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Mirova

PRI reporting framework 2020

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You are in Direct - Listed Equity Active Ownership » (Proxy) voting and shareholder resolutions

(Proxy) voting and shareholder resolutions

LEA 12. Typical approach to (proxy) voting decisions

12.1. Indicate how you typically make your (proxy) voting decisions.

Approach

Based on

12.2. Provide an overview of how you ensure that your agreed-upon voting policy is adhered to, giving details of your approach when exceptions to the policy are made.

Mirova is a front-line player in the RI industry, that offers cutting-edge thematic and multi-thematic approaches to sustainability. ESG issues are therefore at the heart of its investment processes, but also key components of is voting and engagement policy.

Organization of voting rights

The organization of our voting activity is articulated around two distinct poles.

Voting principles are defined by Mirova’s Responsible Investment Research Team, which is composed of analysts who are experts in environmental, social and governance issues. Our voting policy is updated annually. It is validated by Mirova’s Executive Committee, and by the Compliance and Internal Control Department. It is presented to the Board of Directors each year.

Resolutions are analyzed by Mirova’s Responsible Investment Research team. Voting decisions are the responsibility of the voting committee, which is composed of Mirova’s Global Head of Research and CIO of Equities and Fixed Income and its two Co-Heads of Responsible Investment Research. Portfolio managers and extra-financial analysts may be invited to participate in the committee’s deliberations depending on the subject under discussion.

Mirova’s voting rights are exercised by Ostrum AM’s Middle Office Department, according to instructions provided by Mirova as part of a service provider agreement. A report on the exercise of Mirova’s voting rights is presented to the Board of Directors annually.

Current procedure for the exercise of voting rights

Mirova uses an external voting services provider in charge of:

-informing Mirova of upcoming general meetings related to securities in its voting universe,
 -analysing resolutions according to the principles defined in the present voting policy (i.e., custom service). In some cases, Mirova's in-house Research team reviews resolutions (further details are provided in LEA.15)
 -providing access to a voting platform for the exercise of voting rights,
 -transmitting voting instructions to the issuer.

This service provider is in direct contact with custodian banks, from which it receives, on a daily basis, a list of every position held for each portfolio within our voting universe. The votes for each account are registered on the voting platform.

The scope of Mirova's voting activities

Except in certain cases, Mirova exercises voting rights for all the UCITS (Undertakings for Collective Investment in Transferable Securities) and AIF (Alternative Investment Funds) under its management and for which it holds voting rights, as well as for employee investment funds the supervisory boards of which have delegated voting rights to Mirova. Mirova will exercise its voting rights for all eligible assets, as identified at the end of the year preceding the vote and which are located in portfolios for which Mirova holds voting rights,, on the condition that the regulatory and technical constraints imposed by markets and depositories permit that the exercise of voting rights be in the best interests of unitholders. In 2019, Mirova's voting universe was made up of 432 companies.

Within this voting perimeter, 469 general meetings (GM) were held in 2019. Mirova has exercised its voting rights for 425 companies at 4623 general meetings, making its participation rate 98.5%.

Mirova did not exercise its voting rights at 7 general assemblies due to technical problems (fund migration into proxy systems and administrative systems, validity of power of attorney, etc.). Mirova is committed to transparency and discloses an annual report on votes cast available on its website, and all Mirova votes on resolutions presented at the general meetings of companies held in its voting funds (not including dedicated funds) are disclosed through an online platform, accessible through Mirova's website: https://vds.issgovernance.com/vds/#/OTAyNg==/

Exceptions to the policy

Mirova has defined guidelines for the application of these voting principles by markets (France, Italy, Japan, UK, etc.) in accordance to local regulation, recommendations and maturity on corporate governance topics, but also for small capitalisations (notably executives paid under 1M€) and for some industries (in accordance to the banking industry regulation for example). [SL1] Detailed voting criteria are described in our “Application Framework”, a large Excel spreadsheet that is continuously updated and provided to our proxy in order to ensure that our voting policy is implemented as expected. This application framework is not confidential and can be communicated. However, due to its complexity, technicality and limited understandability to the larger audience, Mirova chose not to publish it on its website.

It should also be noted that the principles defined in our voting policy may not apply, depending on companies' nationality, as shareholders' meetings may exhibit varying prerogatives depending on national legislation.

12.3. Additional information.[Optional]


LEA 13. Percentage of voting recommendations reviewed

13.1. Of the voting recommendations that your service provider made in the reporting year, indicate the percentage that was reviewed by your organisation, giving the reasons.

Percentage of voting recommendations your organisation reviewed

Reasons for review

13.2. Additional information. [Optional]

We vote on 100% on our resolutions, which are all reviewed by our proxy-service provider ISS, on the basis of our in-house voting policy. The implementation of this Mirova bespoke voting policy has been optimised thanks to continuous work of the MiIrova RI-research team with the ISS team, so that ISS implements it on an automatic basis for all Mirova's voting rights, respecting strictly Mirova's voting guidelines. As a resultMirova also reviews resolutions internally for the following cases: a/ companies identified as “core” for Mirova (i.e. those where Mirova represents a significant shareholder or those which represent a significant weight in Mirova’s portfolios) , ; b/only outstanding resolutions for which ISS cannot vote on an automatic basis are treated directly internally by Mirova. In 20189, only12%16% of the resolutions were reviewed by our in-house RI Research team, among which:

86% reviewed as part of Mirova's engagement approach, notably applied to its largest holdings and/or when a specific governance issue is identified. The remaining 14% are resolutions for which ISS could not determine a voting recommendation.

Among resolutions reviewed internally, the main themes were:

- the fair distribution of corporate value (33%), especially executives' compensation policy
- the balance of power (20%) among which 98% were about election of re-election of directors
- shareholer resolutions (5%)

Mirova is committed to transparency and discloses an annual report on votes cast available on its website, and all Mirova votes on resolutions presented at the general meetings of companies held in its voting funds (except for dedicated funds) are disclosed through an online platform: https://vds.issgovernance.com/vds/#/OTAyNg==/

 


LEA 14. Securities lending programme

14.1. Does your organisation have a securities lending programme?

14.2. Describe why your organisation does not lend securities.

As mentioned in its voting policy, Mirova does not have any securities lending activity.

14.4. Additional information. [Optional]


LEA 15. Informing companies of the rationale of abstaining/voting against management

15.1. Indicate the proportion of votes participated in within the reporting year in which where you or the service providers acting on your behalf raised concerns with companies ahead of voting.

15.2. Indicate the reasons for raising your concerns with these companies ahead of voting.

Explain

          On company’s request
        

15.3. Additional information. [Optional]

 The dialogue carried out over the year is disclosed in Mirova's engagement report, which includes a focus on cross-investment engagement themes, notably on governance (number of companies targeted, themes addressed, etc.). This report is available on its website: http://www.mirova.com/en-INT/voting-and-engagement
 Furthermore, all Mirova's votes on resolutions presented at the general meetings of companies held in its voting funds (except for dedicated funds) are disclosed through an online platform: https://vds.issgovernance.com/vds/#/OTAyNg==/


LEA 16. Informing companies of the rationale of abstaining/voting against management

16.1. Indicate the proportion of votes where you, and/or the service provider(s) acting on your behalf, communicated the rationale to companies for abstaining or voting against management recommendations. Indicate this as a percentage out of all eligible votes.

16.2. Indicate the reasons why your organisation would communicate to companies, the rationale for abstaining or voting against management recommendations.

16.3. In cases where your organisation does communicate the rationale for abstaining or voting against management recommendations, indicate whether this rationale is made public.

16.4. Additional information. [Optional]

Ahead of the voting campaign, Mirova automatically communicates the content of its voting policy and recommendations for best ESG governance practices. Therefore, all companies for which there has been abstaining or voting against management recommendations can understand the reasons of our vote.
In addition, we conduct an in-depth dialogue with companies in our "core" universe, i.e. those representing a significant shareholding and/or with which we have had a constructive dialogue for multiple years. For all of them, we have sent an email explaining the rationale of our vote (either positive of negative).


LEA 17. Percentage of (proxy) votes cast

17.1. For listed equities in which you or your service provider have the mandate to issue (proxy) voting instructions, indicate the percentage of votes cast during the reporting year.

Votes cast (to the nearest 1%)

98.5 %

Specify the basis on which this percentage is calculated

17.2. Explain your reason(s) for not voting on certain holdings

Technical problems (such as fund migration into proxy systems)

17.3. Additional information. [Optional]

In 2019, Mirova has exercised its voting rights as a shareholder of the UCITS and AIF it manages. The 2019 voting perimeter therefore covered 432 assets held in 51 UCITS and AIF, all of which are managed by Mirova. Within this voting perimeter, 469 general meetings (GM) were held in 2019, and Mirova exercised its voting rights at 462 of them, for a participation rate of 98.5%. Mirova did not exercise its voting rights at 7 general meetings due to technical problems such as fund migration into proxy systems or administrative systems and validity of power of attorney.

Mirova is committed to transparency and discloses an annual report on votes cast available on its website, and all Mirova votes on resolutions presented at the general meetings of companies held in its voting funds (not including dedicated funds) are disclosed through an online platform, accessible through Mirova's website: https://vds.issgovernance.com/vds/#/OTAyNg==/


LEA 18. Proportion of ballot items that were for/against/abstentions

18.1. Indicate whether you track the voting instructions that you or your service provider on your behalf have issued.

18.2. Of the voting instructions that you and/or third parties on your behalf have issued, indicate the proportion of ballot items that were:

Voting instructions
Breakdown as percentage of votes cast
For (supporting) management recommendations
78 %
Against (opposing) management recommendations
20 %
Abstentions
2 %
100%

18.3. In cases where your organisation voted against management recommendations, indicate the percentage of companies which you have engaged.

18.4. Additional information. [Optional]

All companies received an email from Mirova which outlined the main corporate governance practices supported by Mirova and enclosing its voting policy. 9% of companies which received a vote against management resolution were subject to a more in-depth dialogue (36 companies out of a total of 395 that received at least one vote against a management resolution).


LEA 19. Proportion of ballot items that were for/against/abstentions

19.1. Indicate whether your organisation has a formal escalation strategy following unsuccessful voting.

19.2. Indicate the escalation strategies used at your organisation following abstentions and/or votes against management.

Specify

          Additional information
        

19.3. Additional information. [Optional]

In case of reoccurring issues leading to an opposition, Mirova may chose (depending on the severity, the previous dialogue and the amount invested) to contact the company representatives (directly or in collaboration with other investors). Absence of feedback or changes in practices may result in a downgrade of the company's sustainability analysis and, ultimately, in Mirova reducing its holdings.


LEA 20. Shareholder resolutions (Private)


LEA 21. Examples of (proxy) voting activities

21.1. Provide examples of the (proxy) voting activities that your organisation and/or service provider carried out during the reporting year.

ESG Topic
Executive Remuneration|General ESG|Other governance
Conducted by
Objectives

Encouraging companies to adopt and communicate on the fair distribution of value

Scope and Process

In our email ahead of the voting season, we highlighted that a fair distribution of value is key to a corporate governance model supporting a sustainable development. We explained that fairness should be understood as a/ correlated compensation of key constituting parties (i.e. executives, shareholders and employees) and b/ responsible fiscal practices.

We ran a review of all companies in our voting scope over the 6 previous years considering these criteria. As a result, we voted against 65 companies due to the lack of information enabling this “fairness analysis” (namely, lack of disclosure on payroll), and we engaged in an in-depth dialogue with 64 other companies to determine whether their distribution of value policy is fair. Most of these companies were able to provide qualitative and/or quantitative information justifying their practices. 7 of them were deemed insufficiently fair in their value distribution and were subject to a vote against dividends and/or executive pay resolutions as a result. With all them, the dialogue was fruitful, and we expect an increased focus on the matter in future years.

Outcomes
ESG Topic
General ESG|Sustainability reporting|Other governance
Conducted by
Objectives

To foster the integration of sustainability at the core of corporate governance

Scope and Process

In our pre-AGM season email, in our voting policy and during every dialog, we support the integration of sustainability as a key pillar of corporate governance. We notably advocate on 3 main aspects: a/ the creation of a dedicated CSR committee at board level, b/ the integration of relevant sustainability KPIs in executives pay and c/ the disclosure of a CSR report which non-financial information have been audited / certified.

No disclosure of a CSR Report or the lack of relevant sustainability criteria in executive compensation leads to Mirova opposing related resolutions.

As a result, we are seeing a lot more companies disclosing CSR report and including non-financial KPIs in executives pay. Appointment of dedicated directors in charge CSR aspects is still rare, we expect evolutions in the future. Our dialogs are largely fruitful on these topics, with many companies appealing to our opinion on which sustainability criteria are deemed relevant to include in executives’ incentive plans.

Outcomes
ESG Topic
General ESG|Other governance
Conducted by
Objectives

Holding governance bodies responsible for their role in setting a sustainable corporate governance model

Scope and Process

In addition to advocating in favour of a sustainable corporate governance model (i.e. including key constituting parties as well as sustainability considerations), Mirova has been holding committee chairmen responsible for the role they should play in setting such a model.

Hence, Mirova opposes the re-election of the chairman of the nomination committee in cases such as insufficient employee representatives at the board, insufficient feminization of the board, lack of balance between represented parties, etc. Likewise, chairmen of the remuneration committee notably will see their re-election opposed if no sustainability criteria are used to define executives’ variable incentives,

All companies in our voting universe are made aware of Mirova’s approach on responsible corporate governance practices as we send our voting policy, together with an outline of the main good practices we are expecting, in a pre-voting season email. For companies where Mirova holds a significant stake and for those representing a significant weight in our portfolios, votes against are accompanied by an in-depth dialog. Hence, companies are aware of our expectations and understand why we vote against these committee chairmen.

Outcomes

21.2. Additional information. [Optional]


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