As long-term investors, environmental, social and governance (ESG) issues are crucial. They affect the way we invest and inform our global engagement agenda. Each year we select engagement themes based on their financial materiality, our previous engagement with companies and where we believe we can have the greatest impact. They are also the issues we understand to be most important to our clients.
AMP Capital’s commitment to ESG is evident through the work carried out by the Global Sustainable Investment Team on behalf of our clients. The Sydney-based team researches a broad range of ESG issues, exercises voting rights, and engages directly with companies on issues of concern that may arise.
Engagement is a vital tool in managing risk and building relationships with the executives and board members of companies. AMP Capital prides itself on its strong commitment to engagement with companies on issues of concern on an ongoing basis. While the topics discussed vary from company to company, recurring themes have been gender diversity, environmental and social responsibility, executive pay, and the management of ESG risks, such as safety, cyber security, conduct and compliance.
For 2020, the Global Sustainable Investment Team has chosen five key engagement themes on which to focus its attention:
- Climate change and water. The environment, and specifically climate change, is arguably the biggest challenge facing the world today. Rising sea levels tends to dominate perceptions around the risk of climate change, but the more imminent threat may actually be a lack of water.
- Diversity. Gender diversity has been a focus for many years and while this continues to be a key priority, we are broadening the scope of this theme to encompass factors such as diversity of ethnicity, age, physical ability, education, religion and socioeconomic background.
- Human rights and supply chain. Human rights abuses in the brands and products we buy and interact with every day remains a far-reaching problem. However, large global companies can wield an enormous amount of influence over their suppliers, even those much further down the supply chain. By both governments and business taking action to eradicate modern slavery, the speed of change will accelerate.
- Executive remuneration. As executive remuneration is an investment of shareholder funds in the management team, AMP Capital believes that remuneration should be fair, reasonable and aligned with shareholder interests.
- Plastic and waste. There is a great need to stem the tide of plastic production. So little of the world’s waste is recycled but companies can play a key role in addressing this through the circular economy – that is, a system without waste and pollution where materials are used and reused.
These themes are discussed in further detail in our latest corporate governance report: 2019 Review Proxy Voting & Sustainable Investment Research.
As owners, shareholders can influence the way companies are run. AMP Capital takes this responsibility seriously and believes active and constructive engagement can add value to the investment process. Through ongoing engagement we will continue to work with companies to ensure they are managing their ESG risks and realising potential opportunities to create long-term sustainable value for all stakeholders.
This blog post has been prepared to provide general information and does not constitute 'financial advice' for the purposes of the Financial Advisors Act 2008 (Act). An individual investor should, before making any investment decisions, consider the information available in the relevant Product Disclosure Statement and seek professional advice. While every care has been taken in the preparation of this document, AMP Capital Investors (New Zealand) Limited and the AMP Group (together, 'AMP') make no guarantee that the information supplied is accurate, complete or timely and do not make any warranties or representations in respect of results gained from its use. The information is not intended to infer that current or past returns are indicative of future returns. The views expressed are those of the author and do not necessarily reflect those of AMP. These views are subject to change depending on market conditions and other factors.