Today, Hermes Investment Management’s stewardship and engagement team, Hermes EOS, has published a new study with University of Göttingen, which sheds light on the key drivers of impactful shareholder engagement. The independent study, “Talk is not cheap – The role of interpersonal communication as a success factor of engagements on ESG matters”, examines the drivers of impactful shareholder engagement using the information from Hermes EOS’ engagement database.
Using a novel analytical method, which benefits from the depth of Hermes EOS’ proprietary engagement and stewardship information captured in a dedicated database going back more than a decade, researchers from the University of Göttingen were able to identify some of the key drivers of impactful engagement and found that:
- Personal, board-level interactions with the company substantially increase the chances of effective engagement success.
- To engage successfully on governance issues, it is particularly important to have direct contact with the chair of the board, who typically is a non-executive director.
- Successful engagements on social and environmental topics are not driven by letter writing; personal interaction with the company is also key for those engagements.
- Engagement is not a one-size-fits-all approach, especially for engagements at companies in emerging markets. The engagement approach needs to be tailored to the company’s specific circumstances and underlying ESG issues.
The new study adds to the growing body of literature on shareholder engagement, by showing that effective stewardship needs to be customised to the investee company’s circumstances and to the material ESG themes the company is exposed to. It also contributes to the discussion that meaningful change regarding companies’ ESG practices can in particular be affected through a personal dialogue at board level.
Dr Hans-Christoph Hirt, Head of Hermes EOS, said:
Professor Michael Wolff, Chair of Management and Control at the University of Göttingen added:
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