Schroders maps out engagement priorities

Schroders recently implemented an “engagement blueprint” for how it works with companies on ESG — and it is making the topic part of its own employees’ performance goals.

The firm on Monday announced its blueprint, identifying six areas of focus: climate; corporate governance; diversity and inclusion; human capital management; human rights; and natural capital and biodiversity. The company did not detail how heavily the factors will weigh into performance goals but noted that fund managers can choose among those themes in determining how to interact with the companies in their portfolios.

Engagement has become increasingly important to active managers in the ESG world, and large investors increasingly have been working with public companies or supporting shareholder resolutions. But Schroders says it is doing more than that.

“Schroders is taking a further step forward in sustainability leadership by introducing engagement objectives for fund managers and analysts,” the company stated in the recent announcement. “This will apply across the equities and fixed income desks and will form part of fund managers’ personal performance goals.”

The new document points to the company’s process for engaging companies, how it can escalate issues and how it evaluates resolutions around sustainability, according to the announcement. Escalation can range from communicating with a company board to submitting resolutions or even divesting. Schroders evaluates climate-related shareholder resolutions based on materiality, transparency, best practices, evidence of implementation and responsible conduct. It also considers “asymmetric knowledge,” recognizing that companies are aware of their day-to-day operations, and it does not intend to micromanage them, according to the document.

“The increased emphasis on company engagements reflects Schroders’ belief that active ownership can help in the generation of alpha for clients,” the firm stated in the announcement.

Under the company’s new blueprint, engagements will be monitored by Schroders’ cohead of investment and head of equities, Rory Bateman, as well as by the firm’s active ownership team.

“Social and environmental forces are reshaping societies, economies, industries and financial markets,” head of active ownership Kimberley Lewis said in the announcement. “By encouraging management teams to adapt to those changes, we are able to strengthen the long-term value of those assets, enhancing outcomes for clients and to accelerate positive change towards a fairer and sustainable global economy.”