Collaborative engagement refers to when a group of institutional investors come together to engage in dialogue with companies on environmental, social and governance (ESG) issues.
Most would agree that pooling capital is an effective and powerful way to increase influence, which is also supported in several studies. Broader industry collaboration and advocacy is as such critical to progress.
Mechanisms that pool investor resources to help divide responsibilities and drive needed action are all welcomed. Investors should consider collaborating bilaterally, through engagement initiatives, and on public policy (both in direct support and through coordinated efforts). Realized benefits include for example strengthened reputation, knowledge transfer, increased local market presence and expertise - all important to increase legitimacy and efficiency in activities. Collaboration can also help address more structural investment stewardship issues such as that of freeriding, i.e. where everyone benefits from activities performed regardless of the amount of work they put in.
We have seen great progress in this endeavor towards increased collaboration in recent years, most prominently exemplified by PRI’s collaboration platform and the Climate Action 100+ initiative. However, there is a veritable myriad of initiatives and organisations out there that facilitate collective action such as Ceres, Share Canada, FAIRR, the Carbon disclosure project (CDP), the Investor forum, IIGCC, Platform on Living Wages Financials (PLWF) and so forth. Furthermore, most of the stewardship codes now require collaborative engagement, although with differing levels of emphasis.
For additional insight, please read our Annual Insights report, which provides some perspectives on the importance of increased collaboration.