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RPIA Investment Integration Overview
Step 3
Engagement
If we determine that an engagement is warranted, we speak with the issuer directly to gain data, context, and clarity on specific issue(s) and discuss how challenges may be addressed. This can include expressing a desire for improved disclosure around ESG-related metrics, outlining appropriate structures for sustainability-linked funding, and encouraging companies to take more proactive positions on critical risks such as emissions reduction. Engagements can help us get a “fuller picture” when evaluating an issuer’s ESG profile through the breadth and quality of disclosures across various metrics, forward-looking ESG plans, and how successful management is in executing these strategies.
Step 4
Evaluate and Monitor
The final step is to evaluate whether any ESG information gleaned from the data or the engagement requires us to reset our fundamental thesis. We aim to determine whether the severity, or lack thereof, of the ESG issue presents a short-term or mid-term acute risk, a longer-term challenge, or no material risk. We do not do “positive screening. 4 ” If a material risk is identified, we have adequate spread compensation given the ESG risks considered. Should ESG risks prove too substantial, we may decide that the risk-reward of the investment is skewed negatively. If we judge that the exposure should be adjusted based on this analysis, then the execution team will proceed with the necessary transactions.
4 Positive screening favors investments in companies that have strong records in a particular area such as the environment, employee relations, or diversity.
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