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Regulating Engagement: Demonstrating Impact in Accordance with the FCA guidelines

By Team Maanch  |  
August 6, 2021  |  
4 minutes read

Consumers are placing significant value on ESG-related investment opportunities. It is therefore essential that funds marketed with a sustainability and ESG focus describe their investment strategies clearly and any assertions made about their goals are reasonable and substantiated. The letter by the Financial Conduct Authority (FCA) specifically highlights the value of stewardship in demonstrating ESG strategy as part of an important intervention designed to build greater trust in the ESG market. The FCA letter and 2020 UK Stewardship Code seek to promote not only the demonstration of active engagement, but also its contribution to a firm’s sustainability themes and goals. 

FCA Guidelines

The FCA has outlined guidelines encouraging clear communication of chosen strategy and well-represented evidence in practice. They expect clear and accurate ongoing disclosures to consumers where funds make ESG-related claims, and want to see funds deliver on their stated objectives and/or strategy. Like the FCA, Maanch recognises that the rapid pace of change in the industry presents challenges. This is why we at Maanch have developed a tool to make active engagement more efficient and robust.  

The Maanch Engagement Tracker

Maanch’s Engagement Tracker (ET) turns raw engagement activity into structured impact data– allowing funds to keep a thorough log of all stewardship conducted and align these actions with ESG metrics and themes. By noting an interaction with a portfolio company on the Maanch platform, you are able to demonstrate and visualise your commitments to your ESG strategy, and showcase this to various shareholders using our reporting functionalities. 

FCA Guiding Principles: Engagement Policies

Under the FCA guiding principles, an AFM must develop adequate and effective strategies for exercising voting rights. AFMs are also subject to the requirements in COBS 2.2B either to develop an engagement policy covering certain areas, or to explain why they have not done so. Where investor stewardship forms part of a fund’s responsible or sustainable investment strategy, the AFM should develop an engagement policy that complies with COBS 2.2B.6R and clarify how stewardship contributes to meeting the fund’s intended ESG/sustainability characteristics, themes or outcomes. 

How the Engagement Tracker makes stewardship activities more digestible

The Maanch ET distills stewardship activities into digestible data for all stakeholders. The dashboard effectively monitors and visualises all stewardship activities and enables funds to demonstrate their progress on stated ESG strategy. Maanch’s reporting is simple and transparent, ensuring that all key engagement information is clear and comprehensible. All reports are in real time. This allows all users to report to their stakeholders on an ongoing basis.

The Maanch ET allows for automated and efficient insights, and access to raw data. The tracker organises and visualises your data while ensuring complete transparency behind all insights. All ET data is simplified and analysed against existing ESG metrics– allowing for greater understanding without further crowding the ESG measurement space. 

ESG Focus

It is important to clearly demonstrate how ESG matters are integrated with investment decision making, including how escalation and divestment decisions are made. The Maanch platform allows you to easily record every issue and interaction undertaken. This makes inputting meeting notes, flagging issues of high severity, and highlighting ESG topics of focus an easy task across the firm. Through these detailed logs, you are able to collaborate across teams (and geographies) and trace every escalation, divestment, and vote over several years. 

Aligned with the FCA’s call for more effective tools to be applied by firms active in ESG, Maanch provides investors with the ESG-specific data and analytical tools necessary to support delivery on these guiding principles– making engagement easy, and more robust. 

If you would like to know more about Maanch’s Engagement Tracker, or are an investment professional interested in attending our upcoming Effective Engagement Roundtable event, please get in touch with Heer at heer@maanch.com

Blog by Maanch team member Heer Baxi.

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Top 3 Benefits of Using Engagement Tracker

Investors are under increasing pressure to demonstrate their stewardship and focus on Environmental, Social, and Governance (ESG) engagements. Studies have shown that companies with high ESG ratings have lower volatility and higher returns, making it an important consideration for investors. However, traditional methods for engagement management are becoming increasingly outdated and ineffective. Spreadsheets and manual processes are prone to errors and lack advanced analytics capabilities, making it difficult to manage a portfolio effectively.

Asset managers are turning to technology to help manage their investment portfolios effectively. Portfolio management software, risk management software, analytics and modelling tools, ESG research tools, and client portals are all tools that asset managers use to manage their portfolios. However, these tools do not focus specifically on stewardship and engagement activity, which is crucial for responsible investment.

The Maanch Engagement Tracker is a holistic tool that streamlines processes and has an open API for internal and third-party integrations. It allows easy and effective capture, analysis, and reporting of every engagement with portfolio companies in real-time, aligned with the latest ESG taxonomies. This increased efficiency, better risk management, and improved communication can revolutionize the way asset managers manage their portfolio engagements.

In conclusion, the Engagement Tracker is an essential tool for any investment portfolio. It offers a wealth of benefits that can help asset managers make informed investment decisions, identify opportunities for diversification, monitor ESG exposures and mitigate risks, and comply with regulations. Adopting this technology can be the key to unlocking the potential of responsible investment and achieving better financial performance for investors.

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