Investors are demanding a consistent approach to ESG across the investment spectrum. Developed as an engagement overlay to Sustainalytics’ flagship ESG Risk Ratings, Material Risk Engagement promotes and protects long-term value by engaging with high-risk companies on financially-material ESG issues.
The focus is on companies with the highest unmanaged ESG risk, as identified by the ESG Risk Ratings. We protect and develop the value of our clients’ portfolio companies through collaborative and constructive engagement that help companies better identify, understand and manage these ESG risks.
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Key Features and Benefits
Engagement with over 350 high-risk companies on the most financially material ESG issues – as identified by Sustainalytics’ ESG Risk Ratings.
Consistent engagement on a global scale in alignment with our comprehensive ratings universe covering > 4,500 companies.
With ~ 30 engagement managers Sustainalytics has a diverse and experienced team dedicated to issuer engagement in collaboration with institutional asset owners and asset managers.
Refined over more than 25 years, we follow a robust and proven approach to ESG engagement with face-to-face interactions, well-defined objectives and a strategy for each case.
Covering more than 2.5 trillion dollars in assets under advisement (AuA), Sustainalytics is the largest engagement services provider, enabling us to leverage our pooled resources to increase our impact.
Unparalleled transparency with the option to attend engagement dialogues and access all ESG information, including company responses.
Use Cases
ESG Risk Management
Material Risk Engagement focuses on high-risk holdings, aiming to help companies better identify, understand and manage ESG risks. With Material Risk Engagement, investors gain better insight to ESG risk and adopt a proactive ESG risk management tool.
ESG Integration
The assessment of responses and progress as well as other data points can improve investors’ insight into companies’ readiness and ability to mitigate ESG risks and opportunities.
ESG/SDG Reporting
Positive engagement cases are consistently tracked, which enable investors to report positive impact from the engagement to clients and beneficiaries. Engagements are also mapped against the Sustainable Development Goals (SDGs).
Proxy Voting
Engagements address material ESG Issues that may end up on companies’ AGM agendas, making case information a useful input for voting decisions.
Compliance with Stewardship Codes and International Guidelines
Engagement is a key element of guidelines for responsible investors, such as the Principles for Responsible Investing (PRI) and the OECD: Responsible business conduct for institutional investors, as well as relevant regulations, such as the UK Stewardship Code.
Engagement Overlay for Passive Strategies
By consistently engaging with the highest risk companies on various indexes, passive investors can meet their stewardship obligations while differentiating their fund and reducing the overall risk of their passive portfolio.
How It Works
1
Process Commences
As soon as a company is assigned an ESG Risk Rating score above 30, the Material Risk Engagement process commences.
2
First Meeting With Company
The first meeting with the company is preferably face-to-face to build a common understanding of the company’s material ESG issues, creating the trust that is key for our collaborative engagement approach.
3
Engagement Strategy
Based on the first meeting, the engagement team defines a change objective and an engagement strategy. The company also receives the first set of suggested actions to address management gaps in the Material ESG Issues.
4
Regular Follow-ups
Sustainalytics regularly follows up with the company and tracks progress on action points and positive developments. Change objective and suggested actions are updated regularly to ensure continuous improvement.
5
Engagement Case Closure
An engagement case is closed when the company’s ESG Risk Rating improves to below a score of 28.
Delivery Options
Global Access
Sustainalytics’ user-friendly investor interface provides full insight into a company’s engagement profile, overall ratings and dialogue. It also includes engagement manager commentary on the case, next steps and upcoming meetings.
Data Services
Basic data points can be delivered as a standard portfolio report in Excel or as a data feed.
Why Sustainalytics?
A Single Market Standard
Consistent approach to ESG assessments across the investment spectrum.
Award-Winning Research and Data
Firm recognized as Best ESG Research and Data Provider by Environmental Finance and Investment Week.
End-to-End ESG Solutions
ESG products and services that serve the entire investment value chain.
30 Years of ESG Expertise
800+ ESG research analysts across our global offices.
A Leading SPO Provider
As recognized by Environmental Finance and the Climate Bonds Initiative.
Related Insights and Resources
The Cost of Climate Indifference: A Pragmatic Look at the Climate and Emergency Preparedness of US Companies
This article explores the climate and emergency preparedness of US businesses, including some of its highest emitting sectors, and the readiness of US companies to mitigate the associated risks.
Say on Pay: CEO Compensation and the Long Tail of Shareholder Dissent
This article explores say on pay voting on CEO compensation, with the aim of illuminating pay practices that lead to low levels of shareholder support. It also identifies opportunities for shareholder engagement based on say on pay voting outcomes.
How Unequal Shareholder Rights Influence Proxy Voting Outcomes and Corporate Governance
This article explains how dual class share structures can distort key governance signals, limiting the influence of minority shareholders on issues ranging from executive compensation to environmental, social, and governance (ESG) resolutions.
Related Solutions
ESG Risk Ratings
Take a coherent and consistent approach to assessing financially material ESG risks.
Global Standards Engagement
Engage with companies that breach international norms and standards as identified by our Global Standards Screening research.
Thematic Engagement
Engage on the most challenging ESG issues, from climate change to human capital.