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How to create successful engagements

Engagements are one of the main approaches for institutional investors to conduct active ownership. It is a procedure that enhances transparency, responsibility and control over the most material ESG issues. With engagements, investors interact in corporate dialogues and together take actions towards a sustainable direction. Through successful engagements, investors improve ESG-issues and thus not only create financial value but also ethical value for the society and environment.


Creating successful engagements can be tricky, but we will present engagement procedures and strategies that help to implement, maintain and achieve engagement targets successfully. As mentioned, engagements are often a long-term procedure and it is important to keep in mind that engaging, regardless of how is better than not engaging as it enables a closer relationship with the investee company and thus facilitating responsible investments. Studies have shown that engagement dialogues are the most efficient procedure to target sustainable goals, regardless of the size of investors’ shareholdings. It is thus a procedure suitable for all active owners.


Active ownership engagements create mutual ESG- value for both investors and investee companies. The United Nations Principles for Responsible Investments (UNPRI) have provided how different engagement dynamics creates value for investors and companies. With these dynamics, communicative, learning and political, investors can standardize engagement procedures and create a common ground for all engagement efforts.



To successfully implement engagements, investors first need to understand the investee companies' perspective, so that ESG issues are targeted efficiently. Research shows that by only demonstrating a willingness to understand the companies and its complexities, the likelihood of succeeding with an engagement enhances. Increasing investors' involvement in companies enhances control and mitigates risk. It also increases understanding of how ESG practices are managed executive management downwards to the staff and manufacturing. It helps to identify gatekeepers and other vital actors from the corporate side crucial for establishing accountability.


According to studies, successful engagements take about one and a half years from being first initiated until fully succeed. It requires company disclosure and monitoring from the investors including feedback that maintains the progress of expected targets. It is beneficial for investors to make internal documentation of all ESG information generated so that monitoring and performance can be tracked and stored. It would be most efficient if investee companies integrated ESG-issues directly in shareholder reports, but this could be a targeted engagement itself.



In addition, the likelihood of succeeding with an engagement increases by prior engagement experience. If succeeding with a prior engagement the likelihood of subsequent engagements to succeed and particularly if it is conducted with the same target company. By succeeding with an engagement, investors can demonstrate a practice to follow and conceptualize ESG- approaches for portfolio companies and other stakeholders. Sharing engagement cases can thus influence the finance sector and enable collaboration among other asset managers and owners. Investors can take advantage of previous demonstrated ESG-engagements in order to successfully implement new engagements.


Collaboration between asset managers and investors has a great impact on increasing the success rate of ESG-engagement. Collaborative engagements, collocated with a number of investors together, is shown as the instrument contributing most positively to the success of engagements as it increases legitimacy and the power of influence.


In a recent case of investor collaboration through active ownership engagement, a large Norwegian asset owner, together with a number of asset managers and service providers, made comprehensive commitments for deforestation in Brazil. The engagement is currently ongoing and has involved several policymakers. It all started with a public policy dialogue from investors through a collocated letter (find the letter here)


Image source: Joao Laet/AFP via Getty Images

Investors' active ownership engagements have resulted in incredible outcomes. Recently we have seen examples of engagement resulting in mitigation of deforestation, enhanced safety and improved work conditions in vulnerable industries and most important of all- it has influenced norms and set new standards for investor impact. You can find out more about successful active ownership engagement from the the UN PRI awards 2020 here


To sum this up, successful active ownership engagement can be created by incorporating these three suggested strategies below:


Plan the engagement together with ESG-department, investors and portfolio managers. Research the targeted company, its structure, decision procedure, the sector and country it is operating in. Plan how to conduct the engagement, look at previous successful active ownership engagement and set up expectations in a clear manner.


Implement the engagement through a direct dialogue with the portfolio company, communicate the expected outcome, show involvement, demonstrate a previous engagement case and document all interactions internally. Seek collaboration with other asset managers & owners, service providers and policy makers.


Maintain the engagement with dialogues through meetings, calls, emails, letters etc. Monitor and ask for disclosure. Highlight milestones of targets and be transparent about the progress.





Sources: Çelik & Isaksson (2013) Institutional investors and ownership engagement; Dimson, Karakas & Li (2013) Active Ownership; Sjöström (2020) Active ownership on environmental and social issues: What works?; Harvard Business Review (2020) Shareholders are getting serious about sustainability; OECD (2014) ; UNPRI (2018) PRI Reporting Framework Main definitions (2018) How ESG engagement creates value for investors and companies; Vermeulen & Fenwick (2018) Institutional Investor Engagement: How to Create a “Stewardship Culture”,


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