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Engagement Process 101: Initiation, Monitoring and Escalation

In a three-part series covering the engagement process, we provide views on evolving expectations and market practice for more effective investor stewardship.

The series covers phases of the engagement process as summarized below:

  1. Objectives and Strategy: Establish, revise and provide transparency on engagement strategy to stakeholders

  2. Prioritization: Observe portfolio companies to identify risks and opportunities to inform selection

  3. Engagement and monitoring: Engage, review of progress and suggested actions

  4. Escalation: Where unsuccessful or insufficient progress, escalate according to strategy

  5. Reporting: Provide insight on activities and value creation to clients, beneficiaries and regulators

The first entry focused on Objectives, Strategy, and Prioritization - covering in part:

  • Building blocks for a successful program

  • Stewardship across asset classes

  • Engagement prioritization

  • Mitigating systemic risks

  • Collaboration and advocacy

In this entry, we provide a spotlight on the initiation phase, monitoring, and escalation. See drop-down sections below for more information. The third entry will focus on Stewardship reporting and disclosures.

Investment stewardship encompass a variety of tools

Before we get going, let’s take a look at what the market expects from effective engagement, and some key factors influencing the ability to drive successful dialog.

In recent years, various soft and hard law initiatives have further tightened expectations of investors’ stewardship practices across asset classes. The PRI defines stewardship as: “the use of influence by institutional investors to maximise overall long-term value including the value of common economic, social and environmental assets, on which returns and clients’ and beneficiaries’ interests depend.”(1)

Commonly associated with activities towards investee companies, investment stewardship encompass a variety of tools, including exerting influence also over policy makers and other non-issuer stakeholders. So, while historically engagement might have been principally concerned with the use of formal shareholder powers, such as voting, there are a range of other ways investors can influence investee behaviour depending on the jurisdiction, type of enterprise and investment relationship.

Mind the gap…. in engagement practice

Enablers and barriers for effective engagement

Engagement initiation

Responsible activity levels

Progress monitoring


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