We engage with companies to use our influence as a shareholder or investor to encourage them to improve how they 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 and deliver positive sustainability outcomes – in turn creating value for long-term investors. Engaging with companies helps to encourage them to make long-term improvements.
We use a portfolio monitoring service to identify 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. We join collaborative engagement initiatives or we may engage directly with companies.
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. if it is: 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 collaborative engagements through international initiatives;
- 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 responsibly..
The Guardians, along with fellow New Zealand Crown Financial Institutions (CFIs) the Accident Compensation Corporation (ACC) and the Government Superannuation Fund, has appointed Columbia Threadneedle to provide responsible investment engagement services globally.
The additional resource provided by Columbia Threadneedle increases the reach and effectiveness of our global engagement programme. Columbia Threadneedle has carried out investor engagement for well over 20 years and has engaged more than 5,500 companies across 87 countries during this time. As well as engaging with companies on individual issues, it carries out thematic and industry-wide engagements on topics such as human rights, work rights, climate change and environmental harm.
Engagement on climate change
Through our membership and support of the Carbon Disclosure Project, Investor Group on Climate Change and the Principles for Responsible Investment we use our influence as a shareholder to engage with investment managers and the companies we invest in about climate change. Climate change is also a key theme for Columbia Threadneedle.
Through these channels, we engage in partnership with some very large international investors; collectively, our capital carries significantly more weight. On occasions, we also engage with companies directly.
For example, the Carbon Disclosure Project focuses on encouraging the disclosure of company-specific climate change data, risks and opportunities. Greater disclosure by companies of this information improves the ability of investors such as ourselves to analyse how well companies are positioned to respond to climate change and be resilient in the changing policy, technology and market landscape.
We have also worked closely with the Treasury and the other CFIs to develop the Crown Responsible Investment Framework that was announced by the Minister of Finance in late 2021. This framework includes commitments to net zero by 2050 or sooner, reporting against common carbon metrics and a focus on climate change engagement.
The framework applies to the New Zealand CFIs and the National Provident Fund, which are among the largest institutional investors in New Zealand.
Importantly, we have agreed to use our collective influence as asset owners to engage with companies on climate change and emissions reductions, with the objective of achieving net zero by 2050 or sooner. The framework sends a strong signal to the broader New Zealand investment industry that best practice is aligning around net zero by 2050 emissions targets.
Social media collaborative engagement
In response to the 15 March 2019 Christchurch mosque terror attacks that killed 51 people and injured 40, the Guardians and other crown-owned investors, began a collaborative effort to engage the world's three largest social media companies (Facebook, Alphabet and Twitter). The objective was to strengthen controls to prevent the livestreaming and dissemination of objectionable content such as the attacks. The engagement, which was supported by 105 local and global investors representing approximately NZD $13.5 trillion, concluded in 2021.
The social media collaborative was awarded the Stewardship Initiative of the Year at the united Nations-supported Principles for Responsible Investment (PRI) 2021 Awards.