The process of engaging with businesses can be a key way to help bring about the changes responsible investors seek. Money Matters has undertaken a wide range of engagement activities over the years.
Four P's of Responsible Business
In Rodger’s PhD applied research he created a Responsibility Scorecard covering his Four P’s of responsible business – Purpose, Principles, Practices and Performance Measurement. He profiled all the NZX40 companies, sending them their Scorecards and, with certain businesses, followed up with meetings and further communications. This research was published internationally. Rodger and his team then applied this approach in providing ongoing research for the first responsible investment New Zealand share fund.
Leadership Development within Business
From this and other experience Rodger identified that a key aspect that required more in-depth engagement was the quantity and quality of leadership development and personal development within business. A key focus for the Money Matters engagement activity in recent years has been activity to encourage businesses to develop their employees and, in doing so, their financial, environmental, social and governance performance. The wisdom of this approach was reflected in research by Harvard’s Kegan and Lahey and their colleagues in an April 2014 Harvard Business Review article Making Business Personal and in the concept of a deliberately developmental organisation (DDO).
The authors spent three years in search of a DDO – organisations committed to developing all their people by weaving personal growth into daily work. They looked worldwide, in the public and private sectors, for organisations with at least 100 employees and a track record of at least five years. They found only about 20 companies: of those, two stood out. The article describes how these companies believe that not only is attention to business performance and the personal growth of all employees desirable, but the two are interdependent. The authors maintain that the quests for business excellence and individual fulfilment need not be at odds – each can be combined in such a way that causes the other to flourish. This reflects the Money Matters philosophy of what makes for a good business and wise investment.
Money Matters is also involved in supporting a wide range of other engagement activities through the fund managers we work with. Examples of engagement issues being addressed by fund managers we work with are:
- Human rights and the supply chain – at a company and industry level. This has included signing the Investor Statement on Bangladesh and engaging with 21 Australasian companies urging them to sign the multi-stakeholder Accord on Fire and Building Safety in Bangladesh and undertaking an assessment on supply chain risk exposure and risk management for approximately 30 listed retailers across New Zealand and Australia.
- Climate change – at a collective engagement level, seeking improvements in long-term policy and the regulatory regime around carbon dioxide emissions; and at a company specific level assessing the risk of ‘unburnable carbon’ to ASX 200 and NZX50 investors.
- Improved ESG (Environmental, Social and Governance) disclosure – providing feedback to international initiatives on integrated reporting and direct feedback to companies on their sustainability reporting.