Key Takeaways on implementing a thorough engagement & stewardship strategy

Why is this article/webinar relevant to you? This article is relevant to you if you are currently trying to get informed on engagement and stewardship processes, and if you’re looking for ways to better engage your firm in implementing engagement initiatives.

This webinar hosted by WeeFin focused on shareholder engagement and stewardship as crucial elements of Environmental, Social, and Governance (ESG) practices. The session was moderated by Sabrine Aouida, co-founder and Chief Impact Officer of WeeFin, and included a keynote by Pauline Berthouloux, ESG Expertise Lead. The discussion primarily revolved around the current practices and challenges of shareholder engagement, featuring insights from two experts: Laureen Tessier, Head of Engagement Investment Service at Caisse des Dépôts (CDC) and Marie Marchais, Head of Engagement at the FIR (Responsible Investment Forum).

Keynote - Origins of Shareholder Engagement

Pauline’s keynote went back on the origins of shareholder engagement in the early 20th century. Initially, the focus was on ethical divestment, with movements like the Quakers divesting from "sin stocks". The notion of engagement, when investors actively influence companies’ ESG practices, started gaining traction after the 1930s when companies opened their capital to investors, and kept growing since. Engagement practices largely grew in Europe in the 2000s, but they remain underdeveloped at the regulatory level.

When it comes to engagement, the UK Stewardship Code, first introduced in 2010 and released by the Financial Reporting Council (FRC), offers a strong framework for setting principles that encourage transparency, accountability and responsible ownership. It is presented as a model that European financial institutions could follow to better implement engagement and stewardship initiatives Discussions have already taken place at the EU scale, on ESMA July's Opinion, the European Authority has called for an EU-wide Stewardship Code suggesting its introduction for market actors.
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Key engagement strategies

Both Laureen Tessier (CDC) and Marie Marchais (FIR) presented their organisations’ unique approaches to shareholder engagement.

• CDC's Bilateral Engagement:: The CDC is following an internalised approach to shareholder engagement. Their strategy is structured around public thematic doctrines such as climate, biodiversity, and human rights policies. CDC creates an annual "targeted engagement plan," selecting sectors and themes based on their impact, such as biodiversity in the automotive sector. A key element of their strategy is the integration of voting guidelines to ensure alignment with their ESG objectives. For the CDC, WeeFin offers a feature that allows them to identify companies to engage, executive and follow-up on their engagement processes, and produce engagement reporting.
  
• FIR Collaborative Engagement: the FIR’s model of collaborative engagement involves a coalition of investors, NGOs, and trade unions working together. FIR prioritises French companies, focusing on those with a societal impact. Their engagement activities include annual ESG campaigns and thematic initiatives like forced labour and "Say on Climate" actions, emphasising shared knowledge and influence to drive change.‍

Challenges in Implementing Engagement

Several challenges were discussed, particularly around the complexity of implementing engagement practices across different organisations.

• Resource constraints: For smaller organisations, engaging in shareholder dialogue can be resource-intensive. As Marie highlighted, collaborative engagement helps smaller asset managers pool resources and knowledge to influence companies with more weight. This collaboration allows them to address significant societal issues collectively.
• Regulatory gaps: Pauline pointed out that while the European market is advanced in sustainable finance, with frameworks like the SFDR (Sustainable Finance Disclosure Regulation), engagement remains underdeveloped at the regulatory level. This gap has created a need for better transparency and regulations around shareholder engagement. Despite the introduction of new tools and regulatory frameworks e.g. ISR label in France, engagement still faces practical and regulatory hurdles.
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Measuring Success in ESG Engagement

One of the most complex topics is the way to measure the success of shareholder engagement:

• Caisse des Dépôts’ Measurement Framework: Laureen explained how CDC evaluates their engagement success using a qualitative approach. They categorise outcomes into strong or moderate success and failure, based on progress made on specific ESG requests. A critical aspect of CDC’s process is the evaluation of "feelings" or impressions gathered from multiple meetings with company stakeholders, which helps assess a company’s commitment to governance and ESG challenges over time.
• FIR’s Collaborative Metrics: Marie acknowledged the difficulty in measuring the success of collaborative engagements, particularly in understanding the real impact. The FIR’s approach involves setting clear objectives and timelines for engagement and using tools like the ISR label to ensure accountability. The "additionality" principle—assessing whether shareholders contributed to real change—remains a challenge in impact measurement, but progress is being made with frameworks that allow for clearer attributions of success.

Both explained that using third-party tools like WeeFin can drastically help in their engagement process execution.‍

How can WeeFin improve your engagement process?

WeeFin developed a dedicated feature for engagement, stewardship and active ownership.

We help investors centralise all their actions, monitor and measure the results, and map out results for every internal stakeholder to collaborate on engagement processes. They all interact using a single interface to enhance streamlined collaboration
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Conclusion

The webinar highlighted that while shareholder engagement is a powerful tool for promoting ESG practices, it requires significant resources, collaboration, and regulatory support to be effective. Both bilateral and collaborative engagement strategies have their merits, but challenges such as resource allocation and regulatory gaps must be addressed. Platforms like WeeFin can help you deal with all these elements, for a streamlined engagement process. The key takeaway is that success in ESG engagement is not solely about influencing companies to adopt better practices but also about building a robust framework for measuring and sustaining those efforts over time. WeeFin helps you monitor your engagement strategy in a coherent and transparent manner, enhancing collaboration across teams.
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To find out more, read our October 2024 newsletter, which focuses on shareholder engagement and the stewardship code.
To find out more about our shareholder engagement feature, take a look at our dedicated page and book a demo with our teams.