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DSM Capital Partners LLC

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

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

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

DSM investment strategies are idea driven and built from the bottom-up. We seek to identify and invest in high-quality growth companies that are selling at attractive valuations. Finding this combination of attributes is what enables us to invest on behalf of our clients in concentrated, high conviction portfolios with an intermediate to long-term investment horizon.

Our investment team combines intensive fundamental research with a rigorous valuation methodology that we believe helps to reduce risk and enhance long-term returns. We search for growing businesses with solid business fundamentals, intelligent management and a history of attractive returns. Typically, these businesses will have projected revenue and earnings growth of at least 10% annually and will have demonstrated higher returns on equity and assets than the average business. In addition, and at least as importantly, we look for financial returns that are stable or rising, driven by improving business fundamentals

We conduct a thorough security analysis of each company we consider for investment.  Our research and stock selection process is designed to be flexible and opportunistic to meet the challenges of an investment environment characterized by rapid change and frequent surprises.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

 

ESG is an important part of DSM’s investment process and is fully integrated into its stock selection, monitoring, and selling processes.  DSM assigns a proprietary ESG score to every company that it researches.  Scores range from 0 to 10 (with 10 being the best), and DSM utilizes MSCI’s ESG Ratings as a starting point to make adjustments to ESG scores across five key categories: environment, customers, human rights / community, labor rights / supply chain, and governance.  These categories are then broken down further into over 20 subcategories.  Each Analyst/Portfolio Manager at DSM completes in-depth research on ESG issues impacting a company and assigns scores using a consistent in-house methodology.  DSM stores all ESG communications and developments in centralized folders so that companies’ ESG histories and DSM’s ESG activities are available to all Analyst/Portfolio Managers.   In addition to weekly updates from MSCI, DSM’s investment team utilizes in-depth ongoing monitoring to identify ESG issues not fully captured by MSCI.

ESG scores are included in DSM’s internal summaries and have an impact on DSM’s investment decisions. ESG considerations and the implementation of ESG scores and in-house research have both kept DSM from investing in certain companies and have led to DSM selling portfolio holdings.

At a client’s request, DSM can apply exclusionary restrictions that accommodate responsible investment considerations and restrictions specified by a client that may generally prohibit the purchase of certain securities, either individually or by region, sector or both.

It is DSM’s policy that all proxies be voted solely in the best interests of the beneficial owners of the securities. DSM’s proxy voting policy lists positions DSM would typically take on certain proxy proposals.  In addition, DSM has contracted with an independent third party, (currently, Institutional Shareholder Services, LLC) (the “Third-Party Administrator”), to provide issue analysis and vote recommendations with respect to proxy proposals. The Third-Party Administrator receives proxies for all of DSM’s holdings and typically votes all proxies received, unless the voting policy recommendation favors withholding on a particular proposal. While it is DSM’s policy to follow the vote recommendations of the Third-Party Administrator, DSM retains the authority to vote differently than the recommendation on any proxy proposal.

DSM’s investment team is responsible for engaging with companies directly by reaching out to investor relations, executive management or the board of directors, when appropriate, in order to better understand ESG matters and potentially influence or identify the need to influence relevant corporate practices.  Engagements may take the form of direct in-person meetings, calls, emails, or letters. The length of each engagement will vary based on the materiality of the issue, a company’s response, and how the information gathered is integrated into DSM’s investment process. DSM monitors its engagements on an ongoing basis to evaluate the actions, if any, taken by a company as well as what further action may need to be taken by DSM.

While DSM engages with companies on a regular basis, and in some cases has seen actions taken by companies which reflect its engagement suggestions (such as share buy-backs or dividend initiations), the companies DSM tend to own have strong management teams and governance practices, extensive intellectual property, few or no competitors, sound and sensible employee practices, very few or negligible ESG issues and reasonably long runways to growth.  Thus, DSM recognizes that the risks and return potential related to ESG issues are dynamic and may evolve over time and therefore it continues to monitor this activity and the need for active engagement.

01.6. Additional information [Optional].

          
        

SG 01 CC. Climate risk (Private)


SG 02. Publicly available RI policy or guidance documents

 

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

URL/Attachment

URL/Attachment

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

02.3. Additional information [Optional].


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

DSM has adopted a Code of Ethics describing its commitment to integrity and high ethical standards. The Code of Ethics is based upon the principle that DSM and its employees owe a fiduciary duty to clients to conduct their affairs, including personal securities transactions, in such a manner as to avoid any actual or potential conflict of interest.  The Code of Ethics contains provisions relating to the prohibition against trading on material, non-public information. It also describes permissible personal securities transactions, gifts and entertainment, outside business activities as well as protecting the confidentiality of client information. 

To align the interests of its employees with its clients, DSM encourages its employees to personally invest in the same model investment strategies and securities as its clients.  This may cause a conflict as DSM, its employees and their related accounts may invest in the same securities, at the same or different times, that it purchases and sells for clients.  Under the Code of Ethics, employees of DSM and their immediate family members must obtain pre-clearance from DSM's Chief Compliance Officer for certain securities transactions. 

All employees of DSM must acknowledge the terms of the Code of Ethics annually and as amended.  

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within investee entities.

04.2. Describe your process on managing incidents

DSM’s investment team is responsible for engaging with companies directly by reaching out to investor relations, executive management or the board of directors, when appropriate, in order to better understand ESG matters and potentially influence or identify the need to influence relevant corporate practices.  Engagements may take the form of direct in-person meetings, calls, emails, or letters. The length of each engagement will vary based on the materiality of the issue, a company’s response, and how the information gathered is integrated into DSM’s investment process. DSM monitors its engagements on an ongoing basis to evaluate the actions, if any, taken by a company as well as what further action may need to be taken by DSM.

While DSM engages with companies on a regular basis, and in some cases has seen actions taken by companies which reflect its engagement suggestions (such as share buy-backs or dividend initiations), the companies DSM tend to own have strong management teams and governance practices, extensive intellectual property, few or no competitors, sound and sensible employee practices, very few or negligible ESG issues and reasonably long runways to growth.  Thus, DSM recognizes that the risks and return potential related to ESG issues are dynamic and may evolve over time and therefore it continues to monitor this activity and the need for active engagement.


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