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.
Principles for Responsible Investment
(PRI) signatory since 2010.1
ESG factors comprise a broad spectrum of considerations—positive and negative—that our investment analysts consider in the context of any company, industry, or region of the world. This approach is driven by the following principles:
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.
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.
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.
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.
1Launched in 2006, the UN Principles for Responsible Investment (UN 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. We are also members of the Carbon Disclosure Project and compliant with the UK Financial Reporting Council’s Stewardship Code.