Maximising the benefits of active engagement
As active managers, I think engagement gives us a valuable opportunity to supplement our knowledge about the companies we invest in and enhance our influence over their long-term success. Our engagement focuses on gaining differentiated insights, assessing and influencing the risks and opportunities facing a company, encouraging transparency improvements and influencing behavioural changes that we believe may impact the future profitability and resilience of a company.
To maximise the impact of engagement and drive value for companies, I believe it is critical to be able to act as a credible and informed partner for boards and management teams, bringing a wide range of perspectives and insights to the table. In our case, we greatly benefit from Wellington’s collaborative culture and the cross pollination of ideas between our specialist investment, research, stewardship, proxy voting and ESG teams.
Successful engagement, in my view, also means taking a genuinely long-term approach. Companies are complex organisations, and they need the necessary time to put in place long-lasting changes. Our long-term investment approach — we seek to hold companies for 10+ years — gives us greater ability to raise awareness of issues that are important to us as fiduciaries of our clients’ assets and to influence change.
This patient approach should, however, be coupled with clear accountability. In our portfolios, we aim to actively use the voting rights we hold on our clients’ behalf to express our views to the board and hold them to account on material topics. If escalation through private engagements proves unsuccessful, investors may consider using public engagement tools such as voicing concerns on an engagement topic in the press or through a letter-writing campaign with other shareholders. From our perspective, we believe building a constructive but candid partnership with the companies in which we invest delivers the best long-term results, so we carefully weigh any decision to engage publicly on a case-by-case basis. In certain cases, I think it is also important to recognise the limits of engagement, and being an active manager gives us the option to divest where we believe our engagement has ultimately been unsuccessful.