How do you deal with ESG controversies or conflicts of interest in your investments?

2 What is ESG stewardship?

ESG stewardship is the responsibility of investors to act in the best interests of their beneficiaries and society as a whole, by integrating ESG factors into their investment decisions and oversight. ESG stewardship also involves using your rights and influence as an investor to promote good corporate governance, accountability, and sustainability in the companies you invest in. ESG stewardship can be seen as a broader concept than ESG engagement, as it covers not only the interactions with the companies, but also the policies, processes, and reporting of the investors themselves.

3 Why is ESG engagement and stewardship important?

ESG engagement and stewardship are important for several reasons. First, they can help investors protect and enhance the long-term value of their investments, by reducing ESG risks, identifying opportunities, and improving the performance and reputation of the companies. Second, they can help investors align their portfolios with their values and goals, by supporting the companies that contribute to positive social and environmental outcomes, and avoiding or challenging the ones that do not. Third, they can help investors contribute to the global agenda of sustainable development, by influencing the corporate behavior and practices that affect the planet and society.

4 How to deal with ESG controversies or conflicts of interest?

When dealing with ESG controversies or conflicts of interest in investments, it is important to assess the severity and materiality of the situation and its effects on investment objectives and criteria. Gathering more information and engaging with the company is essential to understand their perspective and actions. Evaluating options such as divesting, reducing, holding, or increasing investments, or using voting or resolution rights can help express a position or demand change. Communicating the decision and rationale to stakeholders like beneficiaries, clients, partners, or regulators should be done while aligning with ESG policy and strategy. Lastly, monitoring outcomes and impacts of the decision should be done while reviewing and updating it when needed.

5 How to improve your ESG engagement and stewardship practices?

If you want to improve your ESG engagement and stewardship practices, there are a few tips and resources that can aid in this endeavor. Defining your ESG policy and strategy and communicating it to stakeholders and the companies you invest in is essential. Additionally, you should create a consistent process for integrating ESG factors into your investment analysis, decision-making, and oversight. Credible and reliable sources of ESG data and information, such as ratings, reports, or benchmarks, should also be utilized to inform your ESG assessment and engagement. Furthermore, it is beneficial to collaborate with other investors or organizations that share your ESG vision and goals, as well as participate in industry initiatives or standards that promote good ESG practices and disclosure. Lastly, reporting on your ESG activities and performance while seeking feedback from stakeholders and peers can help ensure continual improvement.