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Morphic Asset Management

PRI reporting framework 2019

You are in Direct - Listed Equity Active Ownership » Overview

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 an active ownership policy.

01.2. Attach or provide a URL to your active ownership policy.

URL

01.3. Indicate what your active engagement policy covers:

General approach to active ownership

Engagement

Voting

01.4. Do you outsource any of your active ownership activities to service providers?

01.6. Additional information [optional]

Our RI Policy covers our active ownership policy under Section 3. Engagement. This refers to voting and references a seperate detailed and documented Proxy Voting Policy.

Extracts from our RI policy follow below:

Portfolio Investments

Morphic seeks to actively engage with our portfolio companies to deepen our understanding of management views and strategies on both business and ESG-related issues. This engagement gives us the opportunity to voice any concerns we may have about any material ESG risks that we observe.

When possible, our analysts typically speak with representatives of the companies we are considering for investment to ask a range of questions about their operations, the challenges they may face, and the key conditions required for their success. These may encompass targeted questions relating to specific ESG factors, such as supply chain management, employee relations, environmental risk and mitigation as well as corporate governance. The dialogue with management continues in regular follow-up meetings and conversations after we invest in the company. Analysts are required to keep a record of the key findings from these meetings and monitor the progress of any initiatives discussed.

We will raise our concerns with management if we believe that the company is pursuing a course of action that risks jeopardising the sustainability of the business and is thus detrimental to shareholder value.

Given our relatively small size and the diversified nature of our portfolios, we are realistic about the extent to which we can effect change through active ownership, and we may choose to exit a position in cases of material ESG risks rather than persisting with attempts to engage with an unreceptive management team. Our guiding principle is to act in the best interest of the investors whose money we manage.

Investment Holding Periods

Whilst our investment time horizon is long term it is sometimes the case that the actual holding period is shorter than envisaged (if our expected valuation is reached quickly or our disciplined risk management process dictates the sale of a loss-making investment). In these instances, it may not be possible to effectively engage with companies where material ESG risks have been identified.

Limitations of Direct Engagement & Membership of Shareholder Action Groups

We recognise that our relatively small size may sometimes inhibit our access to management.

Another way our relatively small “voice” can be heard is through membership of groups which bring together shareholders and organise more effective collective engagement on particular issues. We are a founder signatory of Climate Action 100+ an organisation which coordinates engagement with the world’s largest corporate CO2 emitters. The purpose of this collective engagement is to improve governance on climate change, curb emissions and strengthen climate-related financial disclosures.

As a signatory we are specifically contributing to the engagement with companies listed in Australia.

We may join other similar collective groups.

Voting

Annual General Meetings (AGM’s) are the formal corporate governance mechanism through which shareholders are asked to express their opinion on various important matters such as the composition of the Board of Directors, remuneration policies for senior management, changes to shareholder capital, and appointment of auditors. Extraordinary General Meetings (EGM’s) are used to address similar matters such as large corporate transaction on an ad-hoc basis.

For the companies that we invest in, the right to vote at AGM’s and EGM’s is ultimately owned by the investors in our Funds. We consider it part of our fiduciary duty to exercise these votes in the appropriate manner on their behalf. Our Proxy Voting Policy further details this policy and the voting process.

Investors' Feedback

We believe that our client base is a valuable resource for understanding the world. We welcome investors’ feedback on any securities we may hold in our portfolio.

In addition to the legal and regulatory reporting requirements of our Funds, we hold regular “town-hall” meetings to provide updates and to give clients the opportunity to communicate with us face-to-face.

General Engagement

We will regularly engage with other investors and relevant industry organisations (such as PRI, RIAA, ASA) to promote the industry wide integration of ESG issues and to further our knowledge and the development of our own investment process in this regard.


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