Our UK Stewardship Code Statement

KBI Global Investors is a specialist investment boutique focused on two distinct strategies; natural resource equities and global equities. The practical exercise of good stewardship is integrated into each strategy in line with prudence and the distinct nature of each investment process.

Principle 1- Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities.

Stewardship responsibilities are intrinsic to our investment strategies, and fully disclosed on our public website.  Responsibility for those responsibilities lies with the firm’s Responsible Investing committee, whose membership includes three of the five executive directors as well as the Head of Responsible Investing and representatives of all main business units. This committee has responsibility for all aspects of stewardship (both policy and implementation) and is evidence of the importance of stewardship to the firm.

We explicitly integrate stewardship into the investment process because we believe that companies with strong governance whose products and services enhance social or environmental goals should meaningfully outperform.

To assist stewardship activity, and in particular to assist with monitoring, we use the services of two industry-leading providers of relevant material: MSCI ESG Research for ESG ratings, and Institutional Shareholder Services Ltd for corporate governance advice and proxy voting recommendations.  We believe that this approach enables us, via these providers, to closely monitor investee company’s activities (as relevant to stewardship) to a greater extent than if we relied on our own resources alone to do so.  However we do not rely solely on the external providers, and in addition we monitor investee companies ourselves via direct meetings with investee companies, reviews of annual report and accounts, and a variety of other sources including broker research, media monitoring, and specialised Responsible Investing publications and reports.

Stewardship is integrated into the investment process in several ways, varying slightly depending on the particular investment strategy, but including active proxy voting based on a tailored voting policy, bilateral and collaborative engagement to achieve specified aims, divestment in most cases when engagement and/or proxy voting activity does not achieve our aims, and collaboration with other investors to achieve various policy aims.

Voting policy:

It is our policy to use proxy voting for all portfolios  and for all votes, other than where we are not given this authority by our client, or in countries where voting is impossible or exceptionally difficult for logistical reasons. (For the last calendar quarter at the time of writing, we voted in excess of 98% of all ballots). We have taken the decision to use the services of an outsourced provider, Institutional Shareholder Services (ISS), the leading provider of proxy voting advice and administrative services, to assist us with this activity given their expertise in this area and the resources that they can devote to this issue.  ISS make voting recommendations to us, based on a pre-agreed set of policy guidelines which are reviewed annually.  We have adopted the “Sustainability” set of voting guidelines, developed specifically to at least meet the UNPRI principles. They have a particular focus on transparency and reporting, and we generally support shareholder initiatives insofar as they request enhanced transparency on ESG issues.

We typically follow the ISS recommendation but the final decision is ours in every case and our Proxy Voting Committee can overrule the ISS recommendation.  We report quarterly, on our public website, on proxy voting activity. The report includes a summary of voting activity, such as the percentage of all votes where we voted against management, but also has full details of every ballot voted including the management recommendation and our voting instruction.  

Engagement:

We carry out both direct and collaborative Engagement.

There are many reasons for commencing Engagement, including but not limited to concerns re board structure and governance, excessive or inappropriately-structured executive compensation, management’s intention or ability to deliver shareholder expectations, disclosure of environmental information, and breaches of best practice with regard to stakeholder management. However, while any of these factors may lead to commencement of Engagement, we have decided to particularly focus on companies which do not publish adequate environmental information or which are ‘laggards’ with regard to a commitment to address climate change issues.

Direct (bilateral) Engagement commences with an approach to the company by the relevant Portfolio Manager(s), outlining our concerns.  This will almost always be an in-person meeting or a direct phone call with the appropriate personnel at the company in question, though on rare occasions the Engagement could commence with a letter or email.  We outline our concern and ask the company to respond, either at the time or (more usually) at a later date having had time to consider the issue.  We consider the company’s response and either close the Engagement if a satisfactory response has been obtained or pursue it further, usually via escalation to the Company Chairperson or designated independent/lead director, as appropriate. The process continues until closed. Engagement can finish either because we have obtained a satisfactory result or because we feel a satisfactory outcome is unlikely, in which case we will consider divestment, if we judge it to be in the best interests of our clients.  We integrate the Engagement with our Proxy Voting, as appropriate and when required.  We do not usually publicise our direct Engagement activity as we judge this to be counterproductive.

Collaborative Engagement:

As a specialist boutique asset manager with focused resources, we endeavour to leverage relationships to engage in collective engagement when appropriate. To that end, we are members of or signatories to the initiatives below, and take an active role in those most relevant to us.

  • The United Nations Principles for Responsible Investment (UNPRI)
  • The Institutional Investors Group on Climate Change (IIGCC)
  • The Carbon Disclosure Project
  • CDP Water Initiative

Principle 2: Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed.

KBI Global Investors always endeavours to act in the best interests of its clients. The firm has a robust Conflicts of Interests policy in place which is made available to all staff and published on our website at this link.  This policy is reviewed annually.  As the policy states, in all instances of actual or potential conflicts of interest we will abide by the principles of treating our clients fairly, and dealing honestly and professionally with all our clients.  We take all reasonable steps to prevent conflicts of interest from damaging client’s interests, and we undertake periodic reviews of business activities and specific transactions, in order to identify circumstances which might give rise to a conflict of interest.  Collective investment schemes managed by the firm are overseen by a separate legalentity (management company) with independent external directors, again helping to mitigate potential conflicts of interest.

Conflicts of Interest Policy

The Board of Directors approves the Conflicts of Interest policy and shall review the Conflicts of Interest Log annually. The Executive Committee (“ExCo”) of KBIGI is responsible for the implementation of appropriate organisational and administrative arrangements to ensure that potential conflicts are identified and managed. Exco reviews the Conflicts of Interest Log throughout the year and decide whether the controls in place to mitigate a potential conflict of interest are sufficient to manage the conflict.  Compliance & Risk are responsible for the maintenance of the Conflicts of Interest Log and may make recommendations to Exco as regard the controls in place to mitigate risks. KBIGI also provides training to staff on potential Conflicts of Interest and the relevant procedures in place to identify and mitigate the conflicts.

Conflicts of Interest Log

The Log documents all identified potential conflicts of interest and determine if the event represents a real potential conflict for KBIGI. In such cases, the controls to mitigate the conflict are documented and assessed. If the arrangements are insufficient to ensure that risks to clients will be prevented, KBIGI shall clearly disclose to its clients the nature and/ or source of such conflict of interest and the extent to which it has/hasn’t been able to mitigate it. Sections on the log include external directorships, personal connections, trading, conflicts between clients, internal conflicts, product governance, inducements and intragroup relationships. For intragroup relationships, all commercial relationships with group companies are considered to determine if there is a potential conflict for KBIGI and if so controls are assessed and documented.

The firm is majority owned by Amundi Asset Management, which markets a wide variety of investment products.  These products, if/when made available to this firm’s clients, will always be subject to the same assessment process as used for third-party products, and our client’s best interests will at all times take priority in choosing between group-affiliated and third-party investments.

It is possible that some of our portfolios may invest in Amundi stock, which is listed on the French stock market.  In such circumstances we will make decisions with regard to proxy voting in exactly the same way as for any other security, in particular taking into account the recommendation of ISS, which provides us with proxy voting recommendations for all stocks.

Collective investment schemes managed by the firm are overseen by a separate legal entity (management company) with independent external directors, again helping to mitigate potential conflicts of interest.

Principle 3 - Institutional investors should monitor their investee companies.

Our portfolio managers have the primary responsibility for monitoring investee companies, using a variety of inputs and tools to do so.  The portfolio managers review financial statements and accounts and similar formal disclosures and announcements by companies with regard to, for example, mergers and acquisitions, changes to expected profitability, senior personnel changes and other material factors.  They also review broker research reports and for many of our strategies will usually meet senior management at investee companies at least annually, where practicable, to discuss ESG, financial and operational developments or issues.  While a variety of stewardship issues can arise at these meetings, we currently have a particular emphasis on encouraging companies to disclose environmental information (for example by responding to the annual CDP questionnaire and/or - for those companies that do not already do so - preparing and publishing Sustainability Reports containing relevant data).

Importantly, the Portfolio Managers also monitor ESG-specific research from two specialised outsourced providers, Institutional Shareholder Services Ltd (which has a particular focus on Governance issues), and MSCI ESG Research.  Both of these companies provide detailed reports on investee companies, periodically, while MSCI ESG Research also provides themed sector-specific reports which are also useful in terms of monitoring specific companies, as well as sectors.

Departures from the Corporate Governance Code, where applicable, are monitored in several ways.  Our Portfolio Managers would expect to be aware of these departures based on their own review of company financial statements and accounts, but in addition such departures would generally be flagged by the relevant reports from MSCI ESG Research and from Institutional Shareholder Services.  Depending on the materiality of the departure from Code and the extent to which we were satisfied with the explanation given by the company for the departure, we may raise the issue with the company through our Engagement process and ultimately through our Proxy Voting (see explanation in Principle 1, above, for more detail on our Engagement, Proxy Voting and escalation processes).

We rarely attend company Annual General Meetings, preferring to interact with companies at bilateral meetings, for time management and logistical reasons.

In certain rare circumstances it may be appropriate for us to become an “insider”, receiving price-sensitive, non-public information re companies that we invest in, most commonly in relation to (actual or potential) capital raises or merger and acquisition activity.  Our policy is that we are not made insiders without our prior permission.  Where a request is made to become an Insider, the Portfolio Manager is the first point of contact and must immediately inform the Chief Investment Officer (or Head of Compliance in the CIO’s absence).  The CIO will grant or deny permission based always on the best interests of clients, taking into account considerations such as the length of time for which we would be likely to be an insider and our existing position in the company.  Where any employee does have inside information, he/she must not divulge the information to any other employee (other than the Chief Investment Officer in some circumstances) and must report the security and details on the insider information to the Compliance department. The Compliance department then put in place restrictions on the security, both for client portfolios and for personal account dealing.  On a post basis, Compliance will carry out certain checks including an analysis of trades in the security.

Principle 4 - Institutional investors should establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value.

We carry out both direct and collaborative Engagement.

There are many reasons for commencing Engagement, including but not limited to concerns re board structure and governance, excessive or inappropriately-structured executive compensation, management’s intention or ability to deliver shareholder expectations, disclosure of environmental information, and breaches of best practice with regard to stakeholder management.  However, while any of these factors may lead to commencement of Engagement (and all of those issues in the past have been factors in commencing an Engagement process with investee companies), we have decided to particularly focus on companies which do not publish adequate environmental information or which are ‘laggards’ with regard to a commitment to address climate change issues.

Direct (bilateral) Engagement commences with an approach to the company by the relevant Portfolio Manager(s), outlining our concerns.  This will almost always be an in-person meeting or a direct phone call with the appropriate personnal at the company in question, though on rare occasions the Engagement could commence with a letter or email.  We outline our concern and ask the company to respond, either at the time or (more usually) at a later date having had time to consider the issue.  We consider the company’s response and either close the Engagement if a satisfactory response has been obtained or pursue it further, usually via escalation to the Company Chairperson or designated independent/lead director, as appropriate.  The process continues until closed, either because we have obtained a satisfactory result or because we feel a satisfactory outcome is unlikely, in which case we will consider divestment, if we judge it to be in the best interests of our clients.  We fully coordinate the Engagement with our Proxy Voting, as appropriate and when required.  We do not usually publicise our direct Engagement activity as we judge this to be counterproductive.

Collaborative Engagement:

As a specialist boutique asset manager with focused resources, we endeavour to leverage relationships to engage in collective engagement when appropriate. To that end, we are members of or signatories to the initiatives below, and take an active role in those most relevant to us.  We have decided to particularly focus on initiatives related to Climate Change and Carbon Risk and have been involved in a number of initiatives in this area. We are members of the Collaboration Platform (formerly the UNPRI Clearinghouse) which is a forum that allows PRI signatories to pool resources, share information and enhance influence on ESG issues.

  • The United Nations Principles for Responsible Investment (UNPRI)
  • The Institutional Investors Group on Climate Change (IIGCC)
  • The Carbon Disclosure Project (now known as CDP)
  • CDP Water Initiative

Principle 5 - Institutional investors should be willing to act collectively with other investors where appropriate.

As a specialist boutique asset manager with focused resources, we endeavour to leverage relationships to engage in collective engagement when appropriate. To that end, we are members of or signatories to the initiatives below, and take an active role in those most relevant to us.  We have decided to particularly focus on initiatives related to Climate Change and Carbon Risk and have been involved in a number of initiatives in this area.  We are members of the Collaboration Platform (formerly the UNPRI Clearinghouse) which is a forum that allows PRI signatories to pool resources, share information and enhance influence on ESG issues.

  • The United Nations Principles for Responsible Investment (UNPRI)
  • The Institutional Investors Group on Climate Change (IIGCC)
  • The Carbon Disclosure Project (now known as CDP)
  • CDP Water Initiative

Eoin Fahy, Head of Responsible Investing, is our primary contact for all collaborative engagement initiatives.

Principle 6 - Institutional investors should have a clear policy on voting and disclosure of voting activity.

It is our policy to use proxy voting for all portfolios where we are entitled to vote on behalf of our client portfolios. As explained in more detail elsewhere in this statement, we have taken the decision to use the services of an outsourced provider, Institutional Shareholder Services (ISS), to assist us with this activity given their expertise in this area and the resources that they can devote to this issue.  ISS issue voting recommendations to us, based on a pre-agreed set of policy guidelines which are reviewed annually and which are designed to comply with UNPRI principles.  The final decision remains with us (and in particular with our Proxy Voting Committee which has defined membership and terms of reference).  On request from a company, either before or after the vote, we will provide an explanation to a company of our voting decision.  Where we are already involved in Engagement, or about to commence Engagement, we may choose to pro-actively inform a company of our voting decision, before the time of the vote, with the intention that this might influence the company’s own decision-making process.

We report quarterly, on our public website, on proxy voting activity.  The report includes a summary of voting activity, such as the percentage of all votes where we voted against management, but also with full details of every ballot voted including the management recommendation and our voting instruction. The report can be found at this link.  As of the most recent report at the time of writing, we voted in 98.1% of all ballots, and we voted Against, Withhold or Abstain on at least one vote at 37% of all meetings.  As is therefore clear from the report, we do not automatically support company boards, instead assessing each and every vote on its own merits.

For some fund vehicles and strategies we do engage in stock lending.  The Portfolio Managers receive a weekly report listing all forthcoming company meetings where stock is on loan.  They then make a decision to recall, or not, the stock in order to vote.  Sufficient advance notice of forthcoming meetings is given to enable the stock to be recalled in good time to vote.  The decision to recall stock, or not, is made in the best interests of clients at all times, and will take account of whether the vote is likely to be controversial or closely contended, whether we are material shareholders in the company, the shareholding structure of the company, the strength of our views on the issue in question and whether it would strengthen our case in an Engagement context to maximise our voting power, and the loss of income to investors that would result.

Principle 7 - Institutional investors should report periodically on their stewardship and voting activities.

We believe that it is important to be transparent about our stewardship and voting activity.

General Stewardship reporting:

Clients receive a Responsible Investing report periodically (usually annually but this may vary), which describes all RI activity within the firm during the period in question, including detailed proxy voting statistics and Engagement activity, as well as a summary of other relevant developments within the firm.  Stewardship activity is a topic that may be discussed at regular (typically quarterly) client meetings, and at the time of writing we are in the final editing stages of a document to be publically available on our website describing all of our Responsible Investing activity and our overall approach to same.

As signatories to the United Nations Principles on Responsible Investment (UNPRI), we submit a Transparency Report to the UNPRI each year, which gives great detail on our Responsible Investing activity.  The Report is publicly available at this link.

Voting policy:

It is our policy to use proxy voting for all portfolios where we are entitled to vote on behalf of our client portfolios. As explained in more detail elsewhere in this statement, we have taken the decision to use the services of an outsourced provider, Institutional Shareholder Services (ISS), to assist us with this activity given their expertise in this area and the resources that they can devote to this issue.  ISS make voting recommendations to us, based on a pre-agreed set of policy guidelines which are reviewed annually and which are designed to comply with UNPRI principles.  The final decision remains with us.

We report quarterly, on our public website, on proxy voting activity.  The report includes a summary of voting activity, such as the percentage of all votes where we voted against management, but also has full details of every ballot voted including the management recommendation and our voting instruction. The report can be found at this link.  As of the most recent report at the time of writing of this Stewardship statement, we voted in 98.1% of all ballots, and we voted Against, Withhold or Abstain on at least one vote at 37% of all meetings.  As is therefore clear from the report, we do not automatically support company boards, instead assessing each and every vote on its own merits.

Engagement:

For Engagement activity, we will generally make public both our priority issues and examples of our work in this area.  However, we believe that direct Engagement can be a partial exception to our general principle of transparency relating to Stewardship activity, as in some circumstances the effectiveness of direct Engagement is reduced if investee companies expect that the Engagement will be publicised, potentially in a way which would - in their view – adversely affect the company.

Independent Assurance:

KBIGI’s management of conflicts and voting activities are reviewed periodically as part of the firm’s Compliance Monitoring program and will be subject to review by the firm’s auditors.  A SOC 1 (Type 1) report is prepared annually, and this report encompasses ESG controls, including the design and implementation of the controls, which are reviewed by an Independent Service Auditor.  It is also envisaged that our Responsible Investing activity, or significant parts of it, will be reviewed by Internal Audit during 2017, however at time of writing this cannot be confirmed due to our recent change of ownership which means that the Internal Audit Plan for 2017 is under review.

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