Engagement is a potent lever for change for investors to influence company decision-making, and according to a survey by the Responsible Investment Association Australasia (RIAA), 71% of companies engage or advocate on public policy issues.
The results have been published in a report, Engage, Advocate, Collaborate: Unpacking Stewardship in Australasia in 2022. Produced in partnership with KPMG, it explores the broader concept of stewardship, and whether investors are making progress in driving change.
Stewardship covers investor activities such as shareholder voting, filing shareholder resolutions, advocating for change, or direct engagement with companies.
For public equity investors in particular, stewardship is the key pathway to influence change and contribute to long term sustainability among portfolio companies.
According to RIAA’s previous research, corporate engagement and shareholder action are the second most common responsible investment approach in Australia (behind ESG integration).
This particular research project covered more than 70 investors, banks and foundations and showed that 82% of those surveyed collaborate with others to achieve better ESG outcomes.
But, only half (51%) of investors surveyed have adopted a stewardship code.
“Investors are recognising that many ESG issues that are a material risk to their portfolios are not going to be solved by individual engagements with investee companies alone. Issues like climate change and cultural heritage protection are systemic in nature, and investors are increasingly working to tackle these risks using a broader range of tools,” said Estelle Parker, Executive Manager, Programs at RIAA.
The most productive example of this collaboration is the work of Climate Action 100+, a global network of institutional investors that form working groups to approach some of the world’s largest companies, and engage them on a key issue.
“Investment managers and asset owners often struggle to measure success of their stewardship activities. There is an increasing focus on the reporting of real-world impact of investment strategies and robust stewardship has an enormous role in generating these real-world outcomes.” says Mark Spicer, Partner Sustainability and Climate Change at KPMG.
“As investee companies become more sophisticated in their own sustainability reporting and global standards such as ISSB emerge, driving better more consistent reporting, we expect investors’ stewardship activity to move beyond engagement on basic investee reporting towards how they are implementing real- world change and managing corporate value.”
According to the report, key issues being pursued by responsible investors through engagement are: climate change (83%), followed by diversity, equity and inclusion issues (69%), and human rights concerns (68%).