Talk isn’t cheap: Engaging corporates on ESG issues (Part 2)

In Part 1 of this blog post, the focus was on the use of dialogue between investors and corporates to engage on environmental, social and governance (ESG) issues. A framework for this engagement proposed by Fabrizio Ferraro (IESE) and Daniel Beunza (LSE) was discussed, in addition to the way in which it might possibly be extended to other actors in the investment community, including fund managers.

How can this framework be harnessed and utilised by non-investors? Part 2 of this blog post takes a closer look at aligning the actions of investors and non-investor activists in interacting with corporates. Further, the use of dialogue by groups such as ShareAction, Fairtrade and Oxfam as part of ESG engagement is analysed. Ultimately, further collaboration between end investors, fund managers, civil society organisations (CSOs) and individuals will enable greater awareness and integration of ESG considerations by investors and corporates.

Talk isn’t cheap: Engaging corporates on ESG issues (Part 1)

Power relationships and influence matter a lot when it comes to corporate behaviour. However one of the less well covered power relationships is between investors and the companies they own. A recent paper by Fabrizio Ferraro (IESE) and Daniel Beunza (LSE) offers some interesting insights on how the Interfaith Center on Corporate Responsibility (ICCR) has used its position as an investor in major multinationals to catalyse changes in corporate behaviour through dialogue. The findings are revealing and also relevant for non-investors, such as activists and certification bodies, for engaging with corporates on environmental, social and governance (ESG) issues. The constructive and collaborative nature of dialogue enables corporates to be more willing to engage.

In Part 1 of this blog post, the key findings of this paper are discussed together with implications for the pensions and investment industry, particularly the way in which fund managers can play a stronger role. Part 2 will analyse broader implications for other stakeholders, including activists, and the way in which non-investors can influence corporates by collaborating with the investment channel.