We recommend Brunel’s excellent stewardship policy as a model for institutional investors everywhere.
Stewardship is defined as the job of taking care of something, such as a company or property. As investors, we use the term assets.
Brunel is committed to responsible stewardship and seeks to contribute to the ‘care’ of all the assets under its remit. We believe that active ownership is how we can contribute to the care, and ultimately long-term success, of those assets. We do, however, recognise the approach needs to be tailored to each type of investment (asset class), take account of the level and legal structure of ownership, regulatory expectations and limitations, and be mindful of differences across geographies.
The engagement objectives for Brunel are identified in three ways. Firstly, top down, looking at Brunel’s holdings and identifying thematic areas of risk and opportunity.
The thematic priorities as identified in the RI Report are:
• UK regulation and policy framework
• Climate change (physical, adaptation and mitigation)
• Supply Chain (water, plastics, modern human slavery)
• Human capital & diversity (inclusion, welfare)
• Cost and Tax transparency
• Cyber security
Secondly, bottom up, reviewing our exposure to individual companies and to specific ESG risks and opportunities. Companies will be identified through asset managers, collaborative engagement forums, external research and Brunel’s own internal ESG risk analysis. Thirdly, reactively to event risks, for example, after a specific, usually significant, incident. The companies that we actively engage with will be prioritised based on our level of exposure and the probability of successful outcome.
Engagement implementation will be undertaken by asset managers, our specialist
provider Hermes EOS and via collaborative forums. However, Brunel will seek to
undertake direct engagement where we feel that this will add value.
Brunel will operate a clear process of engagement escalation. Again, this will be supported by both our asset managers and by Hermes EOS. The escalation route
starts with alerting companies to areas of concern through letters and face-to-face meetings. Initial engagement will usually focus on communication with the
appropriate operational lead but will escalate as needed to the Board and Chair.
Where a company Board is unresponsive and not already part of a collaborative
engagement we will reach out to other investors. Addressing AGMs together with
voting is an intrinsic part of the escalation process, including co-filing of shareholder resolutions. A recommendation to divest will be the last resort, but appropriate if we believe the risk to long-term shareholder value is being undermined.
One example of escalation is that we may choose from time to time to “pre-declare” or publicly announce our voting intentions for resolutions, for example, against the reappointment of a Chair where there are serious governance concerns not being addressed or in support of a shareholder resolution relating to climate disclosure. On such occasions there will have been prior extensive engagement, a clear risk to shareholder value, and the objective will be to raise awareness with other investors to the risks presented. This type of action will be used sparingly as it is generally used when other attempts at active ownership have not proved successful.