The key elements of Capital's responsible investment policy are:
Research and resources - Capital has over 200 in-house equity and fixed income analysts who are responsible for evaluating all relevant factors, including ESG issues, as part of their company research into generating long-term value. Within Capital these individuals have the deepest knowledge, regular interaction with and understanding of companies and we believe they are best placed to generate investment convictions on behalf of our clients. Our intensive research and long-term holding period naturally lead to our analysts to develop productive relationships with companies, providing us with access and credibility.
Our global network of analysts and portfolio managers are the frontline resources in considering ESG issues as part of their overall company evaluation. We have a dedicated global ESG team who works with our investment professionals, supports the integration of ESG factors into our investment process, and drives the implementation of ESG initiatives across Capital. ESG team members have expertise in research, sustainable investing and issuer engagement.
In addition, we have a Governance and Proxy team who supports Capital’s stewardship and voting activities for our funds and segregated accounts. The team works with our portfolio managers and investment analysts to facilitate the voting decision-making process as well as enabling reporting of proxy voting decisions to clients. With global presence we are able to apply our governance principles consistently across all markets.
Screening/ Exclusions - Active stewardship is a key pillar of our responsible investment approach. We believe engagement creates value for investors and companies and that this is a far more impactful approach than excluding controversial companies — in equities and fixed income. In line with this approach, we do not apply screens or exclude stocks, unless it is part of the fund objectives or we are required to do so by our client’s guidelines or law.
A number of our clients with segregated accounts have ethical or other reasons why they may not want to invest in securities of companies with certain business interests. The criteria for the exclusion of securities or sectors are chosen in discussion with our clients. Our systems offer the flexibility for segregated accounts to avoid excluded securities or sectors.
Engagement with portfolio companies - Making thousands of company visits annually, and regularly meeting with the management of companies enables us to engage and generate dialogue on any issues that could affect the company’s long term prospects.
Our guiding principle as an organisation is always to seek to act in the best long–term interests of — and seek value for — our clients. In line with this overarching principle we decide, on a case-by-case basis, whether our clients’ interests are best served by engaging with companies or by the sale of the shares of underperforming companies. Where appropriate, we will consider the views of other investors in deciding when and how to engage with companies.
Proxy Voting and Corporate Actions - All proxy voting decisions are made in-house by our proxy committees based on recommendations from our investment analysts. With their in-depth knowledge of companies, investment analysts factor in the circumstances which may apply to each vote rather than using a box-ticking approach or relying on external service providers. Voting decisions are overseen by regional proxy voting committees comprising portfolio managers, investment specialists, research analysts and legal counsel.
Our Governance and Proxy team provides in depth experience and enables a consistent set of policies and procedures to be applied globally. This approach facilitates consistency but allows us to be responsive to regional differences.
Our investment analysts also provide recommendations for voluntary corporate actions at the companies they cover. Decisions on corporate action events will be made by the portfolio managers and investment analysts responsible for shares held.
Industry Initiatives - Our companies participate in the following industry initiatives:
- Sustainability Accounting Standards Board’s (SASB): Capital is an Alliance tier member of the SASB. Capital's Vice Chairman, Robert W. Lovelace is a member of the SASB Investor Advisory Group (IAG) that comprises leading asset owners and asset managers who recognize the need for consistent, comparable and reliable disclosure of material and decision-useful ESG information.
Asian Corporate Governance Association (ACGA): Steven Watson, Portfolio Manager at Capital, is Vice-Chairman of the ACGA Council.
International Corporate Governance Network (ICGN): Capital’s Corporate Governance Specialist Tom Elliott is on the ICGN’s Shareholder Rights Committee.
Council of Institutional Investors (CII): Capital’s Corporate Governance Specialist Tom Elliott sits on the CII Corporate Governance Advisory Council.
The Investor Forum (UK) (founding member): In her function as Senior Adviser to Capital, Ida Levine is on the Investor Forum Board of Directors.
Eumedion: Capital’s ESG Manager Rob Beale sits on Eumedion’s investment committee.
Assogestioni: Matteo Astolfi, managing director for financial intermediaries in Italy, is a named member of the association.
We are active participants in the above organizations and contribute by speaking at and attending events, working on collaborative engagement initiatives and participating in working groups such as the ICGN’s Cross Border Voting Working Group or the IASB and Financial Services Agency to improve accounting transparency. Finally, Capital's Chairman, Timothy D. Armour, was involved in the release of the Commonsense Principles of Corporate Governance available at http://www.governanceprinciples.org.
Capital has always invested for the long-term on behalf of our clients and as a matter of course has incorporated the impact of environmental, social and governance issues into the decision-making process where relevant. We continue to look for opportunities to encourage transparency from companies in which we invest on behalf of our clients. We remain committed to encouraging good governance practices through our own activities and those of other organisations promoting these concepts.