Regnan: Make sure your sustainable investments manager is a good ‘engager’

Asset managers who engage with investee companies achieve better outcomes for investors and the community, argues Regnan’s Laura Sheehan

• Engagement with management is crucial to impact investing
• No one-size-fits-all approach when consulting with a company
• Find out about Regnan Global Equity Impact Solutions Fund

IT’S NO surprise that corporate engagement and shareholder action have become one of the most common responsible investment approaches in Australia.

Engagement generally refers to the process of asset managers “engaging” directly with investee companies and bond issuers to influence corporate behaviour and achieve better outcomes for investors and the community.

It comes under the umbrella of “stewardship” which also includes active ownership (voting), collaboration and policy and advocacy, according to the Responsible Investment Association of Australasia.

More than half (51%) of investment managers and asset owners surveyed in Australia and New Zealand had a adopted a stewardship code by 2021, RIAA reports.

Engagement is a critical component of the investment process for sustainable investor Regnan – and senir analyst Laura Sheehan sees it as an essential tool for driving positive change.

“There’s many ways to invest, and the right or wrong of that isn’t binary,” Sheehan says.

“But you can’t be something you’re not. So for me, it’s important to understand and agree with an investment approach.”

“We need to be able to identify companies that are willing to engage with us,” she says.

“Typically, companies are happy to engage when you bring something, rather than a spoiler plate, to the table.”

Sheehan cautions against a one-size-fits-all approach when it comes to engagement.

“Some high-growth companies may need more breathing room to execute their plans,” she says.

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Engagement is a two-way relationship, and the key is to have a deep understanding of the business and the in which a company operates in. That ensures better engagement between investor and management.

“If you’re asking for things that are just not even realistic, or things that show you don’t understand the business, I think that’s going to impact your influence and the willingness of management to engage more broadly.”

Engagement in the resources sector

Sheehan’s experience in the energy sector has given her a unique perspective on the value of informed engagement.

“One frustration for me covering oil and gas was when people have a superficial understanding of energy systems and energy infrastructure and the lifecycle of investments, even the difference between energy and electricity.

“They start engaging but not in a very impactful way, because they might be asking for actions that don’t make sense or could never be achieved.”

At Regnan, Sheehan and her colleagues take a more nuanced approach, seeking to understand the company’s position within the broader system and how that system is evolving.

“It’s about understanding where the company sits within the context of the value chain and the system that it’s in. And it’s about understanding how the system itself is changing and how it needs to change,” she says.

As the newest member of the Regnan Global Equity Impact Solutions team, Sheehan says Regnan’s investment philosophy aligns with her own, with a focus on long-term investment horizons and searching for mission-driven companies delivering impactful solutions  to address social and environmental challenges.

“I think that’s an incredibly motivating universe to go fishing in,” she says, adding that working with people you like is also critical to success.

“I met with each person individually, and I think it was very clear for me that it would be a team of people I would be able to get along with and enjoy working with,” she says.

As Sheehan embarks on her journey with Regnan, her commitment to impact investing and meaningful engagement is clear.

She highlights the significance of the proprietary Regnan Taxonomy, explaining “It gives you the guard rails you’re looking for and the mission you’re trying to achieve, which ultimately is what you need to be doing when you’re investing for the long term.