Investors engage in climate dialogue with companies

Investors tend to focus their investments on companies committed to climate action, not only from an ethical point of view – which should be obvious by now – but also in terms of investment and return.

By clearly setting out these expectations to companies, the latter are better able to focus on and commit to these goals.

This is why KBC Asset Management’s methodology not only excludes companies that do not meet ESG (Environmental, Social and Governance) standards, but also focuses on strategies such as dialogue and engagement in tackling climate change.

'A lack of corporate responsibility is often something that has developed over time and cannot be fixed overnight. ‘The way we engage companies in a dialogue should be viewed as a marathon rather than a sprint,’ says Kenneth De Bruycker, analyst at KBC Asset Management.

The emphasis in marathons is more on endurance than on speed, which also holds true for corporate climate commitments. It won’t all be smooth sailing.

That’s why it’s crucial to engage in a dialogue with companies, to further the aim of having a positive impact on the world, on the value of these companies and ultimately on investor return, too. This is exactly why investors want to make their voices heard and see certain things done.

KBC Asset Management puts climate centre stage, focusing on the following issues in its dialogue with companies

• Making climate data transparent and publicly available

Climate change and climate-related risks are among the most critical issues for investors. It is essential that companies disclose their climate data in a transparent manner so that investors can better integrate these risks into their investment, engagement and voting processes.

• Defining ambitions and targets for greenhouse gas emissions
  

Companies covered by Climate Action 100+ are contacted if they have not set any short- or medium-term targets for greenhouse gas emissions. Climate Action 100+ is an investor initiative in which KBC Asset Management is involved. It addresses major greenhouse gas emitters and other companies with the aim of boosting the transition to renewable energy and helping achieve the Paris Agreement goals

Before engaging in a dialogue with a given company, KBC Asset Management first conducts a thorough analysis of that company’s ESG data and any related controversies, consulting both internal and external information from data providers. The asset manager may also communicate with relevant company stakeholders to gain additional insights.

In a second stage, KBC Asset Management defines the necessary improvement targets before communicating them to the company.

If a company fails to respond – or fails to respond appropriately – to the improvement targets, the asset manager can vote against certain agenda items tabled at the shareholders’ meeting.

Legally speaking, a company cannot make independent decisions on certain matters without the consent of its shareholders. The relevant laws do not focus specifically on environmental issues, but rather on corporate governance.

A company puts resolutions on its agenda covering matters such as the election of directors, remuneration schemes, setting dividends, issuing shares, share buybacks, and approval of the annual report.

By voting on these resolutions, the asset manager defends the customer’s interests.

The world of dialogue and votes is always changing. There has been a noticeable increase in the number of votes cast by KBC Asset Management.

Last year saw a huge increase, which is why the practice of proxy voting is given significant attention within KBC Asset Management’s responsible investment methodology.