We operate in an environment that is continually changing and subject to vast information flows. As a result, we remain open 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 the following issues:
§ client-sponsored initiatives or requests
§ collaborative activity
§ the size of our position
§ whether the company is a new position
Below is a representative list of the types of themes that might trigger an engagement. Governance and sustainability issues are often interconnected and a single engagement may relate to multiple stewardship themes. For example, when engaging on remuneration we will routinely consider how stakeholder considerations such as health and safety, customer service and employee engagement are incorporated into remuneration outcomes. Correspondingly, our dialogue with companies on climate-related issues often examines how oversight of these matters is incorporated into formal governance structures.
As such, the below themes should be viewed as different facets of our stewardship dialogue with companies, rather than as standalone engagement topics:
§ Routine monitoring or relationship meetings
§ Succession (management and board levels)
§ Leadership changes
§ Stakeholder agenda (environment, employee and customers)
§ Climate-related risks and strategies
§ Mergers and acquisitions
§ Corporate strategy and culture
§ Board effectiveness and composition
§ Performance and financial issues
§ Political risk
§ Regulation, conduct or cyber security
We would like to add three elements that help define our engagement identification and priorities i) Formalised objectives for all investment personnel, ii) Internal governance structure - stewardship committee and iii) trading activity (new holdings). This comment applies to both internal and collective priorities. We would also like to emphasise most of our engagement is not reactive to problem scenarios but building relationships and being proactive on long-term and leadership issues.
INTERNAL OBJECTIVES: Stewardship is now a factor in the objectives of our investment personnel and is assessed within the 'performance' section. We feel these formal objectives also help drive the prioritisation around engagement.
All of our investment personnel (fund managers, assistants, analysts, product specialists) are required to outline their own ESG priorities which will be monitored by the GS Team and these objectives will be monitored by the CIO and Deputy CIO as part of the routine and formal fund manager review process.
As an active investment firm with concentrated portfolios, we believe it is incumbent on our fund managers to demonstrate leadership around stewardship. Therefore, managers are required to identify their key priorities for monitoring and engagement based on their experience and views (e.g. change of CEO / Chairman, board oversight of M&A, corporate culture). We feel stewardship is also reflective of investor skill and their key priorities should be identified to both our clients and internal partners.
Over the long-term, we have observed that this approach has also been beneficial in building a stewardship culture at Jupiter as colleagues share experiences and learnings. Being clear on priorities also allows the internal specialist to better serve our managers and bring understanding when questioning issues and providing alternative views and providing CIO oversight.
STEWARDSHIP COMMITTEE: Our internal governance structure also assists with engagement prioritisation. We have a stewardship committee that is chaired by the CIO and has investment representatives from our various asset classes. The Committee also contains our Vice Chairman to provide board-level representation as well as our ESG specialists. The Committee includes a revolving seat for alternate managers, we view this as particularly beneficial to incorporate different investor views and experiences. The Committee agenda does not dictate or explicitly direct managers to undertake company-specific voting or engagement actions. Nevertheless, it is an effective platform to consider the principles and learning from engagement experience and consider whether we need to undertake actions across other portfolios. The Committee is also a forum that allows us to discuss our firm-wide actions in relation to developments within the wider stewardship / industry landscape (e.g. position on climate change, decisions to join investor campaigns).
TRADING ACTIVITY (NEW HOLDINGS BUILDING RELATIONSHIPS): We may prioritise engagement activity to build relationships with the independent directors as well as management teams.