Material Engagement (with suppliment included)

Material Engagement
Make it Real (SDGs). Make it Matter (SASB).
Make it Heard (Process).
Nawar Alsaadi
2020
The Missing Link

Nawar Alsaadi - 2020 2
Nawar Alsaadi is a sustainable investment professional with 10+ years
capital markets and corporate engagement experience. He has been
involved with a number of high-profile activist battles with TSX and
NYSE listed companies on issues pertaining to corporate governance
and corporate strategy. In 2014, he founded Semper Augustus Capital,
an activist investing firm with a focus on corporate governance and
strategy. In 2018, he expanded his investing focus to the full spectrum
of ESG investing through the development and application of the
Material Engagement concept. Nawar holds a Sustainable Investment
professional certification from Concordia University, an ESG Investing
certification from the CFA institute (UK), and an FSB Credential from the
Sustainability Accounting Standards Board (SASB).

There has been Little Progress on CO2 emissions, income inequality, and
excessive CEO Pay despite significant growth UN-PRI aligned assets

What’s missing?
The strong growth in ESG committed assets (UN-PRI, USSIF), and the proliferation of ESG disclosure and
integration requirements (EU SRD2, UK Stewardship Code, Japan Stewardship Code) have not been
accompanied by an analogous increase in active ownership. Shareholder voting - which is a good proxy of
investor engagement (passive and active) – signal continued investor passivity:
Voting dissent in the UK largest 350 companies has hardly changed over the last decade
(Source: Minerva Analytics)

ESG Empirical Evidence
Nawar Alsaadi - 2020
Multiple studies affirm a positive correlation between ESG
integration/engagement and market & corporate financial
performance, to cite a few…:
Flammer, C. (2013). “Does corporate social responsibility lead to superior financial performance? A regression
discontinuity approach”. Journal of Economic Literature, 27 Oct. 2013. Available at:
https://ssrn.com/abstract=2146282
Bassen, A., Busch, T. and Friede, G. (2015). “ESG and Financial Performance: Aggregated Evidence from More
than 2,000 Empirical Studies”. Journal of Sustainable Finance & Investment, 5(4), pp. 210–233. Available at:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2699610
Principles for Responsible Investment (2018). ESG engagement for fixed income investors: Managing risks,
enhancing returns. Available at: www.unpri.org/download?ac=4449
Mooney, A. (2018). “Unilever U-turn shows how angry shareholders are securing change”. Financial Times, 14
Oct. 2018. Available at: www.ft.com/content/d7211dba-ce21-11e8-9fe5-24ad351828ab
Hoepner, A.G.F., Oikonomou, I., Sautner, Z. et al. (2018). “ESG shareholder engagement and downside risk”.
AFA 2018 paper. Available at: https://ssrn.com/abstract=2874252
Dimson, E., Karakaş, O. and Li, X. (2015). “Active ownership”. Review of Financial Studies (RFS), 28(12), pp.
3225–3268. Available at: https://ssrn.com/abstract=2154724
Becht, M., and Franks, J.R., Mayer, C. and Rossi, S. (2006). “Returns to shareholder activism: evidence from a
clinical study of the Hermes UK Focus Fund”. ECGI – Finance Working Paper No 138/2006. Available at:
https://ssrn.com/abstract=934712
Kölbel, Julian F., Florian Heeb, Falko Paetzold, and Timo Busch. in press. ‘Can Sustainable Investing Save the
World? Reviewing the Mechanisms of Investor Impact’. Organization & Environment. Available at:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3289544
“The study combines the findings of about 2,200
individual studies…The results show that the
business case for ESG investing is empirically
very well-founded. Roughly 90% of studies find a
non-negative ESG-CFP relation. More
importantly, the large majority of studies reports
positive findings.” Journal of Sustainable Finance &
Investment
5
…. shareholder engagement emerges as
the most reliable mechanism for investors
seeking impact, in the sense that it has
been clearly demonstrated empirically ….
Organization & Environment
After successful engagements,
particularly on environmental/social
issues, companies experience
improved accounting performance
and governance and increased
institutional ownership.
Review of Financial Studies

ESG Transmission Channels
ESG impacts on stock prices are transmitted through three channels*:
Idiosyncratic
- The cash-flow channel (higher revenues, profitability, and dividends)
- The idiosyncratic risk channel (better risk management, lower tail
risk)
Systematic
- The valuation channel (lower market risk, beta, cost of capital)
6
*Guido Giese, Linda-Eling Lee, Dimitris Melas, Zoltán Nagy and Laura Nishikawa
The Journal of Portfolio Management July 2019, 45 (5) 69-83; DOI: https://doi.org/10.3905/jpm.2019.45.5.069
(S) Example: Higher
employee satisfaction
leading to higher
productivity, higher
profitability, higher
dividends.
(G) Example: Better
cybersecurity risk
management leading to
lower regulatory risk, lower
fines, and lower reputational
risk.
(E) Example: More efficient
energy management leading
to reduced exposure to
energy prices volatility.

What needs to happen?
1. Mindset: ESG is not a mean to
gather assets, gathered assets are a
mean to advance ESG issues.
2. Take Responsibility: Asset owners &
managers need to drive the
sustainability agenda within their
invested universe.
3. Prioritize: Focus engagements on
the most pressing issues.
4. Target: Target engagements on
sectors/industries and companies that
provide the most impact.
5. Deliver: Engagements are not an end
in themselves, Engagements must lead
to tangible, measurable, verifiable
outcomes.
Make it Real (SDGs).
Make it Matter (SASB).
Material
Engagement
7

Identify SDGs priorities Scan against SASB’s materiality
map
Identify laggards (internal
analysis, ESG ratings, NGOs .. Etc.)
Define Engagement
Scope:
What the target
company needs to
do? What
resources should
they commit? Over
what timeframe?
Why should they
do what you are
asking?
Set KPIs &
Milestones, and
Timelines:
What defines
success? What
are the key
millstones? Over
what timeline?
Select Engagement
Approach:
Go it alone? Co-
ordinate with
fellow
shareholders? Soft
or aggressive?
Urgent or
prolonged?
Private or public?
Select
Communication
Method:
Letter, email,
phone, video
call, in person
meeting?
Establish Escalation
Strategy:
Submit shareholder
proposal? Go public?
(if private approach)
Involve other
shareholders (if
started alone) Vote
Strategically? Seek
board seat? Exit
investment?
4. 5. 6. 7. 8.
1. 2. 3.
The 8-STEPs Material Engagement Process
A detailed breakdown of all steps is
available in Appendix 1 & 2.

Why the UN 17 Sustainable Development Goals?
• The SDGs provide a universal sustainability blueprint.
• The SDGs are well defined, actionable, and chart a
clear path to a better and sustainable future.
• The SDGs have been designed with the participation
of the private sector in mind.
• The SDGs are timebound, planned to be achieved by
2030.
• The SDGs have widespread governmental and private
sector backing. (72% of global companies already
refer to the SDGs in their sustainability reports – PWC
2019)
• Focusing the ‘firepower’ of trillions of dollars in ESG
aligned assets on a single set of goals increases the
likelihood of their achievement.
• With 17 goals to choose from, asset owners and asset
managers can focus on the issues that matter most to
them.
Make it Real
9

Why SASB?
• Sector Specific (79 industries, 11 sectors).
• SASB Materiality definition is in alignment with the
US Supreme court materiality definition, and the
SEC Regulation S-K disclosure requirements.
• Shareholder engagement on material issues as
defined by SASB leads to increase in corporate
valuations*.
• Failure to disclose or act on material risks as
defined by SASB exposes issuers to legal and
regulatory risks.
• SASB Standards are rigorously reviewed and
updated every three years, thus ensuring
continued relevancy.
• SASB is endorsed by prominent asset managers
such as Blackrock, State Street and Vanguard.
• SASB’s adoption is growing an exponential rate,
with 44% of reporters based outside the United
States.
Make it Matter
*Grewal, Serafeim,Yoon. 2016. Shareholder Activism on
Sustainability Issues. Harvard Business School.
10

Why SASB?
Make it Matter
11
Source: SASB
• SASB’s Materiality approach
targets sustainability metrics
that have a direct impact on
enterprise value creation.
• The link between sustainability
topics/metrics and enterprise
value creation is likely to
increase companies’
responsiveness to ESG
engagements.
• Material sustainability metrics
provide an opportunity to
measure sustainability impacts
in their absolute form (GHG
emissions, water consumption,
governance structure .. Etc.)
and/or in their financial
impacts (revenues, production
cost, trading multiple … etc.)

ESG Transmission Channels
ESG impacts on stock prices are transmitted through three channels*:
Idiosyncratic
- The cash-flow channel (higher revenues, profitability, and dividends)
- The idiosyncratic risk channel (better risk management, lower tail
risk)
Systematic
- The valuation channel (lower market risk, beta, cost of capital)
12
*Guido Giese, Linda-Eling Lee, Dimitris Melas, Zoltán Nagy and Laura Nishikawa
The Journal of Portfolio Management July 2019, 45 (5) 69-83; DOI: https://doi.org/10.3905/jpm.2019.45.5.069
(S) Example: Higher
employee satisfaction
leading to higher
productivity, higher
profitability, higher
dividends.
(G) Example: Better
cybersecurity risk
management leading to
lower regulatory risk, lower
fines, and lower reputational
risk.
(E) Example: More efficient
energy management leading
to reduced exposure to
energy prices volatility.
By focusing on financial materiality through
SASB integration, Material Engagement is
specifically targeting the three identified ESG
transmission channels

Why not other frameworks?
Other standards/frameworks are either all-stakeholder focused, general in scope or
focused on a single sustainability issue such as climate change. SASB is the only
standard focused on a large sustainability spectrum, and on what matters for
participants in financial markets (investors and issuers).
Make it Matter
13

Process
Make it Heard
Define Engagement
Scope:
What the target
company needs to
do? What
resources should
they commit? Over
what timeframe?
Why should they
do what you are
asking?
Set KPIs &
Milestones, and
Timelines:
What defines
success? What
are the key
millstones? Over
what timeline?
Select Engagement
Approach:
Go it alone? Co-
ordinate with
fellow
shareholders? Soft
or aggressive?
Urgent or
prolonged? Private
or public?
Select
Communication
Method:
Letter, email,
phone, video
call, in person
meeting?
Establish Escalation
Strategy:
Submit shareholder
proposal? Go public?
(if private approach)
Involve other
shareholders (if
started alone) Vote
Strategically? Seek
board seat? Exit
investment?
14
Desired Outcome Actual Outcome
Outcome AlignmentOutcome Alignment

Material Engagement
Make it Real (SDGs). Make it Matter (SASB).
Nawar Alsaadi
2020
The Missing Link
Appendix 1 – Step 1 to 3

Select Your SDG Priority
16
Make it Real
The SDG Compass provides guidance for
companies on how they can align their
strategies as well as measure and manage
their contribution to the realization of the
SDGs. www.sdgcompass.org
•Sustainable water withdrawals
•Improved water quality through effluent treatment
•Improved water efficiency through application of 5R
principles: reduce, reuse, recover, recycle, replenish
•Equal, affordable, and safe, access to water access, sanitation,
and hygiene for employees and communities
•Protection of water-related ecosystems and biodiversity
Additional details on SDG Compass
can be found in Supplement 1 of the
presentation (Slides 42 – 46)

Scan Against SASB Materiality Map
Sectors where Water
Management is MOST
Material:
Extractives & Minerals
Processing
Food & Beverage
Renewable Resources &
Alternative Energy
Make it Matter
Additional details on SASB-SDG-SDG
Compass scanning can be found in
Supplement 1 of the presentation
(Slides 42 – 46)

Scan Against SASB sub-sector
Food & Beverage sub-industries with most exposure to Water
Management:
Agriculture Products, Alcoholic Beverages, Meat, Poultry & Dairy
Non-Alcoholic Beverages, Processed Foods – Restaurants
Identify laggards
within these sectors
Make it Matter

Identify Sector Laggards
Identifying sector laggards involves a number of steps that may include one or
a combination of the following:
- Company by company water management performance analysis* (time consuming
– most accurate )
- Consulting an ESG ratings database (Ceres, CDP, Sustainalytics, MSCI, Virgo
Eiris, RipRisk… etc.) (Good starting point, cross check against company data )
- Scanning the news/social media for water management failures and
deficiencies for companies in the Food & Beverages industry. (Good starting point,
cross check against company data )
For this example, we will use Ceres’ Water Risks & Food Sector database
to identify lagging companies in water management/stewardship.
Make it Matter
*SASB Industry Briefs (slide 21) provides relevant assessment indictors to assess industry/company performance on a
given sustainability issue.

Ceres Company Scorecard
For this example, we will choose Dean Foods
which scores 17/100 on its water stewardship
according to Ceres rating methodology.

How to choose an engagement area?
Dean Foods Water Stewardship
deficiency by category (worse to
best):
• Agriculture Supply Chain
• Manufacturing Supply Chain
• Governance & Management
• Direct Operations
Although Governance & Management is the 3rd worst sustainability performance area for Dean Foods,
it is best to start your engagement here since without a proper governance structure no sustainability
improvement can be sustained. You may choose to engage on multiple sustainability areas
simultaneously as you define your engagement scope (step 4). Nonetheless, you need to make sure that
engaging on sustainability Governance & Management is part of your engagement process in case of an
identified deficiency in this area.
Make it Matter

Engaging on Governance
Source: Ceres detailed Company Score (Dean Foods)
Potential Governance
Engagement Topics
based on Ceres’
Methodology :
• Board Water
Management
Oversight
• Senior Executive
Water Management
Oversight
• Executive
Compensation &
Water Management
• Water Management
integration in
Business Strategy &
Risk Management
Make it Matter

SASB Industry Briefs
SASB provides industry briefs on the most relevant sustainability
accounting metrics for a given industry.
SASB’s Water Related Metrics for the Meat, Poultry and Dairy Industry
23
A governance engagement
with Dean Foods would
need to include a
discussion around the
disclosure/governance and
management of these water
sustainability issues within
the company. For example,
Board/Management,
Executive Pay, needs to be
tied to these water
sustainability metrics.
Make it Matter

Summary
• Choose an SDG priority or priorities
• Scan against SASB’s Materiality Map
• Scan against SASB’s sub-sector Materiality Map
• Identify laggard(s) within impact sectors
• Company Analysis
• ESG Ratings Databases
• Media, other.
• Choose engagement area/areas within identified company/companies.
• Always start with sustainability governance if the investee company is deficient
in this area.
• Consult SASB’s industry briefs to identify the relevant sustainability metrics to
include in your engagement.

Material Engagement
Nawar Alsaadi
2020
The Missing Link
Appendix 2 – Step 4 to 8

Define Engagement Scope (1/2)
What sustainability improvement(s) the investee company needs to undertake? How
fast should they act? What resources should they commit?
• The answer to the above is a function of your chosen SDG priority(s), the urgency to
act, the deficiency exhibited by the investee company in this particular sustainability
area(s), your available engagement resources, and the time you are welling to
allocate to a given engagement.
• The engagement scope is also a function of the size of your investment in the
investee company, your stewardship policy, your investment mandate, the nature of
your relationship with the investee company, the extent of change you would like to
see, and the solidity of your theory of change in the engagement area.
• The engagement scope is equally a function of the internal buy-in within your firm. It
is vital that the engagement scope has the backing and approval of the relevant
teams, departments and officers within your institution.
Make it Heard

Define Engagement Scope (2/2)
• When outlining your engagement scope, you need to be aware of the inverse
relationship between the complexity of the ask and the time required to see it
through. Asking a coal company to become a renewable energy company is far more
complex than asking a coal company to disclose its scope 1 emissions.
• When defining the scope of your engagement you have to be clear about your final
goal. An engagement scope can’t be defined without an established final
engagement objective. Establishing scope is a function of the final engagement
objective (Step 1 to 3).
• When defining the engagement scope you need to decide on whether you will
engage on a single sustainability issue, or multiple issues at once (function of final
objective).
• When addressing multiple sustainability deficiencies at a given company, make sure
to align your engagement scope with your sustainability deficiency priorities. (priority
areas get more coverage/attention)
• Who will you engage with at the investee company? (Head of IR, CFO, CEO,
Chairman, Lead Director, Head of Sustainability … etc.). The person or persons to
approach is a function of the scope of your engagement.
Make it Heard

Set KPIs & Milestones, and Timelines (1/2)
• Your engagement timeline is a function of the complexity of the identified
sustainability deficiency, its urgency. The timeline is also a function of the
investment horizon and available engagement resources.
• Milestones are set along your engagement timeline, they are your guideposts
as to whether you are moving in the right direction, and within your
projected timeframe. Missed milestones, might signal a need for a change of
engagement approach, escalation.
• Key Performance Indicators (KPIs) are the indicators you use to gauge a
company performance in relation to your chosen SDG area of engagement.
SASB Industry briefs provide relevant performance indicators (sustainability
accounting metrics) for a given industry (slide 20). A Material Engagement
must incorporates SASB’s sustainability accounting metrics as part of its KPIs
setting process. Engagers who wish to include additional indicators may do
so as long as they can make a solid case as to why the KPI is relevant to the
sustainability issue, and to the engaged company.
Make it Heard

Set KPIs & Milestones, and Timelines (2/2)
29
TimeLine
Request Complexity
• Sustainability
Disclosure
• Product Sustainability
Certification
• Total Change of
Corporate Strategy
• Change of Leadership
• Sustainability
Scenario Analysis
• Board Composition
• Forming Sustainability
Committee
• Embedding Sustainability in
Risk Assessment and
Corporate Decision Making
Make it Heard

Engagement Example (Static)
Objective: Board
composition
(increase female
directors to at least
50% of board
members).
Company agrees in
principal to increase
women directors.
Company nominates
two new women to
the board. Bringing
total women
directors to 5 from
3, in a 9 members
board.
Engagement Starts
New nominees are
voted to the board.
1st Milestone 2nd Milestone Engagement Ends
Engagement KPI
Milestones
6 months 12 months 18 months0 months
Timeline
Make it Heard

Engagement Example (Dynamic 1/2)
Objectives:
1. Improve Hotel Group
labour practices
disclosure. (SASB -
SV0201-07). (Phase 1)
2. Improve Hotel Group
performance on
disclosed metric.
(Dependant on the
content of the disclosed
data – Phase 2.)
Hotel Group agrees to
disclose SASB SV0201-
07 (the amount of legal
and regulatory fines and
settlements associated
with labor law violations.)
Hotel Group discloses the
amount of legal and
regulatory fines and
settlements associated
with labor law violations.
Engagement Starts
(Phase 1)
Hotel Group refuses to
commit to improving
labour standards, cuts
off discussions.
1st Milestone
2nd Milestone
(Phase 1 completed)
Engagement KPIs
Phase 1
Milestones
4 months 8months 15 months0 months
Timeline
Make it Heard
11 months
Engagement resumes with
the goal to improve
performance on the
disclosed metric.
Engagement Resumes
(Phase 2 Starts)
3rd Milestone missed
• Escalation options
contemplated.
• Milestones, timelines
reset.
A Dynamic Material Engagement has
multiple KPIs with phased
implementation characteristics.

Engagement Example (Dynamic 2/2)
The engager forms a
coalition with other
shareholders. They send a
strong worded letter
demanding action on labour
standards.
resume discussions on
improving labour
standards.
improve labour standards.
Engagement Escalates 1st Collective Milestone 2nd Collective Milestone
(Active Engagement Ends)
Escalation from individual
engagement to collective.
22 months 26 months18 months
Make it Heard
Active Monitoring Phase
Active Monitoring Phase
Post Engagement follow-up.
Discuss progress to date,
review implementation
challenges, and assess
potential for active
reengagement if must be.
34months
Escalation Phase
Milestones

Select Engagement Approach (1/2)
• The engagement approach is a function of the engagement final objective, the scope and
complexity of the SDG sustainability request, the desired/available timeline, the urgency of
the sustainability matter, the culture and prevailing regulatory environment, the engager
available resources.
• A long-term engagement approach is proper for a fundamental long-term sustainability
improvement (such as profound corporate strategy change at the investee company), and
vice versa, a short term engagement approach is appropriate for a simple sustainability
improvement (such as improving the investee company sustainability disclosure).
• Individual engagements are best suited for an initial engagement, although in certain
circumstances, a collective engagement might be appropriate as an initial approach. An
individual engagement can evolve into a collective one as part of an escalation strategy.
• Private engagements are generally perceived to be less hostile than public engagements.
Public engagements are often the product of a failed private engagement. In certain
cultures, where saving face is important, its best to focus on a private approach.
• Meeting company officials in person or individually, is best taken as a second step, after
an initial written letter has been submitted. Although in an extreme situation, a meeting
might be initiated without prior communication.
Make it Heard

Select Engagement Approach (2/2)
• Collective engagements generally have a bigger impact, however collective engagements are
much harder to organize than individual engagements. Accordingly, one should be aware of the
trade off between impact and efficiency when deciding on an individual or collective
engagement approach. ‘Acting in concert’ regulation in certain jurisdictions can further
complicate a collective engagement approach.
• Which officer to engage at a given company is a function of the sustainability factor subject to
engagement. The Chairman or Lead Director might be the right person to approach in a
governance focused engagement, while the Head of the Sustainability Committee or Chief
Sustainability Officer might be the best person to approach when discussing an issue such as
sustainability disclosure. Certain officers might be more readily available for a meeting or a
phone call than others.
• An individual or a collective engagement meeting may commence informally, as a side
discussion during an annual shareholders’ meeting, investors’ meeting, or other formal/informal
event. An investor may choose an informal engagement approach by design.
• Choosing the right engagement approach is essential to the success of a given engagement.
Engagers should choose their engagement approach carefully, and bespoke their approach to
the specifics of the sustainability issue and the particulars of the engaged company. One-size
fits all is not an effective engagement approach.
Make it Heard

Communication Method
35
The chosen communication method must be consistent with the nature/seriousness of the engagement,
its urgency, the culture of the engaged company, and the person or persons you are engaging with. In
this table we will use the boiled egg analogy to characterize the harshness classification of the various
communication methods:
Individual Engagement Collective Engagement
Generic Letter
(Soft)
Generic Letter
(Soft)
Tailored Letter/Conference Call
(Soft/Medium)
Tailored Letter/Conf. Call
(Medium)
Periodic/Informal Meeting (in
person, virtual)
(Soft/Medium)
Periodic/Informal Meeting (in
person, virtual)
(Medium-Soft/Medium)
Special Meeting (in person,
virtual)
(Medium/Hard)
Special Meeting (in person,
virtual)
(Hard)
Private
(Soft/Medium/Hard)
Private
(Medium/Hard)
Public
(Hard)
Public
(Hard/Very Hard)
In most cases, the
‘hardness’ of the
communication
method is amplified
when employed in a
collective setting.
In certain cultures
(such as in Asia/Mid-
East) public
communications are
perceived far more
harshly and must be
used with care.
UrgentCompatible

Engagement Letter writing tips!
For this slide, we will refer to the excellent advice* of Anita Green at Wespath Investment Management on ways
to write an effective engagement letter:
1. Demonstrate your knowledge of the company. Show that you have done your homework and understand the
company’s business model and how a particular risk or issue relates to the company’s operations. Use language
that will resonate with the company, avoiding jargon or acronyms.
2. Be clear. Early in the letter, communicate the action you are requesting. Many letters build the case first, which
pushes the “ask” to near the end where it may be overlooked. Executives are busy people. Say what you want
up front, followed by your supporting arguments.
3. Be brief. Shareholders tend to lay out the full business case and all supporting details in every letter, resulting in
a document that is so long it loses impact. Collaborative letters are particularly challenging because signatories
want their individual perspectives to be represented. Compromises may be required to achieve the shared end-
goal. Use the body of the letter to introduce your points, and use footnotes, web links and appendices to
elaborate. the credibility of the sponsor. Remember, your organization’s reputation is at stake with every letter
you send and every engagement action you pursue. Following these simple steps will send the message that
you are a serious, thoughtful investor who deserves to be listened to.
4. Write to the highest professional standards. Unfortunately, an alarming number of poorly written letters are
circulated for sign-on. A clear, concise, high-quality letter establishes the credibility of both the argument and
the author(s). Research your sources to ensure that they are reputable. Always ask someone else to review and
edit. Read it aloud, sleep on it, and read it again.
*21st Century Engagement – 2017 -Blackrock & Ceres joint publication
Make it Heard

Engagement Escalation
According to Macmillan, the verb ‘escalate’ was coined in the 1920s, it meant
to ‘use an escalator’. In the late 1950s, it was expanded to mean ‘increase
rapidly’ mostly in reference to a nuclear threat.
In an engagement context we should refer back to the original meaning,
because when it comes to engagement the last thing you want to do is to
escalate rapidly (unless it’s a truly urgent matter).
While Engagement should be rooted in a definable and clear objective, the
engagement process itself is more of an art rather than a science.
Engagement is about getting people in power (C-Suite, Board members) to
do things that they might not necessarily agree with, or wish to be involved
in. Your job as the engager is to get them to buy into your sustainable vision,
and this requires a careful balance between offering a carrot and wielding a
stick.
Escalation is expensive and time consuming, your goal should be to win your
engagement without resorting to escalation. “The supreme art of war is to
subdue the enemy without fighting.” Sun Tzu, The Art of War.
Make it Heard

When/and if to escalate?
• The decision to and how far to escalate an engagement (in case of no or slow
progress) should be taken prior to the start of the engagement. The importance of
the sustainability matter you are engaging on, its urgency, and your internal
stewardship/engagement policy, are vital factors in determining when and if to
escalate.
• An escalation could take place at any phase during the engagement process, and it’s
a function of the progress, or lack thereof, with the investee company. Missed
deadlines, and failure to reach key milestones are indicators of a potential need to
escalate.
• An escalation could be followed by a de-escalation or vice versa, depending on the
progress of the negotiations.
• You should only escalate if you are able and willing to manage the consequences.
Escalate when you are ready to do so. Internal backing, buy-in, for your escalation
strategy must be fully secured prior to escalation.
• Don’t jump the gun, a hasty escalation can weaken your position rather than
strengthen it, escalate strategically.
Make it Heard

How to escalate? (1/2)
• How to escalate an engagement is highly depended on where you are in the
engagement process, how far you are from your objective, and on what
engagement approach you are pursuing (private or public, individual or collective
… etc.).
• The manner in which you escalate is equally a function of the engagement
context, existing regulation, prevailing stewardship code, the culture of the
investee company and country where it is located, the depth of and trust in the
relationship between you and the investee company management and board, the
size of your investment, the nature and urgency of your final objective.
• How to escalate is also a function of your ability to de-escalate post escalation,
certain escalation strategies (i.e. turning a private engagement in a public one
can’t be dialed back easily). Don’t paint yourself or the investee company into a
corner.
• Make sure the chosen escalation method is consistent with your ultimate
objective. For example, long term material sustainability objectives require a
patient engagement approach, and thus require a carefully dosed escalation
mechanism.
Make it Heard

How to escalate? (2/2)
*Some of these options may not be
readily available in certain markets.
The Investor Forum in the UK identifies five methods
for individual investor-company engagement. We will
use those as basis for our escalation options:
Send a tailored letter, if not enough
Request an in person meeting
Request an unscheduled meeting,
involve other directors/executives,
threaten use of proxy vote
Involve other shareholders, make
the engagement public, threaten
use of proxy vote, rebuke company
at the annual shareholder meeting.
or a combination thereof
Submit a shareholder resolution*,
call a shareholder meeting*, seek
board seat*, reduce investment, or
exit investment
Color Coded Escalation Options:
Please note the highlighted escalation approach applies to individual engagements
only. Collective engagements have different dynamics, and thus different escalation
options.
Escalation
Depending on the engagement progress, the five color
coded escalation options can be dialed back, and/or re-
initiated.
Make it Heard

Key Points to Remember
• Always keep in mind your final objective when choosing to escalate, don’t make the
process about ‘ego’, focus on the outcome.
• Don’t jump the gun, a hasty escalation can weaken your position rather than
strengthen it, escalate strategically.
• Don’t be too rigid, be open to a compromise as long as the proposed compromise
meets the core of your objective. A sure partial outcome is better than a zero-
sustainability outcome.
• Use the ‘zeitgeist’ to your advantage, if a given topic is gaining a lot of media
coverage use the momentum to your advantage.
• Be persistent, keep pushing for your desired outcome. Be dynamic with your
escalation choice, push and pull, be creative, be diplomatic, yet firm, know when to
give ground, and when to stand your ground.
• Monitor the agreed upon outcome, make sure the investee company is delivering on
what was promised, be ready to re-engage if must be.
“Many are stubborn in pursuit of the path they have chosen, few in pursuit of the goal.”
Friedrich Nietzsche
Make it Heard

Conclusion
Material Engagement is the missing link between the sharp growth in ESG aligned assets,
and the lack of progress on many of the pressing environmental, social and governance
issues facing humanity today. The sustainability priorities of Material Engagement are
grounded in human rights by virtue of its focus on the 2030 UN Sustainable Development
Goals (SDGs). Furthermore, by linking the SDGs to SASB’s Materiality Map, the Material
Engagement approach provides the legal, commercial and strategic impetus for companies
to make the SDGs a reality. Said another way, Material Engagement is an approach that
combines the heart (SDGs) with the brain (SASB) thus birthing a new sustainable business
reality, one that’s rooted in human rights, and guided by the power and genius of private
enterprise.
In addition to its powerful intellectual and moral foundation, Material Engagement offers a
turn-key sustainability engagement solution, with relevant KPIs, scope and milestones
blueprints, clear timelines, escalation pathways, and communication methods. Material
Engagement is the missing link between the world we have, and the world humanity
deserves.

Make it Matter
(SASB).
Make it Heard
(Process).
Make it Real
(SDGs).
Thank you!

Material Engagement
with SDG Compass Integration
Supplement 1

SDG 3 Good Health and Wellbeing
SDG Compass* (Business Themes) SASB General Issue Category
•Occupational health and safety
•Access to medicines
•Access to quality essential health care services
•Air quality
•Water quality
Employee Health & Safety
Access & Affordability
Customer Welfare
Air Quality
Water & Wastewater Management
Developed by GRI, the UN Global Compact and the World
Business Council for Sustainable Development (WBCSD), the
SDG Compass incorporates feedback received through three
consultation periods from companies, government
agencies, academic institutions and civil society
organizations worldwide.
SASB Materiality Map
Nawar Alsaadi 45
*https://sdgcompass.org/sdgs/sdg-3/

SASB General Issue Category SASB Sector
• Employee Health & Safety Most Material (50%+ of sub-sectors impacted):
Extractive & Minerals Processing
Infrastructure
Transportation
Less Material (under 50% of sub-sectors impacted):
Food & Beverages
Healthcare
Renewable Resources & Alternative Energy
Resource Transformation
Services
Technology & Communication
SASB Materiality Map
Nawar Alsaadi 46

SASB Sector SASB sub-industry
Extractive & Minerals Processing
SASB Sector Map
1. Coal Operations
2. Construction Materials
3. Iron & Steel Producers
4. Metals & Mining
5. Oil & Gas – Exploration & Production
6. Oil & Gas – Midstream
7. Oil & Gas – Refining & Marketing
8. Oil & Gas – Services
Nawar Alsaadi 47

SASB Sub-Sector SASB Metrics
Coal Operations
Employee Health & Safety
Access & Affordability
Customer Welfare
Air Quality
Water & Wastewater Management
Back to General
Issue Category –
Slide 3
For total potential engagement indicators on SDG
the same steps will have to be repeated for each
SASB general issue, sector, and sub-industry (slides
43 to 45).
Nawar Alsaadi 48

Material Engagement (with suppliment included)

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Material Engagement (with suppliment included)