What is our goal with engagement?

Our goal is to encourage sustainable performance through dialogue – both individual and collaborative. We carefully monitor the companies selected for investment and identify areas for further improvement, and then engage on a particular topic such as climate change or basic labour rights.

We continue to have the one-on-one dialogue with these companies and follow up, holding a mirror to them and showing what best-practices are applied in the industry, for example with British publisher RELX. This company has been subject to criticism by scientists for charging high subscription fees. We first engaged on this issue in 2012 and again, more urgently in 2015 through individual dialogue. On December 10, 2015, it was announced that the Dutch Universities and Elsevier (part of RELX) had closed an agreement about a transition to open access, no longer charging high subscription fees.

For each engagement, it’s always important to have an end goal in mind, particularly if it is required that companies improve their performance in order to remain selected for sustainable investment by Triodos Investment Managment.

What is the most effective form of engagement?

As mentioned, we engage through dialogue, but also by proxy voting. Depending on the goal of the engagement, one form can be better than another. Often times, we learn more through private dialogue because we can better understand where the company stands on an issue and how it is being managed.

In addition, if we want to bring a new topic to the table, it helps to understand what best-practices are being applied in the industry. It also helps build long-term relationships based on trust.

For immediate impact, collaborative and public engagement is effective if we think the whole sector should be made aware. For instance with topics such as conflict minerals and basic labour rights, both of which positively illustrated the effect of our collaborative and public engagement.

For immediate impact, collaborative and public engagement is effective if we think the whole sector should be made aware.

How do you see engagement going forward in 2016?

A lot of our agenda is driven by the three-year research cycle we apply. For each sector we examine different relevant topics such as animal testing or genetic engineering in the pharmaceutical sector. Our agenda can also be driven by public urgency and if there is an interesting opportunity for collaborative engagement.

As we define which topics to dive into, we also continue to reassess our minimum standards. We don’t currently have exclusionary criteria for board diversity, but following a letter that was sent last year and a strong focus on that particular topic, we are now thinking of developing such a standard.

Going forward, we are also focused on addressing how companies can progress on climate change following the Paris Climate Summit and on labour rights, particularly living wage as this is an important topic to help further improve the lives of factory workers, and companies are only now beginning to think about such a standard.

How do you define effective engagement?

Often times we contact companies to find out what they are doing on a certain topic, and we use their answer to rethink (often strengthen) our investment criteria. Many times, companies are not yet addressing such an issue but still we receive honest and detailed responses.

For instance, we are in the process of strengthening our arms criterion for financial institutions and have asked these institutions questions on their current exposure. Of the fifteen institutions contacted, fourteen responded in detail. They trusted us to respond honestly, despite knowing that they will most likely not meet the requested requirements. We now have to decide how to proceed with both strengthening our approach and further engaging with these institutions.

We constantly evaluate our criteria and are pleased to see that companies are interested in engaging in order to improve their sustainability performance.

To read more about our individual dialogue and other forms of engagement in 2015, please refer to the Company Engagement Report.