Stewardship is part of our fundamental investment process and Lombard Odier has set out the basis for our engagement with companies in our Engagement Policy. This policy relates to our asset management business. Our private clients business integrates best practices adapted to its business model. During 2020, we intend to formalise our engagement policy for all internally managed assets, including those of our private client unit.
Stewardship at Lombard Odier is purposeful dialogue with companies to enhance and ensure the sustainable, long-term outcomes of the assets entrusted to us by our clients. Our stewardship approach is designed to focus on addressing both systemic-level sustainability-related challenges, as well as those that are most financially material to the sector and industry a company is in. In doing so, we believe stewardship helps to:
- Preserve and enhance the value of client assets;
- Address systemic-level issues by helping to accelerate the transition to a sustainable economy;
- Create positive environmental and social impact
Based upon the intelligence and analysis gained from our SIRSS team and ESG Solutions team, we address issues that may have a financially material impact through engagement. We will enter into a dialogue with the company to test and challenge its approach to the sustainability factors we think are most material to its prospects and will seek to influence its sustainability positioning in areas we think there are weaknesses or room for development.
Our dialogue with companies can be undertaken in a variety of ways including correspondence through email and more formal letters, one-to-one calls with the Chairman, the Senior Non-Executive Director, the Chair of the Remuneration, Sustainability, Nomination Committee, Sustainability Officers, Investor Relations, CFO, CEO, periodic investor calls/meetings, during pre-offering capital markets roadshows as well as through collective/coalition investor initiatives. Our range of tools also includes press campaigns, attending AGMs, attending and speaking at AGMs, filing shareholder proposals and divesting.
We have designed our engagement to:
- Inform our analysis and enhance our risk / return calibration;
- Encourage companies towards more sustainable business models and practices (particularly in relation to corporate governance);
- Provide disclosures of the material, decision-useful types of information that we believe to be highly investment relevant.
During 2019, Lombard Odier became a supporter of the Taskforce for Climate-related Financial Disclosure (TCFD). The TCFD recommendations will improve our ability to analyse material risks companies face and how well they are positioned for the transition to a decarbonised economy.
We are active participants in collaborations designed to address systemic, sector and company level issues. Lombard Odier supports UNPRI collaborative initiatives and is actively involved with local, national and international regulatory and political authorities in order to promote a sustainable finance framework.
During 2019 we also became a signatory of the Global Investor Statement on Climate Change 2019 and became members of the Energy Transitions Commission.
Since 2015, we have also been supporting an investor group run by the United Nations that works to encourage stock exchanges to adopt guidelines requiring listed companies to report non-financial data in a transparent and standardised way.
We recognise that exercising voting rights is an important part of investment management and a key component of the stewardship activities we undertake on our clients’ behalf. We seek to ensure that our voting is aligned with our clients’ long-term interests. We aim to exercise our voting rights across 100% of our holdings. We use recognised global frameworks to guide our voting based on international best-practice (ICGN and OECD principles).
We also use Institutional Shareholders Services (Europe) S.A. ("ISS") to provide operational, record-keeping, research and reporting services. ISS prepares written analysis and recommendation of each proxy vote, based on our custom voting guidelines.
Our voting falls into five broad categories (it being understood that in practice certain topics may not fall into any of those categories and will be dependent on the view of either the stewardship or portfolio management teams).
- Routine matters: Unless we determine otherwise in any particular case, the routine matters below are voted in accordance with our guiding principles, as determined by best market practices (audit, income distribution, amendment to Articles of Association, capital related resolutions, etc.)
- Predefined matters: Certain pre-identified matters will be voted on in accordance with predefined guidelines that we have notified to the Proxy Voting Service.
- Voting against a Company’s Board: Certain Board-related topics, listed below, will be referred to the relevant portfolio management and stewardship team when the proposals are not aligned with our guiding principles (fixing the number of Directors and/or Auditors, eliminating Cumulative Voting, approving discharge of Management and Supervisory Board, electing Directors)
- Material events: Material events, including those below, will be systematically referred to the relevant portfolio management team for a voting decision: (merger agreement, reorganization/restructuring plan, joint venture agreement, plan of liquidation, spin-off agreement)
- Sustainability topics: Sustainability related topics, including those below, will be systematically referred to our Stewardship team for a voting decision: robust oversight structures around ESG issues, climate-related risks and opportunities (including: taking action to address climate change and to establish environmental/social issue board committee, genetically modified organisms (GMO), weapons related, and M&A activity when it involves sustainability issues)
In addition to the above five broad categories, certain matters will be referred to our Stewardship team when the Proxy Voting Service recommend to vote differently to our guiding principles. When we have an Active Engagement with a company, the vote will require input from the Head of Stewardship.
In line with our strong commitment to stewardship and transparency, from Q2 2020 we will disclose retrospectively our voting records on our website.
This information is reflective of our asset management activities.