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Jupiter Asset Management

PRI reporting framework 2020

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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

305
63

Collaborative engagements

16
9

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

09.5. Additional information. [Optional]


LEA 10. Engagement methods

10.1. Indicate which of the following your engagement involved.

10.2. Additional information. [Optional]

We operate in an environment that is continually changing and subject to vast information flows. As a result, we remain alive to the prospect that any company we invest in may present specific issues that require our assessment. There are also times when we are required to support companies or accommodate requests for engagement from management teams.

Consequently, engagement decisions are taken on a case-by-case basis, and with due consideration for:

§ client-sponsored initiatives or requests

§  collaborative activity 

§  the size of holding and overall weighting

§  whether the company is a new position.  

Below is a representative list of the types of themes that might trigger an engagement:

§  Routine monitoring or relationship meetings

§  Succession (management and board levels)

§  Leadership changes

§  Mergers and acquisitions activity

§  Corporate strategy and culture

§  Board effectiveness and composition

§  Performance and financial issues

§  Stakeholder agenda (environment, employee and customers)

§  Political risk

§  Regulation, conduct or cyber security

We aim to be reliable owners of trustworthy businesses that are led by managers with a long-term mindset. As stewards of our clients’ assets we believe it is fundamentally important that our approach is not one based on box-ticking but is rather founded on the application of intelligent considerations of what will best support the long-term success of a business.

To that end, we seek to build relationships with company leaders, both the management and non-executive directors, to understand their perspectives and to share constructive views. We seek to encourage long-term value creation and will support boards that have a clear and appropriate strategy. We will provide early feedback when we have concerns about the strategy, or the structures put in place to deliver that strategy.

We identify six key drivers of long-term business performance, which we seek to encourage in our dialogue with management teams and boards, and aim to reinforce through our voting decisions:

§  Long-term strategic planning

§  Protection of investor rights and interests

§  Climate-related risks and strategies

§  Remuneration

We aim to be reliable owners of trustworthy businesses that are led by managers with a long-term mindset. As stewards of our clients’ assets we believe it is fundamentally important that our approach is not one based on box-ticking but is rather founded on the application of intelligent considerations of what will best support the long-term success of a business.

To that end, we seek to build relationships with company leaders, both the management and non-executive directors, to understand their perspectives and to share constructive views. We seek to encourage long-term value creation and will support boards that have a clear and appropriate strategy. We will provide early feedback when we have concerns about the strategy, or the structures put in place to deliver that strategy.

We identify six key drivers of long-term business performance, which we seek to encourage in our dialogue with management teams and boards, and aim to reinforce through our voting decisions:

§  Long-term strategic planning

§  Protection of investor rights and interests

§  Appropriate management of risk exposures

§  Independent and effective boards

§  Tailored and appropriate remuneration structures

§  Transparency and culture

An escalation policy is in place and we have various channels available should a situation not be resolved through considered and continued dialogue with management. The ultimate decision is taken by the fund manager, but the escalation pathway can include: i) further dialogue with chairman/ independent directors, ii) voting against, iii) collective engagement, iv) filing / co-filing resolutions, v) convene and EGM and v) making public statements, vi) reducing position / divesting. The ultimate decision rests with the fund manager and some of these options such as filing a resolution is rare, but it is not uncommon to take concerns to an independent director.

An example of our escalation policy in action was Godfrey Phillips, an Indian company in which we are long term and engaged shareholders. We had previously engaged over several years on the need to improve standards of corporate governance, the group’s reputation in capital markets and the dividend policy. We wrote to the Board following the death of the group's managing director who was also head of the family who control the company. We offered our condolences and also sought to underline the importance of a clear and transparent succession process during the transition period and the Board's oversight role on behalf of all stakeholders, including minority shareholders. The Board appointed the former MD’s wife as his successor, we did not consider this to be an appropriate succession arrangement. There was also a lack of transparency regarding the succession arrangements for the trust which holds the family’s shareholding. We wrote to the CEO relaying our concerns regarding the succession process and seeking full disclosure regarding succession agreements between the company and its major shareholders. We subsequently sent a second letter to the Board reiterating our concerns, which was also copied to the CEO of the group’s US parent company. We also commissioned independent research from a proxy research provided which illustrated shortcomings in the group’s governance arrangements, which was subsequently sent to the Board and parent company. The engagement continued into the 2020 calendar year and we will assess outcomes once a resolution has been achieved.  

 


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
Conducted by
Objectives

A meeting with the recently appointed Senior Independent Director of a listed UK company, who also serves as Remuneration Committee Chairman. This meeting was convened at the company's request and formed part of the group’s ongoing response to shareholder opposition to its remuneration report at the AGM in May. We had voted against remuneration items and sought to understand the new Director’s approach to executive remuneration as well as other strategic and governance matters. 

 

 

 

Scope and Process

As well as an update on the Committee's thinking with regards to the future shape of executive remuneration, including a planned new remuneration policy that would provide better alignment with shareholders and move to a more orthodox variable pay structure, our dialogue covered the Director's early impressions of the company, the integration process of a recent transformational acquisition, employee engagement and a new employment contract recently rolled out. We were satisfied with the remuneration changes proposed and gained insight into wider human capital and integration matters.

Outcomes
ESG Topic
Climate Change
Conducted by
Objectives

We participated in a collective engagement led by fellow members of the Institutional Investors Group on Climate Change (IIGCC), the goal of which was to secure a commitment from a multinational mining company to align its lobbying activity with the goals of the Paris Agreement. Both IIGCC and the UN PRI have sought to highlight the need for companies to be transparent on lobbying activities and to take action in situations where policy engagement is not aligned with company policy, or with the goals of the Paris Agreement. We have engaged with several mining and oil and gas companies on this issue in 2019.

Scope and Process

In this case, we were initially approached by the proponents who sought our support to co-file a shareholder resolution. We attended a group engagement with management prior to the filing deadline in an attempt to resolve the issue without the need for a resolution being filed. Following the engagement, the group issued a public statement committing to enhance its governance of its trade association memberships in line with IIGCC expectations prior to the 2020 AGM. As investors, we are aligned with IIGCC expectations that companies lobby positively in line with the Paris Agreement and establish robust governance processes to ensure that all public policy engagement by the company is aligned with the company’s climate change commitments and supports appropriate policy measures to mitigate climate risks.

Outcomes
ESG Topic
Human rights
Conducted by
Objectives

We were signatories to a joint letter calling on a FTSE 350 company to seek accreditation from the Living Wage Foundation, which ensures companies pay employees and contractors an hourly rate higher than the national minimum.

Scope and Process

The company has yet to update its stance on the matter. The engagement remains ongoing.

Outcomes
ESG Topic
Company leadership issues
Conducted by
Objectives

We are long-term bondholders and engaged with a UK Building Society's Senior Independent Director. The initial trigger for this engagement was to assess the appointment process for the recently-appointed Board Chair and to consider Board oversight of his time commitments given two other external Chairmanships. More broadly, the meeting was an opportunity as bondholders for a general engagement on group governance and culture in line with new guidance in the UK Stewardship Code on investor responsibilities to monitor and engage across all asset classes.

Scope and Process

The group is known for its conservative culture and approach to risk tolerance and our engagement served to gain assurance as bondholders to ensure that this was still the case. It also provided insights into specific governance areas of buildings societies, such as the level of engagement of members and borrowers who occupy the role played by shareholders at listed companies. Additionally, the group had recently announced that the CEO would depart and so this our meeting was a chance to explore succession arrangements. The SID also serves as Remuneration Committee Chair and we discussed the Board’s approach to executive and employee remuneration, the degree of alignment this provides between management and bondholders and how staff are incentivized in a far lower quantum environment than pertains in the listed UK banking sector. Overall we were satisfied with the Board's oversight of the above matters and considered that the investment case for our bondholding remained in place, we have since remained invested in the group.

Outcomes
ESG Topic
Diversity
Conducted by
Objectives

The backdrop to this communication was the decline in female board representation in the past few years and it was considered appropriate to highlight expectations around these matters.

Scope and Process

We signed a joint investor communication to the Chairman that encouraged the Board to be vigilant of gender diversity issues when considering future succession planning. The company subsequently announced the appointment of an additional female independent director, bringing it closer to expected practice in this area.

Outcomes
ESG Topic
Health and Safety
Conducted by
Objectives

We sought to influence the management of a marine park operator to end the practice of wild animal capture for its installations.

 

Scope and Process

Over an extended period of dialogue, both written and face to face, we called on the company to end the practice and presented evidence for our position. Progress on the issue was limited and we subsequently abstained against Director elections and communicated our rationale for doing so. We met with company investor relations at our offices. The meeting touched on topics related to business operations, such as leverage, in addition to continued calls for the company to end its practice of wild capture for cetaceans. The company did not update its public policy on the matter but told us it does not intend to include the wild capture of orcas and belugas in its next five year plan and responded positively to our suggestions that the management of this material reputational, environmental, and H&S risk be assigned to the Board's Risk and Audit Committee for continual oversight. While the company has not committed to change its policy, this moratorium on wild capture was a welcome development. The engagement remains ongoing.

Outcomes
ESG Topic
Sustainability reporting
Conducted by
Objectives

We signed a joint shareholder letter sent to the Audit Committee Chairman and Auditors of a multinational oil company seeking enhanced disclosures demonstrating that the groups’ financial statements appropriately incorporate material climate-related risks. The company has announced measures to address climate risks following engagement with members of the Institutional Investors Group on Climate Change and the Climate Action 100+ investor initiative. The letter sought to ensure that the oil major’s strategic response flows through into the different elements of financial reporting and is appropriately reflected in the accounting and audit process. We saw merit in participating as the group’s engagement objectives are aligned with our own priorities. The letter requested a group meeting with the Audit Chair and SID to discuss these matters further.

Scope and Process

The company responded in writing that it would consider these points in the context of its energy transition strategy. Following the engagement, the annual report disclosed that the Board reduced long-term oil price assumption from $70/bbl to $60/bbl (down from $80/bbl in 2017) & gas from $3.5 to $3/ MMBtu - contributing to impairments recorded.  in 2019. They clearly linked this to climate/energy transition considerations. The auditor also substantively increased its focus and analysis of the energy transition as it impacts core accounting assumptions.

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

We engaged in a call with a cosmetic company's Head of IR to gain greater insight into the company’s supply chain, particularly for mica. Mica is a common input material used in cosmetics to bring a sparkling quality to the product. Its extraction can at times expose companies to child labour concerns in mines within India’s Jharkhand and Bihar states and in Sri Lanka and Madagascar.

Scope and Process

We explored the company’s CSR activities and responsible supply chain strategies in this area, including its membership in the Responsible Mica Initiative (RMI) and work the Kailash Satyarthi Children’s Foundation in India to address issues surrounding child labour in the mica mining industry. Their approach has included partnerships with this non-profit and others to support the setup of Bal Mitra Grams or ‘Child Friendly Villages’ where children are enrolled in school and taught to advocate for themselves and their peers.

Outcomes
ESG Topic
Anti-bribery and corruption
Conducted by
Objectives

We wrote to the local financial markets regulator to communicate our suspicions regarding an investee company's latest AGM. We called for the regulator to open an investigation based on voting patterns which we believe indicated that the published results may have been subject to interference.

Scope and Process

We subsequently wrote to the regulator again to reiterate our concerns. We then raised our concerns with a local Proxy Advisory Service and the Stock Exchange, in an effort to draw attention to these concerns. Subsequently, the stock exchange investigated the matter and required the company to withdraw several voting items and reclassify entities holding company voting stock as affiliated parties. The regulator subsequently investigated and required certain monies relating to these voting items to be repaid to the company.

Outcomes
ESG Topic
Shareholder rights
Conducted by
Objectives

New regulations required the payment of royalties from listed subsidiaries in India to their overseas parent companies to be put to a shareholder vote for the first time. We sought to engage with subsidiary management to understand why the payments were in the interests of minority shareholders and to seek further disclosure and value for money regarding the payments.

Scope and Process

We met with the Managing Director. Management were keen to emphasise the support the parent company gives the subsidiary but seemed to be receptive to our comments. We also discussed potential for future engagement with investors and operational performance. Ultimately no change in disclosures or the rate of payments was made and we subsequently voted against the payments.

Outcomes

11.2. Additional information. [Optional]


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