Active investors work with companies – for the greater good.
by The ESG Team
There’s a difference between active and activist investing. The confusion between the two terms is understandable. CEOs and boards often hear the term ‘active’ investing and think they’ll be forced into mass spending cuts and face demands for change in their management structure. That’s actually closer to what “activist’” investors do. NEI Investments is nothing like an angry mob trying to coerce actions that will jeopardize business.
An activist investor is an individual or group that buys a significant stake in a public company in order to influence how the company is run, such as by obtaining seats on its board of directors. That’s not us.
As active investors, we work on behalf of individual and institutional investors. We put their money to work by investing in companies that we see as being poised to become tomorrow’s leaders. At a time when social, economic and environmental disruption has galvanized investors and society around the need for positive, sustainable change, we strive to deliver value for all stakeholders, including investors. The companies we choose to work with help to transform the world through performance improvement across environmental, social and governance (ESG) factors.
Our work drives change through dialogue, proxy voting and policy:
Dialogue: We put a heavy emphasis on holding direct interaction with company management to address specific concerns, improve ESG performance and advance key ESG objectives. From letters to face-to-face meetings, we engage with our corporate partners to improve their investment potential.
Proxy voting: NEI aims to vote every proxy for every company in our funds, based on publicly available voting guidelines and country-specific best practices. This includes votes on board member elections, pay packages, shareholder proposals, mergers and other corporate matters. Where it’s appropriate and beneficial to shareholders, we encourage management to take specific actions.
Policy: Through consultation with governments, regulators and organizations, we work to establish best practices in various industries to make it easier for responsible investors, companies and stakeholders to move forward together.
Where activist investors try to force change, we seek to create it. Activist investors can negatively impact shareholders with short-term decision making — purchasing large portions of stock, for instance, can drive up a company’s share price and drop it down just as fast when they decide to sell. This is not good for other investors. Our approach focuses instead on long-term, sustainable value creation. Responsible investors entrust us with their assets and we take that responsibility seriously.
The companies that we engage with — whether in energy, manufacturing or technology — are selected because they’re either at the forefront of change in their respective industries, or because they can grow into industry leaders by effectively addressing their ESG issues. Through our three-pronged approach to corporate engagement, we can express our support for a company’s board or management, or we can communicate our concerns and encourage them to improve on ESG factors.
Actively engaging with companies in our portfolio
“Society is starting to look at companies and corporations as it should — they are a core piece of society, where their role is to help society meet its goals,” says Jamie Bonham, director of corporate engagement at NEI Investments.
In 2020, the corporate engagement team increased its activity over 2019. With COVID-19 forcing most business interactions to go virtual, we took advantage of the circumstances to expand and strengthen global partnerships. Our list of engagements included:
- 170 total companies engaged (32% of our fund equity holdings)
- 81 companies, through intensive dialogue
- 89 companies, through correspondence
- 26 different ESG topics raised
- 855 company meetings attended
- 10,745 proxy items voted
- 3,333 votes against management (30% of all proxy items voted)
- 322 votes against North American compensation plans (85% of all plans voted)
As you can see, we’ve been very active over the past year. We’re proud of our progress, but we won’t rest on our laurels. We have an equally ambitious mandate for the year ahead — summarized in our 2021 Focus List: A guide to our ESG themes and the companies we’re talking to this year — and we intend to keep offering responsible investors a way to participate in the markets and be part of the change.
NEI aims to vote every proxy for every company in our funds. Where it’s appropriate and beneficial to shareholders, we encourage management to take specific action.