Disclosure

Transparency is a key component of active ownership and it forms part of many stewardship codes and principles (i.e. Principle 6, the ICGN Global Stewardship Principles, the OECD Responsible Business Conduct for Institutional Investor and several national stewardship codes). As much as investors are engaging with companies to access and encourage better ESG information and practices, they are responsible for reporting to their clients and beneficiaries on their engagement and voting activities and relevant outcomes. Such information should be easy to access and understand and provided on a regular basis (i.e. quarterly or annually). Disclosure to clients and beneficiaries may also be more detailed than public disclosure to other stakeholders. Reporting practices should also be reviewed periodically to continuously improve communication.

Investors might be reluctant to provide too much information as it can take a long time for the positive outcomes of active ownership activities to unfold. Additionally, attribution might be difficult to prove as companies change practices for multiple factors happening at the same time. Dialogue with companies is also often kept private to build trust and ensure openness by corporate management. Therefore, some investors might perceive reporting as a hindrance to forming relationships with companies.

Nevertheless, the benefits of disclosure clearly outweigh the possible downsides. More information facilitates the validation of active ownership and creates business opportunities in markets where asset owners are focusing more attention on stewardship responsibilities. Sharing details on the progress of dialogue also enables better consideration of engagement and voting data in investment decision making when active ownership activities and asset management functions are run by two separate entities. Greater disclosure by investors is also an opportunity to improve how they communicate their expectations to companies and reward positive dialogue and progress in ESG practices. Finally, reporting allows for more robust monitoring by and accountability to clients, beneficiaries, regulators, standard setters and other stakeholders.

Best practice disclosure on engagement activities includes:

• a presentation of the overall engagement strategy, due diligence and monitoring approach;
• detail on the selection of engagement cases and a definition of objectives;
• number of engagements undertaken;
• breakdown of engagements by type/topic;
• breakdown of engagements by region;
• an assessment of progress and outcomes achieved against defined objectives;
• examples of engagement cases with specific companies (when the information is not considered sensitive and confidential);
• detail on eventual escalation strategies taken after the initial dialogue has been unsuccessful (i.e. filing resolutions, issuing a statement, voting against, divestment etc.); and
• whether the information provided has been assured externally.

Good quality reporting on voting activities covers:

• all voting decisions, including on ESG resolutions;
• number of votes cast and corresponding AGMs covered across markets and percentage of total available votes;
• an overview of topics covered during the voting season;
• percentage of votes cast for, against or abstained;
• explanation of rationale for voting against management or abstentions; and
• whether the information provided has been assured externally.