Pictet Asset Management's Active Ownership Policy is currently being reviewed and will be available on our website in Q2 2020.
We consider it our fiduciary duty to engage selected corporate issuers in order to positively influence a company’s ESG performance and to protect or enhance the value of our clients’ investments. We press management to adopt appropriate policies, practices and disclosure in line with established best practice but focus on those that lag behind or where accidents or events bring to light structural weaknesses in their governance and/or management of environmental and social issues.
Where appropriate, we engage companies on material ESG issues, to satisfy ourselves that they fully understand and address them effectively over the short, medium and long term.
We engage on behalf of our equity (active and passive) and corporate debt holdings, through a combination of in-house-led discussions, third-party engagement services and via collaborative institutional investor initiatives.
The foundation of our understanding of corporate issuers is the thousands of regular meetings that our investment teams attend each year with companies’ management. Material ESG issues are often on the agenda. These discussions contribute to our understanding of all dimensions of companies’ strategies, plans and operations, and inform our investment analysis and decision- making.
In all of our engagement, we set or support specific objectives, we track progress against these objectives and in some cases, if they are not met, we may reduce or sell our holdings.
Our approach to engagement has three tiers.
Tier 1: The first tier of our active ownership is a programme of targeted engagement with corporate issuers. These companies were identified jointly by investment teams and our ESG team. Each company was selected because we had significant ESG concerns and the strategic nature or size of our holding was significant enough to indicate that our engagement would likely be effective.
Tier 2: Taking part in collaborative engagement with other investors forms the second tier of our approach. The collaborative initiative we have most actively supported to date is Climate Action 100+. Climate Action 100+ is a five-year initiative, launched in December 2017, led by investors. The initiative is designed to implement the investor commitment first set out in the Global Investor Statement on Climate Change in the months leading up to the adoption of the historic Paris Agreement in 2015. It engages systemically with the largest global greenhouse gas emitters, and with other companies that have significant opportunities to drive the clean energy transition and achieve the goals of the Paris Agreement. By the end of 2019, 320 investors with more than USD 33 trillion in assets under management had signed up to this initiative.
In addition, in 3Q 2019 we joined two new investor collaborations:
- Investor Initiative for Sustainable Forests’ which is focused on mitigating deforestation in the Amazon across cattle and soy producers
- ‘Mining & Tailings Safety Initiative’ which was launched in the wake of Vale’s Brumadinho dam disaster in January 2019 causing c. 270 deaths
Tier 3: The third tier of our engagement is conducted by Sustainalytics. This engagement is designed to address issues that arise in relation to companies’ failings on governance issues and/or significant deviations from relevant international norms and standards such as the UN Global Compact, OECD Guidelines for Multinational Enterprises, as well as human rights and environmental conventions.
The overarching purpose of our voting is to protect and promote the rights and long-term interests of our clients as shareholders. We consider it our responsibility to engage with and challenge companies’ management to ensure that the issuers we invest in on our clients’ behalf are well-run, adhere to their strategy and deliver shareholder value. We aim to support a strong culture of corporate governance, effective management of environmental and social issues and comprehensive reporting according to credible standards.
Our proxy voting guidelines are based on generally accepted standards of best practice in corporate governance including board compensation, executive remuneration, risk management and shareholder rights.
To assist us in performing our proxy voting responsibilities, Pictet Asset Management uses the services of third party specialists to provide research and to facilitate the execution of voting decisions at all relevant company meetings worldwide.
Third party specialists are tasked with collecting meeting notices for all holdings and researching the implications of every resolution according to Voting Guidelines defined by Pictet Asset Management. All recommendations are communicated to relevant Investment teams and the Environmental Social Governance ‘ESG’ team.
Pictet Asset Management always reserves the right to deviate from third party voting recommendations on a case by case basis in order to act in the best interests of our clients. Such divergences may be initiated by Investment teams: or by the ESG team and must be supported by written rationale.
In instances when consensus cannot be reached between the Investments teams and ESG team, the decision is escalated to relevant CIOs and, if necessary, the Head of Investments.
The following principles are used to define the scope of accounts and securities eligible for proxy voting:
For actively managed funds, we aim to vote on 100 per cent of equity holdings.
For passive strategies, we aim to vote on companies representing 80% by weight of underlying benchmarks. This target may be revised upwards or downwards for specific strategies depending on factors such as portfolio size, geography or market capitalization.
For segregated accounts, including mandates and third-party (i.e. sub-advisory) mutual funds managed by Pictet Asset Management, clients who delegate the exercise of voting rights to us have the choice between Pictet Asset Management’s policy or their own voting policy.
The Indexation team retains the right to take part in the decision-making process on a case-by-case basis
 This activity does not include indirect investments through third-party funds that we invest in on behalf of our clients, where we expect those managers to exercise their votes according to their own policy and report accordingly to relevant Pictet Asset Management entities.