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Aeon Investment Management (Pty) Ltd

PRI reporting framework 2020

You are in Direct - Listed Equity Active Ownership » Outputs and outcomes

Outputs and outcomes

LEA 09. Number of companies engaged with, intensity of engagement and effort

Indicate the proportion of companies in your listed equities portfolio with which your organisation engaged during the reporting year.
We did not complete any engagements in the reporting year.

Number of companies engaged

(avoid double counting, see explanatory notes)

Proportion of companies engaged with, out of total listed equities portfolio

Individual / Internal staff engagements

27
78

Collaborative engagements

3
7
Service-provider engagements
15
15

09.2. Indicate the breakdown of engagements conducted within the reporting year by the number of interactions (including interactions made on your behalf).

No. of interactions with a company
% of engagements
One interaction
2 to 3 interactions
More than 3 interactions
Total
100%

09.3. Indicate the percentage of your collaborative engagements in which you were the leading organisation during the reporting year.

Type of engagement

% leading role
  Collaborative engagements

09.4. Indicate the percentage of your service-provider engagements in which you had some involvement during the reporting year.

Type of engagement

% of engagements with some involvement
Service-provider engagements

09.5. Additional information. [Optional]


LEA 10. Engagement methods

10.1. Indicate which of the following your engagement involved.

10.2. Additional information. [Optional]

Visits to company operational sites if not initiated by Aeon Investment Management, usually occur when management hosts their presentation results and/or roadshows at these sites.


LEA 11. Examples of ESG engagements

11.1. Provide examples of the engagements that your organisation or your service provider carried out during the reporting year.

ESG Topic
Executive Remuneration|Company leadership issues|General ESG
Conducted by
Objectives

The Aeon Investment Management team attended a governance and remuneration meeting with Woolworths’ remuneration Chairman Tom Boardman and the Company Secretary Chantel Reddiar. The agenda of the meeting was based on Woolworths’ remuneration policy with regards to the incentives used for each executive, stretch targets, malus & clawback provisions and other operational factors.

Scope and Process

Notable highlights from the meeting include the
following:

  • The Adjusted Profit before Tax target (“aPBT”) is set in line with the forecasted budget and not with economic metrices such as CPI and GDP.
  • Woolworths also makes use of the Gatekeeper Principle: This principle enables employees in non-executive and non-managerial roles to obtain a bonus irrespective of whether or not management met their Group performance targets.
  • Woolworths is currently busy with recruiting new talent, however, they noted that South Africa has a limited number of professionals with retail experience.
  • The Long-term incentive plan is composed of performance Share Plans (PSPs) and the Restricted Share Plan (RSPs). PSPs are linked to each executive’s key performance metric. The RSPS are provided on annual and sometimes once-off basis. In the previous two years, the Remuneration Committee made the decision of awarding RSPs to the executive team as a means of retaining talent despite Woolworths’ poor financial performance.
  • Tom and Chantel noted that Woolworths no longer makes use of share options; they have been phased out

 

Outcomes
ESG Topic
Executive Remuneration|Company leadership issues
Conducted by
Objectives

Aeon Investment Management attended an engagement with Naspers. The basis of the engagement was to gain a further understanding on Naspers Ltd's remuneration structure amongst other things.

Scope and Process

Asief Mohamed and Jay Voamcka, on behalf of Aeon Investment Management, attended a Naspers Ltd investor call. The following was noted:

Aeon Investment Management has conveyed concern regarding the voting share structure used to award excessive remuneration; Naspers noted this concern.

 

Outcomes
ESG Topic
Executive Remuneration|Sustainability reporting|Other governance
Conducted by
Objectives

Aeon Investment Management submitted an engagement letter to Santam's Investor Relations and board on their remuneration policy. The basis of the engagement was to address the concerns surrounding Santam's Remuneration Policy and Implementation Report. 

Scope and Process

A brief overview of the concerns we raised can be found below:

 

  • Santam’s long-term incentive (“LTI”) scheme shares are not awarded with a strike price in place but rather an allocation price (weighted average price of Santam Shares). The lack of a strike price will mean that even in the event that Santam’s share price declines during the vesting period of the LTI’s shareholders, albeit at a lower value than the value at the award date, executives will effectively receive shares at no cost.
  • Santam has a policy that requires for the group CEO, CFO and executive heads to hold a minimum number of Santam shares. We are aware that the CFO, Hennie Nel, holds a significant number of shares in Sanlam as well which might bring into question potential conflict of interest issues.

Santam hosted one-on-one investor meetings at the start of 2020 with the Chief Financial Officer to clarify concerns and address questions posed by investors. A better understanding of their policies was obtained and they were now more aware of investor disclosure requests.

Outcomes
ESG Topic
Climate Change|Pollution|Sustainability reporting
Conducted by
Objectives

Aeon Investment Management participated in a collaborative engagement with other investors which proposed for Sasol Ltd, an energy and chemical production company, to disclose their emissions and to link their emission targets to their remuneration structure. 

Scope and Process

The  resolutions proposed to the Sasol board include the following:

  • Ordinary resolution 1: Publish in its annual reports, as appropriate, for the year ending 2020 and on an annual basis thereafter, short-, medium- and long-term company-wide quantitative greenhouse gas targets (Scopes 1 and 2) aligned with the goals of Articles 2.1(a) and 4.1 of the Paris Agreement. These targets are to be linked to executive remuneration on both a short- and long-term basis.
  • Ordinary resolution 2: Publish in its annual reports, as appropriate, for the year ending 2020 and on an annual basis thereafter, its Scope 3 greenhouse gas emissions, including the emissions associated with the end-use of Sasol’s energy products.
  • Ordinary resolution 3: For the year ending 2022, and on an annual basis thereafter, the inclusion of Scope 3 emissions in Sasol's greenhouse gas emissions targets.

After numerous communication with Sasol's investor relations and executive directors, Sasol rejected the proposal citing that the requested disclosure and actions were already anticipated to be included in their annual Sustainability report. As investors, we then further challenged their response stating that the inclusions of the proposed resolutions to the AGM would serve as an accountability measure. Our response was rejected by Sasol.

Outcomes
ESG Topic
Pollution|General ESG|Plastics
Conducted by
Objectives

Aeon Investment Management was a signatory to a collaborative engagement initiated to bring to consumer retailer’s (e.g.Shoprite, Pick n Pay etc.) attention the need to reduce the sale and subsequent use of plastic bags

Scope and Process

An engagement letter was compiled and sent by the investor in charge of the engagement to the executive teams of South African food retail companies. Contributions from other investors were also made and incorporated into the letter.

Outcomes
ESG Topic
Company leadership issues|General ESG
Conducted by
Objectives

The objective of the engagement with Intu Properties Plc was to highlight concerns regarding their leadership, risk management controls and their operations.

Scope and Process

Aeon Investment Management highlighted the following concerns: 

  • Leadership suitability: We questioned the suitability of Intu electing an internal member of the company into an executive position.
  • Risk mitigation plans to address their debt levels.
  • The loss of the Group’s REIT status and the risk this poses.

Aeon Investment Management has communicated these concerns over multiple engagements with the company. Intu Properties Plc noted to our concerns.

Outcomes
ESG Topic
General ESG|Labour practices and supply chain management
Conducted by
Objectives

Asief Mohamed, on behalf of Aeon Investment Management, had a broker meeting with one of our service providers on the current state of electricity production in South and the socioeconomic effect it currently has and will have in the future.

Scope and Process

In the meeting it was noted that Increased taxpayer and social losses are being caused by poor governance and operational practices at Eskom (electricity supplier); thus, further negatively impacting South Africa’s socio-economic structure. IPPs have thus far not become tax effective. aeon investment provided input to the research and the service provider was able to meet with  to discuss the analysis of the electricity crisis in South Africa and possible solutions.

Outcomes
ESG Topic
Executive Remuneration|General ESG
Conducted by
Objectives

Aeon Investment Management submitted an engagement letter, at the request of Sasol Ltd's and post their annual general meeting to raise concerns over their remuneration policy.

Scope and Process

Aeon Investment Management submitted an engagement letter in response to Sasol’s invitation for shareholders to submit their reasoning for voting against ordinary resolution eight – non-binding advisory vote on the Company’s Implementation Report on the Remuneration Policy. We voted against the Sasol’s Implementation Report and Remuneration Policy for the following reasons:

  • STI target growth rates are too low 
  • Inappropriate calculation of STI target figures
  • Unequal remuneration between the two Co-CEOs

In addition, we also voted against the following resolutions:

  • To elect SA Nkosi who has appointed by the Board.
  • The election of C Beggs as a member of the audit committee.

 

Outcomes
ESG Topic
Executive Remuneration|General ESG
Conducted by
Objectives

Aeon Investment Management submitted an engagement letter at the request of Wilson Bayly Holmes-Ovcon (WBHO) and post their annual general meeting. The engagement highlighted our concerns with WBHO's remuneration policy and subsequently their Implementation Report.

 

 

Scope and Process

Aeon Investment Management raised our concerns with regards to the following:

  • Re-appointment of auditors (long tenure)
  • Appointment of Ms SN Maziya as an audit committee member of the board
  • Endorsement of the remuneration policy
  • Endorsement of the remuneration policy and implementation report.
  • Authority to provide financial assistance in terms of section 44 and 45 of the Act

 

 

Outcomes
ESG Topic
Executive Remuneration|General ESG
Conducted by
Objectives

Aeon Investment Management submitted a response to the request from MultiChoice’s investor relations for shareholders to submit their reasoning for voting against non-binding advisory resolution one and two at the 2019 AGM. 

Scope and Process

We listed the following concerns in our communication with Aeon Investment Management:

  • Limited disclosure of actual performance target figures
  • An inappropriate discretion provided in the Termination policy that allows employees who exit the firm to be granted bonuses.
  • Aeon Investment Management recommended that non-executive directors’ fee structure be split between a base and an attendance fee.
  • Limited to no disclosure on the policy and criteria used in assessing non-executive directors’ independence.

MultiChoice hosted a Remuneration Roadshow in February 2020 to present the changes (some at the request of investors) that they had made to their Remuneration Policy and Implementation Report.

Outcomes

11.2. Additional information. [Optional]

Given South Africa's landscape, political and socioeconomic history and the very significant inequality gap, there is still a very significant focus and attention required on governance issues in South Africa and accountability and transparency within the corporate sector. There is a lot of attention around company environmental awareness, disclosure and reporting; and rightly so. However, awareness of the social impacts (the "S" in ESG) that companies have on their employees, their immediate surroundings and the society at large is still required.


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