Our beliefs

 

We believe that, as stewards of our clients’ assets, we want to be as open and transparent with our investors as we would like our investee companies to be with us.

We state our responsible investment beliefs in our responsible investment policies and principles document, and publicly disclose all our responsible investment activities in a quarterly report.

Additionally, we have a range of sustainable strategies which aim to achieve their objectives through investing for the long term in securities of companies that demonstrate attractive investment attributes and sustainable business practices and have no material unresolvable ESG issues.

Our sustainable strategies adopt the fundamental principles captured by our integrated ESG approach, and amplify the responsible investment requirements. Importantly, we seek and support those companies that are making the positive transition to more sustainable activities.

Our commitment to being a responsible active asset management firm is reflected in the consistently high marks we have received in our UN Principles for Responsible Investment (PRI) annual assessment report, with the top A+ rating for investment strategy and governance in 2018.
Responsible investment – policies and principles

Responsible investment policies and principles

Details our approach, how it works in practice, and the value it adds


TCFD Disclosure Report

2018 TCFD disclosure report

How we consider climate-related risks and opportunities with regard to our business and our clients’ investments.

Adding value

We aim to optimise performance returns for our clients by investing in well-managed companies. Intrinsic to the understanding of the potential of an investment is an appreciation of the quality of the company’s management, its structure, the appropriateness of its internal controls, and the assurance that ESG issues are managed to the benefit of long-term investor value.

An active, integrated approach

Our responsible investment process includes identifying the ESG risks and opportunities faced by a company and ensuring that these challenges are well managed within the company’s business strategy.

We continue to try to protect and enhance the value of our clients’ holdings throughout the life of an investment. Active engagement with companies enables us to monitor trading, strategy, changes in management processes, remuneration, and social and environmental issues. We have a rigorous approach to ESG and proxy voting, and take our stewardship responsibilities to our clients very seriously.

Active engagement in policy and regulation

We take an active role in the policy and regulation landscape, and we have board positions on, or membership of, a wide range of key regulatory and advisory bodies and networks.

These include: Principles for Responsible Investment (PRI), Council of Institutional Investors, International Corporate Governance Network, Pensions and Lifetime Savings Association (PLSA) Stewardship Advisory Group, and the 30% Club Investor Group.

Transcript

Rob Stewart (RS): Hanneke, as CEO, what are the areas you have focused on within the company to try to bring responsible investment into practice?

Hanneke Smits (HS): I
t’s not just about holding the companies we own to account, I think it’s very important that we live and breathe it ourselves. There are a number of things that we have been focusing on. One is I’ve actually asked our responsible investment team to work on an ESG review of Newton. Newton is not a listed company, but one could think of us as a listed company and say, if our investment team had to rate Newton using ESG criteria, what would that look like. I have already taken some steps to address some of the gaps that exist, and also help celebrate where I think we are really strong. One area for example is diversity and inclusion. Newton has led the way in many ways. It already has a flexible working programme. How we recruit is perhaps different from other firms as well. We recruit vocational trainees, we participate in the returning from the military programme, we have a graduate recruitment programme which brings people from different backgrounds, skills and different phases in their life journey into Newton and that has been very rewarding. On the workforce, a third are female, it could be better, but it is a third, and I that is better than for some other investment firms. 25% of the investment team is female. That is also better than industry standard, but nonetheless it is not a reflection of society and there could be more balance. A diverse workforce should lead to better decision making – whether it’s for Newton as a company or how we think about investing clients’ capital. So putting an additional focus on how we recruit, how we promote people, for me is very very important and so to that extent, I have asked Curt Custard, who is CIO at Newton, to chair the diversity and inclusion committee which brings together a number of people from different teams around the firm.

RS:
One of the areas I did want to ask you about was, as you know over the last year, because clients have been asking and because I think there has been internal demand from some of the investment team, we have launched a suite of sustainable products. Has the launch of those products changed the way you think about our responsibility in this area at all?

HS: Well, it has. It has put more focus in terms of how we invest, and you have done a lot of work with the team Rob in terms of helping us to define, and taking us on a journey as to what is ESG, and what is sustainable investing and there are different strands to it. There is exclusion, versus moving to inclusion, in terms of how we think about companies and how we invest in them. That has then also meant that we have had to do some training with the team, because the ESG approach has been very integral for the 40 years that Newton has been around, but shifting to sustainable has meant engaging with the clients to also understand what they need to get out of these products and strategies, but also engaging with our own team, because it is a shift in mind set to actually include companies on a positive basis rather than actually perhaps considering or not considering them or working on an engagement plan, so I think it has also meant quite a bit of training internally.

Responsible investment team

Our responsible investment team is part of our global research team and an integral part of the investment process. The team exercises voting rights and conducts proprietary ESG quality reviews of individual companies that are being considered for investment. It also conducts research on ESG issues and undertakes engagement.

Transcript

Ian Burger (IB): Why do we focus on ESG [environmental, social and governance analysis] in emerging markets or in any market for that matter? It’s a focus on materiality – what can have an impact on the underlying investment case.

Rob Marshall-Lee (RML): What we are trying to achieve from the investment side is to make sure the value stays in the business. You can have the best business in the world, fantastic growth opportunity, really nice investment thesis, but ultimately if you’re not benefiting from that as a shareholder and the value is not staying in the business, then what is the point. What we see in emerging markets quite often is there is some key actor – be it an oligarch or a state owned entity – where they are misaligned with your interests; they are trying to take value out of the business in a way that makes sense to them. We like companies where they are making the capital-allocation decision, recycling the cash into highly value-creative investments going forward, and that’s how we can compound our value.

IB: In a number of cases we have identified companies that have environmental or social opportunities, or we think that their risks are fairly high because they are not disclosing it, and the first port of call for us is to look at what the companies are physically putting in the public domain, what they are publishing. Often it can be the case and we have found examples on a fair few occasions where the companies aren’t telling their story; they have a great story to tell but they are physically not telling it. It’s only when we engage with the management that we find out that actually they are doing a whole lot more than we ever gave them credit for. In terms of how we analyse companies and the flags that we are looking for, one of the things we are very conscious of is not to apply a broad global brush on how a company should be doing on an ESG perspective. It is very important really to look at it in its local market context.

RML: We are looking for alignment of interests; we’re looking for the right kind of decision-making that works for us. We also need to go quite deep; we can’t just do a tick-box approach, because, for example, you can have a really well-run Indian family company and you can have a really badly run one, and superficially they can look exactly the same, so it’s only by looking at their track record over the last ten-plus years that you can understand the true difference – have they treated the shareholders well for a prolonged period of time. It’s very important that corporate governance is the first question we ask of every investment case; it’s not an afterthought or engagement after the fact. It’s the first question we ask because, if that’s not true for an emerging-market company, then why are you bothering?