We regard stewardship as an integral part of our investment process. Our aim is to align our stewardship approach with clients' investment beliefs, policies and requirements. There are environmental issues that companies face, social issues and corporate governance issues. We are committed to taking an active approach through a clear and structured program which encompasses the integration of ESG factors into four strongly interlinked activities:
- Investment decision making
- Engagement with corporate management
- Exercise of shareholders rights
- Advocacy with policy makers and standard setters
Factors relating to a company's interaction with the Environmental
- Climate change and carbon emissions, Air and water pollution, Biodiversity, deforestation, energy efficiency, waste management, water scarcity
How a company may impact society
- Customer satisfaction, data protection and privacy, gender and diversity, employee engagement, community relations, human rights, labor standards
The way a company is governed
- Board composition, audit committee structure, bribery and corruption, executive compensation, lobbying, political contributions, whistle-blower schemes
We believe that managing both active and passive strategies brings a number of synergies to our stewardship approach. Active strategies can benefit from the increased exposure to companies generated by passive strategies. This in turn can lead to stronger corporate access and a greater ability to influence management. Meanwhile, the in-depth knowledge of expert financial analysts with sector expertise, and their relationships with corporate management, can benefit passive strategies.
Corporate engagement: encouraging dialogue
Corporate engagement implies a two-way dialogue between investors and companies. Its objective is to enhance information and improve business performance, both in terms of ESG issues and strategy, risk management and capital allocation. Investors can share their expectations of corporate management and encourage practices which could enhance long-term value. Companies, meanwhile, can explain the relationship between sustainability, their business model and financial performance.
In our view, it is this two-way dialogue which defines engagement. Simply asking companies questions without providing feedback and encouraging improvements would not be classified as an engagement.
Factors determining which companies in our invested universe would be prioritized for in-depth research and dialogue
- High financial exposure
- Presence of high ESG risks and opportunities
- History of votes against management
- Performance on topics selected for thematic programs
- Presence of strong controversies
Proxy Voting: The value of the vote
Voting at shareholder meetings is a vital component of our overall approach to the effective stewardship of our clients' assets. Voting isn't an end in itself, but rather a crucial element of our oversight role. It allows us to voice our opinion to a company on a broad range of topics and is a way of encouraging boards to listen to and address investor concerns.
It is important that proxy voting is linked to our research and investment process. If holdings are included in more than one portfolio then we aim, as far as possible, to vote consistently to send one strong, unified message to our investee companies.
We also use voting to complement and support our engagement activities. In situations when our engagement dialogue is not bringing the results we'd expected, we'll escalate and use voting as an additional means of expressing our opinion and seeking to influence boards and management. In circumstances such as these, it is essential to communicate effectively with management pre- and post-vote to explain the reasons for our dissent and to open the doors for further dialogue.
Stewardship codes we adhere to
We're signatories to several stewardship codes of best practice.
- The International Corporate Governance Network (ICGN) Global Stewardship Principles
- The UK and Japanese Stewardship codes
We also support the Hong Kong SFC Principles of Responsible Ownership, the investor-led ISG Stewardship Framework in the USA and meet the requirements of the Australian FSC Standard 23 on Principles of Internal Governance and Asset Stewardship.