creating value for long-term investors such as the Fund.
Our portfolio monitoring service identifies companies that have breached – or might breach – recognised ESG standards. We then assess this information, along with data from other sources, to determine whether we should include the company in our engagement programme – through which we seek improvements from companies and play a role in influencing change.
One of the key factors we consider when prioritising our engagement efforts is whether the breach is of international standards or represents a high / significant ESG risk, i.e. is it: long-term or short-term; historic or ongoing; isolated or endemic; a potential reputation risk internationally or nationally.
Other factors we take into account include:
- Our ability to participate in collaboration through the UNPRI clearinghouse led by other peers or as a co-lead;
- Our ability to engage directly with the company;
- The potential effectiveness of the engagement; and
- The resources required.
As a result of engagement programmes by the Guardians and other investors around the world, companies are increasingly aware that investors are analysing their ESG performance and expecting them to address ESG issues head on.
In 2015 the Guardians, along with fellow New Zealand Crown Financial Institutions ACC and GSF, appointed BMO Global Asset Management to provide responsible investment engagement services globally.
The additional resource provided by BMO will increase the reach and effectiveness of our global engagement programme.