We have identified five key themes we expect to shape the responsible investment agenda in 2019. Here we explain why engagement matters, offer more detail on the five themes and provide insights into how our Responsible Investment team will be engaging with companies on these issues.
Why engagement matters – engagement is a powerful tool that we, as stewards of our clients’ capital, need to use as we strive to mitigate ESG risks and deliver sustainable long-term returns for investors. We also believe that through engagement, we can work with fellow investors to drive progress towards a more sustainable world by supporting the achievement of the Sustainable Development Goals (SDG). Our 2019 priorities have been chosen on the basis that they meet both these objectives: that all five are material to investors and of critical importance to the SDGs.
Protecting vulnerable workers
Inadequate wages, weak safety practices and modern slavery all contribute to poverty and inequality and undermine the achievement of sustainable development and the targets of SDG11 and SDG82, which call for an end to global poverty and safe working practices.
In 2019, we will continue to engage companies on how they are tackling modern slavery practices such as forced and child labor within their supply chains. New legislation is shining a spotlight on this issue through driving better disclosure. Based on the work we undertook in 2018, we have built an understanding of corporate best practice, and will use this to press companies to make improvements.
This year will also see us follow up on previous work on the payment of a living wage, with emphasis on the retail sector, where corporate reputations are sensitive to allegations of poor staff treatment. We will also start a new strand of engagement around apparel sourcing practices and their impact on the environment and local populations, including the emerging risks arising from shifts toward sourcing from Africa as companies seek to diversify their supply chains.
The world remains a long way from achieving the targets set under SDG5 – gender equality. One area where there has been intensive investor focus, with some degree of success, is board-level gender diversity. However, with equality issues still deeply entrenched throughout the labor force, board diversity is only the tip of a very large iceberg.
Building on our engagement at board level, in 2019 we will expand our focus to look more deeply at the representation of women at senior management level and below, linking to target SDG5.53. Based on an identification of best practices in areas such as mentoring, flexible working and pay, we intend to work with companies to identify barriers and encourage the adoption of forward-looking approaches – which should ultimately benefit company performance through attracting and retaining high-caliber employees.
Climate change has been the subject of intensive investor focus over the past year, with the Climate Action 100+ initiative being one of the largest investor collaborations ever formed.
Engagement has particularly concentrated on the oil & gas and mining sectors, and to a lesser extent, the energy-intensive industries such as utilities and automobiles. However, the impacts of climate change range much more widely. In 2019, we plan to widen our own perspective through focusing on the role of the finance sector, in line with the focus of SDG134 – climate action, which sets targets for climate finance. Our engagement will target banks in Southeast Asia, which have generally been slow to act on climate change but are highly exposed to the risks, and may be missing opportunities to finance solutions.
We also plan to initiate a dialogue with the marine transportation sector, which we believe has so far been under-engaged by investors, despite accounting for approximately 2% of global greenhouse gas emissions.