2021 ESG Investing Annual Report
Our 2021 ESG Annual Report not only details our ESG investment integration, company engagement, and proxy voting activities for the year, but also explores several key themes, including the challenge of divergent ESG ratings, corporate political activity, the shift to a circular economy, and the journey to net zero.
Companies Covered by our Responsible Investing Indicator Models (RIIM)
In-house ESG Research Tool1
In 2021 on ESG
Voted in 20212
Our ESG Integration Approach
Environmental, Social, and Governance factors comprise a broad spectrum of considerations—positive and negative—that our investment analysts, supported our ESG specialist teams, consider in the context of any company, industry, or region of the world. Our approach is driven by the following principles:
Listen here for our ESG Integration Approach
- ESG Integration Approach Video
and Governance Factors
Integration of environmental, social, and governance factors into our investment process, inclusive of climate-related risks and opportunities, starts with the initial research at the inception of an investment idea and continues through the life of the investment. As identifying the potential impact of these factors can be a more subjective process than traditional financial analysis, each of our investors defines a potential investment’s ESG-related risk and reward based on its industry, geography, and company dynamics. Our research analysts work closely with our in-house ESG specialists to determine which factors will be most material to the underlying fundamentals of a particular investment.
Our perspective on shareholder activism
The purpose of this statement is to share our philosophy and policies on shareholder activism with our clients, portfolio companies, activist investors, and other market participants.
Engaging with portfolio companies in a variety of ways.
Assessing a broad range of investment concerns (including environmental and social issues) is integral to our investment process. Based on this view, our interactions with issuers of corporate securities are driven by portfolio management and supported by the expertise of our industry-focused analysts and our in-house specialists in corporate governance and sustainability.
Our priorities in these efforts are tightly connected to our investment views on a company, so we generally conduct our company-level engagement activities privately. In contrast, we tend to collaborate with other shareholders on policy-level concerns, such as advocating with regulators for better disclosure or the protection of shareholder rights.
- Who represents shareholders on a company’s Board?
- What drives the executive incentive program?
- How robust are shareholders’ rights at the company?
- How is the company managing its environmental risks,human resources, facilities, stakeholder relations, and long-term access to critical resources?
Proxy voting is a critical component of our approach to corporate governance. We offer our clients a high degree of transparency related to the votes we cast on their behalf.
T. Rowe Price Investment Management, Inc. (TRPIM) makes independent proxy voting decisions, as described in their proxy voting guidelines, from T. Rowe Price Associates, Inc. (TRPA) and its investment advisory affiliates.
We maintain regular dialogue with the managements of issuers represented across our portfolios.
Where we find areas of concern, we make those concerns known to them.
In accordance with the European Union Sustainable Finance Disclosure Regulation ("SFDR"), T. Rowe Price considers and, where appropriate, incorporates into its investment and engagement processes the Principal Adverse Impacts ("PAI") of investment decisions.
Two Primary Levels of Engagement
After many years of dialogue with management and Board members of the companies in our clients’
portfolios, T. Rowe Price’s practice has focused primarily on two distinct levels of interplay.
High number of brief interactions.
Fewer resources devoted to each encounter.
Low number of intensive, often multiyear activities.
More resources devoted to each action.
1 As of March 7th, 2022 RIIM analysis will be different across advisers. T. Rowe Price Investment Management, Inc. (TRPIM) was established as a separately registered U.S. investment adviser. TRPIM has a separate ESG team to that of T. Rowe Price Associates, Inc. (TRPA). TRPA and TRPIM ESG teams are both dedicated to supporting investment decisions and leverage a similar approach, framework, and philosophy.
2 As of December 31, 2021.