ENVIRONMENTAL, SOCIAL, GOVERNANCE
Protecting our clients, associates, and stockholders.
ESG Annual Report 2019
ESG considerations continue to grow in importance for many investors around the globe. Our 2019 ESG Annual Report details our comprehensive ESG investment integration, company engagement, and proxy voting activities for the year. It highlights how the data and analysis of our Responsible Investing Indicator Model (RIIM) is helping our analysts and portfolio managers better integrate environmental, social, and ethical factors into their investment decisions. The report also features insights into key ESG issues and how we factor those into our investment analysis, including climate change, income inequality, governance for public versus private companies, and proxy voting in relation to shareholder proposals.
ESG Annual Report 2018
Our inaugural ESG Annual report illustrates how we integrate ESG factors into the investment process across asset classes. It also highlights our latest ESG research and provides insights into our activity across our global engagement and proxy voting programs.
Integrating ESG considerations into our fundamental research has helped the firm identify well-managed companies that are leaders in their industries, more forward-thinking, better at anticipating and mitigating risk, and focused on the long term.
President and CEO, T. Rowe Price
Our ESG Integration Approach
Environmental, Social, and Governance factors comprise a broad spectrum of considerations—positive and negative—that our investment analysts, supported by two groups of internal investment specialists: our Responsible Investment and Corporate Governance teams, consider in the context of any company, industry, or region of the world. Our approach is driven by the following principles:
At T. Rowe Price, we have embedded environmental, social, and governance analysis into the investment process, meaning the responsibility for integrating ESG factors into investment decisions lies with our analysts and portfolio managers.
In order to support our investment professionals’ capacity to incorporate ESG factors into their decision-making, we have specialists in ESG and regulatory research within our investment research teams who work with our analysts and portfolio managers to delve into situations where these issues are particularly significant.
We focus on the ESG factors we consider most likely to have a material impact on the performance of the investments in our clients’ portfolios
Integration of Environmental and Social Factors
Integration of environmental and social factors into our investment process 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?
Our approach to proxy voting
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.
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.
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.
As a global investment management firm, we recognize the influence we have on social and environmental issues through our investment portfolios.
The central mission of our company is to help our clients reach their long-term financial goals through a thoughtful, disciplined approach to managing investments. Consistent with that mission, we have an obligation to understand the long-term sustainability of a company’s business model and the factors that could cause it to change. We do this by incorporating environmental, social, and governance (ESG) considerations into our investment process.
PRI
Principles for Responsible Investment (PRI) signatory since 20101
2020 Assessment Report
for T. Rowe Price2 : A+
1Launched in 2006, the Principles for Responsible Investment (PRI) are a set of voluntary best practice standards that asset owners and asset managers pledge to uphold in order to incorporate environmental, social, and governance (ESG) issues into their investment processes.
2 Used with permission. PRI is not affiliated with T. Rowe Price. For reference, please refer to the PRI assessment methodology and the T. Rowe Price Transparency Report.