IN FOCUS6-8 min read

Why we have launched an Engagement Blueprint for private markets

Our new Engagement Blueprint for private markets sets out our approach to active ownership at Schroders Capital.

01-24-2024
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Authors

Katie Frame
Active Ownership Manager ESG
Anne Dardelet
Sustainability and Impact Investment Lead

In private markets, active ownership and stakeholder engagement is fundamental to our regular business activity as a responsible manager of assets. Given the importance of engagement, Schroders Capital has established its own Engagement Blueprint, setting out our approach to engagement in private assets.

This draws on the thematic framework outlined in the Schroders Engagement Blueprint for listed assets, first published in 2022. This new Engagement Blueprint for private markets further tailors that framework to the processes of the investment teams in private assets and their key stakeholders.

We will continue to review our Engagement Blueprint framework to reflect market needs and investment processes across asset classes.

Why do private markets need a specific Engagement Blueprint?

While the guiding principles of why and how we engage are consistent across Schroders, the distinct nature of private markets places active ownership at the heart of our value creation and sustainable and impact strategies in private assets.

Private assets investment strategies have distinct characteristics including typically longer investment horizons, the provision of capital for tangible assets and a greater ability to operate and enhance our assets. These features can provide us with an opportunity to build operational and financial value from origination to exit along all the different steps of our investment process.

The Blueprint seeks to demonstrate:

  1. Our engagement priorities
  2. How differing engagement practices are governed and structured consistently
  3. How and why the engagement approach differs by asset class
  4. Our future ambitions.

The document reflects the same six engagement priority themes as for listed assets. These are: climate change, natural capital and biodiversity, human capital management, human rights, diversity and inclusion, and governance.

We seek to communicate the guiding principles for engagement across the platform and highlight how the implementation and execution of engagement is specific to the idiosyncrasies of each asset class.

Active ownership in practice in private assets

Where we have the power and rights to influence, which often differs by asset class and strategies, we may use one or a few of the following stages of the investment lifecycle as points of interaction and influence:

1. Origination

• Screening and selection

2. Pre-investment

• In-depth due diligence and analysis

• Contracting

3. Post-investment

• Ongoing monitoring and engagement dialogue

• Governance and holding our investments to account

This engagement could be both with the investee or the asset and with a broader range of stakeholders such as operators, tenants or local authorities in real assets. In addition to engagement throughout the investment lifecycle, often we conduct ongoing strategic engagement in collaboration with the wider industry.

Our approach here is to collaborate with other market stakeholders, such as investment managers, broker communities, industry bodies or standards setters, to influence wider market practice on sustainability and impact.

Why are we launching this Blueprint now?

We believe it is important to communicate to our clients, investments and other key stakeholders what we aim to achieve through engagement in private markets, and how we do this. This is an important step to bring further transparency into private assets.

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The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.

Authors

Katie Frame
Active Ownership Manager ESG
Anne Dardelet
Sustainability and Impact Investment Lead

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