Environmental, Social and Governance Policy
Lansdowne Partners (UK) LLP (the “Firm”) is committed to considering Environmental, Social and Governance (‘ESG’) factors as part of the investment philosophy and process for the funds it manages, and in its operation of the business as a whole. This policy sets out the methods of integrating ESG factors across the business.
As part of this commitment, the Firm is a signatory of the Principles for Responsible Investment (PRI), a member of the Alternative Investment Management Association (AIMA), and has committed to the UK Stewardship Code which is aimed at improving governance by encouraging engagement between investors and issuers. A copy of the Firm’s UK Stewardship Code Disclosure is available to view on our website: https://www.lansdownepartners.com/home/governance/.
This policy is applicable to all of the funds managed by the Firm and is reviewed annually by the Management Committee. The Chief Compliance Officer and Chief Risk Officer oversee the implementation of the policy.
ESG factors are core inputs for our fundamental, bottom-up analysis and decision-making. The impact ESG factors have on the attraction of shares as investments, either because of implications for profit pools or likely costs of capital, will clearly be material. We seek, through our analysis, to identify significant opportunities and mitigate risks, especially where such trends are nascent. We recognise the importance for all stakeholders to contribute to the minimisation of current and future environmental challenges, promote responsible business practices, encourage diversity, and protect human rights. We understand that as an investment manager, we have a vital role to play in encouraging positive change for future generations.
Each investment team is responsible for considering such factors, including sustainability risk, and their impact on shareholder value throughout the investment process. Conclusions across different teams may vary, as assumptions and interpretations can be subjective.
Examples of issues that are considered as part of company and industry analysis include:
- Environmental: consideration of the entire value chain (including end product use), monitoring and disclosure of impact, emissions (greenhouse gases and local emissions), hazardous waste, resource and land use.
- Social: sustainable labour practices (competitive pay, labour and management dispute resolutions), support of wider community and equal opportunities (gender, age, social, origin).
- Governance: board independence and authority, senior management track record, CEO compensation level and structure, insider trading, special voting rights or restrictions, downside management, equity issuance and buy back history.
Research, monitoring and engagement with companies are fundamental to our investment process. As part of this we seek to build effective relationships and maintain high and broad levels of engagement with management and other stakeholders of the companies to which we allocate capital.
Generally we do not engage publicly with companies on specific issues, but have a long history of interacting directly with management teams to articulate the case for applicable ESG issues. Such debates have, we believe, led to meaningful shifts in company approaches that are economically, environmentally and socially advantageous to the companies, their stakeholders and our clients. We believe that active, fundamental long-term investing is best-placed to achieve such goals, given the depth of dialogues and the linkage between social and economic outcomes.
The EU Sustainable Finance Disclosure Regulation (“SFDR”) requires in-scope entities to disclose information on their policies on the integration of sustainability risks in investment decisions. Lansdowne Partners (UK) LLP, as a UK firm, is not directly subject to SFDR, but provides portfolio management to a number of entities which may be directly subject to SFDR.
SFDR defines “sustainability risk” as an environmental, social or governance (“ESG”) event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of an investment. The Firm’s investment teams are provided with quantitative and qualitative information on sustainability risks and will generally take sustainability risks into account when making an investment decision. Sustainability risk forms an important part of the Firm’s overall risk management processes but is one of many risks which may, depending on the specific investment opportunity, be relevant to a determination of risk. Therefore, sustainability risk may not, by itself, prevent the Firm from making any investment on behalf of its clients.
Proxy voting is an important right of shareholders and reasonable care and diligence must be undertaken to ensure that such rights are properly and timely exercised. When the Firm has discretion to vote the proxies of its clients, it will vote those proxies in the best interest of its clients and in accordance with its Proxy Voting Policy.
Since 2016 the Firm has engaged with Institutional Shareholder Services (“ISS” www.issgovernance.com), the world’s leading corporate governance and responsible investing solutions provider, to facilitate and assist with the voting process. In November 2018 the Clean Energy Strategy subscribed to the ISS Sustainability Policy and in January 2021 this was added to all the strategies in order to further enhance our ESG reporting capabilities with regard to Voting and Engagement. The ISS Sustainability Policy is a set of sustainability proxy voting guidelines and seeks to promote support for recognised global governing bodies promoting sustainable business practices advocating for stewardship of environment, fair labour practices, non-discrimination, and the protection of human rights. Generally, ISS' Sustainability Policy will take as its frame of reference internationally recognised sustainability-related initiatives such as the United Nations Environment Programme Finance Initiative (UNEP FI), United Nations Principles for Responsible Investment (UNPRI), United Nations Global Compact, Global Reporting Initiative (GRI), Carbon Principles, International Labour Organization Conventions (ILO), CERES Roadmap for Sustainability, Global Sullivan Principles, MacBride Principles, and environmental and social European Union Directives.
The Firm generally votes in favour of routine corporate housekeeping proposals, including election of directors (where no corporate governance issues are implicated). For other proposals, the Firm will assess what is in the best interests of its clients and, in doing so, may take into account the following factors:
- whether the proposal was recommended by management and the Firm’s opinion of management;
- whether the proposal acts to entrench existing management;
- whether the proposal fairly compensates management for past and future performance;
- Environmental, Social and Governance factors, and
- ISS’ Research Reports and Sustainability Policy.
The Firm’s Proxy Voting Policy requires the Firm to identify and address conflicts of interest between its related persons and clients. If a material conflict of interest exists, the Firm will determine whether voting in accordance with the guidelines set forth in the Proxy Voting Policy is in the best interests of the client or whether taking some other action may be more appropriate.
The compliance team reviews the proxy voting records on a monthly basis to ensure consistency with the Proxy Voting Policy.
We recognise that quantifying exposures to various ESG factors is an increasingly important part of reporting. Each strategy receives ESG investment risk reports on their funds.
- Provide overall portfolio scoring of ESG rankings as well as separate E, S and G scoring split by long and short books (where appropriate) and trended over time;
- Use a combination of external data providers; and
- Highlight outliers, both positive and negative.
The central risk team, led by the Chief Risk Officer, also considers ESG investment risk as part of its overall risk assessment.
Principles for Responsible Investment
The Firm became a signatory of the internationally recognised Principles for Responsible Investment (PRI) in 2020. The Firm recognises this commitment as a way to embed current and future responsible investment considerations in both the investment process and promote ongoing positive firm culture.
The PRI is the world’s leading proponent of responsible investment. It works to understand the investment implications of ESG factors and to support its international network of investor signatories in integrating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.
The PRI encourages investors to use responsible investment to enhance returns and better manage risks, but does not operate for its own profit; it engages with global policy makers but is not associated with any government; it is supported by, but not part of, the United Nations.
Lansdowne Partners Procedures
The Firm is conscious of its green-house gas emissions and has taken steps to build a carbon management programme. Since 2016 the Firm has commissioned the team at Carbon Footprint to conduct a full annual audit of the firm, our business practices and travel, in order to reduce our carbon footprint. Internally, we have set up an environmental team to manage these initiatives, identify our major emission sources and obtain opportunities for savings now and in the future. Our Firm initiatives include a recycling programme, a bike to work scheme, paper and travel reduction plans. The Firm is delighted to be a Carbon Neutral Organisation (http://www.carbonfootprint.com/).
As a Firm we are committed to share our success with those less fortunate by providing firm resources to important causes. Through the Lansdowne Charity Committee, every employee is encouraged on an annual basis to nominate a charity they are involved with, be it through volunteering or fundraising, for a discretionary grant. In addition to this, the Charity Committee has selected a number of charities to support that have been specifically chosen so that employees can be directly involved in volunteering and fundraising.
The Firm is committed to providing equal opportunities in employment and ensures that it will not discriminate against job applicants or employees on the grounds of their sex, marital status, pregnancy or maternity, sexual orientation, disability, age, race (including colour, nationality or national or ethnic origins), religion or belief or gender reassignment. It is the Firm’s policy to make every effort to provide a working environment free from harassment, intimidation and discrimination.
The Firm is dedicated to providing ongoing professional development opportunities and has established a mentoring programme that offers staff the opportunity to be guided and assisted by a partner of the Firm for a one year period. Additionally, partners and senior staff hold weekly open meetings whereby relevant topics and Firm updates are discussed.
In accordance with the Modern Slavery Act 2015, the Firm publishes annually a Modern Slavery Statement regarding the steps we have taken and continue to take to ensure that modern slavery or human trafficking does not take place in our business or our supply chain. To view the full statement, please refer to our website.
We recognise the importance of robust corporate governance practices that help to ensure effective oversight and strong accountability. The Firm is governed by a Management Committee where decisions are made by consensus and appropriately documented.
Each investment team is led by a portfolio manager(s) who is overseen by the Risk and Audit Committee, which is comprised of the Chief Executive Officer, Chief Risk Officer and Chief Compliance Officer.
The Firm has strong compliance and governance policies in place including: Code of Ethics, Conflicts of Interest, Human Resources, Remuneration, Whistleblowing, Business Continuity and Cyber Security. Please refer to our Firm DDQ for summaries of our Regulatory and Compliance Framework as well as our Risk Oversight Framework.
Moreover, the Firm has a set of values that underpin all of our activities and shape how the Firm is governed. All new staff attend an introductory session on the Firm values, typically held by the Chief Executive Officer or the Chief Compliance Officer. From time to time, employees are asked to complete surveys regarding governance and policies, the results of which are used to help future improvements.