There are two main parts to Jupiter's engagement framework for the period under review i) UK Stewardship Code Statement (under 2012 Code) and Jupiter's Stewardship Policy. Both frameworks cover active ownership and engagement and are reviewed on an annual basis. In terms of internal governance, the UK Stewardship Code Statement is approved by the main Board of Jupiter Fund Management plc and the Stewardship Policy is approved by the CIO. Both are reviewed on an annual basis. Internal governance around stewardship is discussed in these documents.
Clarity over internal oversight and accountability around stewardship is important for client transparency and strengthening internal culture. Jupiter's Board and Executive Committee receive regular stewardship updates from the CIO and Head of Governance.
Although each fund manager has accountability and leadership for stewardship activity on their funds, the CIO has overall responsibility for stewardship oversight in the fund management department. This includes development and articulation of policies, training, resources and monitoring overall ESG risks across our asset base. The CIO does not make nor direct voting and engagement decisions, these matters are left to the individual fund manager in partnership with Jupiter's Governance & Sustainability Team (GS Team). From 2019, stewardship is a formal component of the performance objectives of all our investment personnel which is used as part of the annual performance review.
Our objectives for conducting engagement activities are publicly disclosed and are centred on client outcomes. Jupiter is an active manager and we are high conviction investors. The internal standard is that the fund manager (i.e. the investment decision maker) is accountable and directly involved in these engagements with support from the GS Team. This format strengthens ESG integration, provides consistent messaging to companies, enhances our understanding and is aligned to investment decision making. We run concentrated portfolios and therefore this set-up is practical and efficient in terms of maximising internal resources and meeting client demands. In addition, over time, this approach builds the experience and skillset of the fund managers and their investment colleagues. The CIO Office works with the fund management department to provide external ESG training.
At Jupiter, stewardship is an umbrella term which incorporates our wider responsibilities as asset managers to understand and manage investment risks we take on behalf of our clients. We have a responsibility to seek to understand material environmental, social and governance ('ESG') risk factors that might affect the outcome of an investment. The challenge for us is to understand the materiality of these risks, in the same way that we do with other risk factors via traditional financial analysis, and to encourage companies to manage these risks appropriately.
Jupiter is an independent asset manager, i.e. not attached to a larger financial services group. Conflicts may arise when clients are also companies in which Jupiter invests. Jupiter identifies and where possible avoids conflicts of interest by adhering to its published Group Conflicts of Interest Policy, which is available at www.jupiteram.com. In circumstances where we identify a potential conflict of interest that cannot be avoided, we mitigate contentious issues by discussing them with the relevant fund managers and the CIO. In addition, there will be close engagement with the company, including where the issue may relate to a voting matter. In this instance, Jupiter will vote in the best interests of the funds / clients who hold shares in the company, using the principles of Treating Customers Fairly (TCF). Where applicable, Jupiter will obtain advance approval from the client prior to voting.
Stewardship activities, including organisational procedures for monitoring ESG practices and performance, may exhibit different characteristics when considering our various asset classes, investment geographies and strategies. We are governed by our principles and polices which are publicly disclosed. We do not adopt a 'one size fits all' approach but our method is centred on understanding the materiality of the ESG factors that may pose risks or opportunities to our investments. This is done by conducting research and engaging in dialogue with companies which informs our investment decisions. We also make use of third party ESG risk and proxy voting services to monitor companies. This information is helpful to form a balanced view and used as part of our ESG integration efforts. However, we do not uniformly make investment decisions based on this data alone.
We may engage with companies that are held and not held within our portfolios, for example, when they relate to a current holding or are under consideration as a potential future investment.
Holding boards to account is an important investor duty but we do not only engage in negative scenarios. Our engagement is also proactive and aimed at deepening relations with companies to refine investor understanding. Engagement around stewardship issues is often linked to longer term considerations. It may also involve collaborations with other investors or special interest groups. Therefore, the nature of this type of dialogue is not necessarily transactional where an outcome may be in evidence in the next quarter. This type of engagement can span multiple periods and associated outcomes should also be viewed within this extended timeframe.
The majority of our interaction is with management teams (CEO / CFO) around the financial calendar but we also engage with wider company staff including Investor Relations and ESG/CSR managers We have also embedded a process to engage with non-executive and independent board directors to specifically target broader ESG themes. The G&S team, fund managers, and investment analysts all carry out engagement.
When encountering cases where engagement has been unsuccessful we will in the first instance escalate the situation with a senior board member at the company (e.g. chairman). This approach will be confidential and direct. Escalation is treated on a case by case basis but we retain all options such as collaborative engagement, shareholder motions, amending weightings and complete divestment
We record engagement on an internal database which is used to track engagement outcomes and drive both internal and external reporting.