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UBS Asset Management

PRI reporting framework 2018

Export Public Responses

You are in Direct - Listed Equity Active Ownership » Engagement » Overview


LEA 01. Description of approach to engagement

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate whether your organisation has a formal engagement policy.

01.2. Attach or provide a URL to your engagement policy.

01.3. Indicate what your engagement policy covers:

          Our approach to collaborative engagement; our escalation strategies and the relationship with proxy voting.

01.4. Provide a brief overview of your organization’s approach to engagement

UBS AM views engagement as an integral part of our investment process and overall approach to stewardship. It can be difficult to judge the effectiveness of a board from outside the boardroom and we believe that effective monitoring is essential. We seek to develop both a long-term relationship and an understanding of mutual objectives and concerns with the companies in which we invest on behalf of our clients.

Our approach involves the following:

Our analysts and portfolio managers regularly monitor their investee companies and have frequent meetings with company executives and non-executive board members, both before and after any investment. Such meetings give us the opportunity to judge the success of the 'outputs' of governance - such as the strategy, acquisitions, capital allocation and operational performance.

Engagement with company management on any environment, social and governance issues that we identify may also be undertaken by our Corporate Governance area. On an on-going basis we monitor corporate developments through market news sources and company announcements. To identify issues of concern and to help with the monitoring of investee companies we use both internal information shared upon our proprietary databases, together with external specialist sell-side broker research and ESG rating tools.

01.6. Additional information [optional]

Through our engagement we encourage companies to ensure that at all times:

- The whole board and management is fully involved in endorsing strategy and in all major strategic decisions (e.g., mergers and acquisitions),

- The board and management satisfy themselves that the company's leadership is effective,

- Appropriate management succession plans are in place,

- The board receives all the information necessary to hold management to account,

- The interests of executives and shareholders are aligned,

- The financial audit is independent and accurate,

- The board provides accurate oversight of environmental and social risks and opportunities,

- The brand and reputation of the company is protected and enhanced.

There may be occasions when, despite discussions with companies, our concerns have not been sufficiently addressed. If a company fails to meet our expectations and we are not satisfied through our regular engagement process with the explanations provided, we will seek to escalate our concerns with the board. In the first instance, this is likely to be through further discussions with the chairman or other senior non-executives.

Such engagements are selective and focused around where we have identified particular issues. We are particularly keen to engage early with companies in order to minimise the loss of shareholder value. Factors for intervention with a company include where our assessment is that shareholder's interests are at risk as a result of a governance failing.

In making decisions as to whether to escalate our engagement we will consider the following:

− The circumstances which have led to our concern,

− The materiality of the potential negative impact,

− Best practice standards, including national guidelines,

− Any explanation provided by the company,

− The significance of the issue for our clients,

− Any pattern of concerns over a period of time,

− The likelihood of success.

If a company consistently fails to meet our expectations, or if a company’s ESG disclosures are insufficient to allow for investors to gain an appropriate understanding of a company’s sustainability-related risks, we may decide to vote against management proposals at the shareholder meeting, including the election of board candidates.

We regard any such action, however, as representing a breakdown in our longer-term relationship with the company. We are only likely to pursue this course when the company's performance has been extremely poor or the board has consistently ignored what we believe to be the legitimate concerns of shareholders.

LEA 02. Reasoning for interaction on ESG issues

02.1. Indicate the method of engagement, giving reasons for the interaction.

Type of engagement

Reason for interaction

Individual/Internal staff engagements
Collaborative engagements
Service provider engagements

Please specify why your organisation does not engage via service providers.

We believe that engagement is an intrinsic part of the investment decision making process. We prefer to engage directly with our investee companies to express our views, learn about their practices and share any insights internally with our investment teams.

02.2. Additional information. [Optional]