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Lombard Odier

PRI reporting framework 2020

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Engagement

LEA 02. Reasoning for interaction on ESG issues

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

02.4. Additional information. [Optional]

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

Engagement

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.

Collaborations

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.

Proxy voting

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.


LEA 03. Process for identifying and prioritising engagement activities

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

03.1. Indicate whether your organisation has a formal process for identifying and prioritising engagements.

Indicate the criteria used to identify and prioritise engagements for each type of engagement.
Type of engagement
Criteria used to identify/prioritise engagements
Individual / Internal staff engagements

Individual / Internal staff engagements

Collaborative engagements

Collaborative engagements

03.3. Additional information. [Optional]

As mentioned in LEA 01.6, 2019 saw the significant expansion of our sustainability-related expertise as well as the codification and publication of an engagement policy. We also started to adapt our engagement approach to ensure our direct and collaborative engagements focused on systemic level issues (notably climate change) and also on the issues we believe are most financially material to a company. During 2019 we initiated some engagements across our asset classes relating to 1. ESG business practices and 2. the alignment of companies business models and activities with the transition to a sustainable economy. We selected our engagements based on materiality and consultations with our clients. We also assessed whether our impact would be maximised through direct or collaborative approach. In some cases, our engagements have served to increase our conviction in companies we engaged with. We view engagement as an ongoing process of dialogue, discovery and development with our investee companies and, as such, many of our current engagements are ongoing. During 2020, the continued development of our active ownership framework and activity remains a key objective and we also plan to improve the transparency we provide around our progress against engagement objectives during 2020.

During 2019, Lombard Odier became supporters 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 also became a signatory of the Global Investor Statement on Climate Change 2019 and became members of the Energy Transitions Commission. 

This information is reflective of our asset management activities.


LEA 04. Objectives for engagement activities

New selection options have been added to this indicator. Please review your prefilled responses carefully.
Indicate whether you define specific objectives for your organisation’s engagement activities.
Individual / Internal staff engagements
Collaborative engagements

04.2. Additional information. [Optional]

As mentioned previously, 2019 saw the significant expansion of our active ownership capabilities, notably with the introduction of our SIRSS team. In 2019 we hired Dr Christopher Kaminker to develop a team with a specific focus on helping to identify the key macro risks and opportunities related to sustainability, as well as developing new investment strategies, and incorporating and managing the firm’s processes around stewardship.

Since his arrival, Christopher has bolstered his team, which now comprises eight sustainability experts with an average of 12 years’ experience across a broad variety of disciplines including investment banking, macroeconomics, lifecycle analysis, data science, stewardship and communications. The team’s expertise is also broad, reflecting the complex, multi-faceted nature of sustainability challenges, including structuring sustainable financing solutions, policy, economics, climate change, circular economy, carbon pricing, and environmental engineering. In addition, the team includes two leading experts on mobility, which is a cross-cutting theme in the transition to a sustainable economy.

In line with the significant expansion of our dedicated stewardship capabilities, we continue to develop and build on our active ownership framework. This will include setting specific objectives for our direct and collaborative engagement activities. We aim to develop specific engagement programmes and strategies, including the establishment of  (1) specific engagement objectives and milestones;  (2) the ability to monitor progress and report against them.

This information is reflective of our asset management activities.


LEA 05. Process for identifying and prioritising collaborative engagement

Indicate whether you monitor and/or review engagement outcomes.
Individual / Internal staff engagements
Collaborative engagements
Indicate whether you do any of the following to monitor and/or review the progress of engagement activities.
Individual / Internal staff engagements
          During 2020, the continued development of our active ownership framework and activity remains a key objective.
        
Collaborative engagements
          During 2020, the continued development of our active ownership framework and activity remains a key objective.
        

05.3. Additional information. [Optional]

As mentioned previously, 2019 saw the significant expansion of our active ownership capabilities, notably with the introduction of our SIRSS team, which is responsible for managing the firm’s processes around stewardship.

In line with this expansion, we continue to develop and build on our active ownership framework and activity. This will include setting specific objectives for our direct and collaborative engagement activities. We aim to develop specific engagement programmes and strategies, including the establishment of  (1) specific engagement objectives and milestones;  (2) the ability to monitor progress and report against them.

This information is reflective of our asset management activities.


LEA 06. Role in engagement process

06.1. Indicate whether your organisation has an escalation strategy when engagements are unsuccessful.

06.2. Indicate the escalation strategies used at your organisation following unsuccessful engagements.

06.3. Additional information. [Optional]

Escalating our engagement is done on a case-by-case basis, and any decision will depend on the severity of the issue, the engagement history (ie whether the company has been responding well to our concerns), previous voting, and immediate controversies affecting the stock. Any decision to use tactical voting, to file a shareholder proposal or divest will require input from the Portfolio Manager, stewardship team and Stewardship Committee.

As mentioned previously, 2019 saw the significant expansion of our active ownership capabilities. In line with this, we continue to develop and build on our active ownership framework and activity. Amongst other areas, we are currently writing our engagement and voting escalation strategy, which will be the public codification of our approach to escalating concerns in the past. We note that the recently created Stewardship Committee will be the final decision maker for escalation matters. 

This information is reflective of our asset management activities.


LEA 07. Share insights from engagements with internal/external managers

07.1. Indicate whether insights gained from your organisation`s engagements are shared with investment decision-makers.

Type of engagement

Insights shared

Individual / Internal staff engagements

Collaborative engagements

07.2. Indicate the practices used to ensure that information and insights gained through engagements are shared with investment decision-makers.

07.3. Indicate whether insights gained from your organisation’s engagements are shared with your clients/beneficiaries.

Type of engagement

Insights shared

Individual/Internal staff engagements

Collaborative engagements

07.4. Additional information. [Optional]

In 2019, we shared insights gained from engagements directly with companies on a case-by-case basis. In the case of some collaborative engagements aimed at addressing systemic-level issues, such as the 2019 Global Investor Statement on Climate Change, we believe it is important to promote these initiatives publically to increase the impact we are able to have. In this instance, and our support for the TCFD, we have been actively promoting these initiatives on our website, in our marketing materials, in internal education/training, in the media, and with clients and the broader industry (for example when speaking at events). 

This information is reflective of our asset management activities.


LEA 08. Tracking number of engagements

08.1. Indicate whether you track the number of your engagement activities.

Type of engagement
Tracking engagements
Individual/Internal staff engagements​

Collaborative engagements

08.2. Additional information. [Optional]

As mentioned previously, 2019 saw the significant expansion of our active ownership capabilities. In line with this expansion, we continue to develop and build on our active ownership framework and activity. This will include setting specific objectives for our direct and collaborative engagement activities, as well as our ability to track engagements, monitor progress and provide increased transparency around our activities. 

This information is reflective of our asset management activities.


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