Engagement: The "Unfinished Symphony" as beautiful as Schubert’s

Sophie Deleuze
Lead ESG Analyst, Stewardship

Schubert began his Eighth symphony in 1822. His Unfinished Symphony is also known as the first Romantic symphony, heralding a new musical type. Used in present-day movies, it is still fresh 200 years later. Engagement is the ongoing manifestation of sustainable investing. May it continue as long.


‘Unfinished’, or only the beginning?

Sometimes, ‘unfinished’ can mean time spent, where we stand, time left, time remaining to accomplishment. But somehow it also rings the bell of “frustration“. While engagement is definitely a matter of time, it is fortunately not always frustrating.

On the contrary. Behind successful engagement lies common purpose. Successful engagement is ongoing, complex, and organized, progressing together from movement to movement as a group and the strength it generates. Engagement is not a frustration, rather a motivating and never-ending range.  


ESG: a moving symphony

Engagement is nothing without ESG analysis and proper assessment of ESG risks and opportunities which issuers should tackle or explore. Engagement builds on this assessment and feeds ESG analysis in return… the ‘virtuous cycle’.

ESG opinions are living, growing things. We should not consider them conclusions, as our views should never be final. Engagement enables opinions to live, take on additional nuances, and to grow over time. As with any opinion, the better informed an ESG view is, the better it is.

  • Events and trends are constantly emerging. Some have greater impact on companies and should change the way we look at these issuers -- when business fundamentals change, the metrics we use to analyse businesses adapt.

    Covid is a dramatic example. The campaign we launched in 2021 is quite representative on how engagement and the evolution of analysis are intertwined -- we investigated how relationships with stakeholders changed, and these are now integrated as the “new normal” course of business for Candriam’s investee companies.
  • Candriam analysis addresses double materiality. That is, for 25 years we have considered ESG investing both a question of values and value, the enhancement of both sustainability and financial return.

    This type of ongoing progress requires engagement to go beyond exchanges with single issuers. It is fundamental that we continuously acquire a more precise and accurate view of the impacts of issuer choices on stakeholders and related expectations. Especially in our thematic engagement campaigns, we contact multiple stakeholders who are material and of prime importance. Regulators, industry federations, unions, civil society, and consumers are among the stakeholders we contacted in the past two years for our campaigns, such as for utilities and the Just Energy Transition, our Pesticides work, and for the collaborative initiative we launched last year on Facial Recognition Technology and its impact on human rights.


Becoming a classic

Engagement is also adapting to investment strategies. For example, the way we approach engagement campaigns with private high yield debt issuers differs from an engagement focusing on quality of green or social issues. Engagement gains in maturity as investors adopt a greater variety of facets.

This growing maturity reflects the expansion of the engagement goals. Twenty years ago engagement was limited to demanding access to most basic ESG data. Engagement has grown to include pushing issuers towards a low-carbon economy aligned with 1.5-degree, scientifically-recognized trajectories.

As long-term investors our role is to support investee companies in their development. As long as we invest in the shares or the debt of an issuer, it means we believe in its management’s capacity to tackle challenges they face, at both the micro and macro level. However, as a conviction-based asset manager we accompany them in their journey. We will also describe our expectations to investee companies, and discuss the material challenges to ensure that the adopted strategy will answer our concerns while creating value. An example of this partnership is our engagement campaign with small- and mid-sized companies on human capital. It has been tailored to the accounting limitations of smaller companies, and provides our target companies with the opportunity to compare their practices with comparably-sizes companies. As we share the more detailed outcomes with dialogue companies (the very detailed portion of our engagement that we do not make public), these companies in turn receive useful input for their strategies.


The next movement will not be the final movement

Recent European regulation such as SFDR have put engagement at the centre of its approach. Regulators are increasingly demanding, notably in terms of reporting on outcomes of our engagements. While these requests are challenging, they strengthen processes in a number of ways. At a high level, these requirements challenge all investors to improve transparency and improve engagement. At the company level, these new requirements facilitate involvement and interaction of the different teams across the company, which is how we at Candriam believe engagement works best.

Perhaps engagement has mainly involved corporates in the opening movements of the symphony. For the past two years the engagement ‘bridge’ with sovereigns has gained in importance. The next phases will show how much remains, including the identification of the right approach and defining interlocutors for efficient and impactful engagement.

Together, let’s write our 9th symphony!