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The UK Stewardship Code (The ‘Code’) was first published in July 2010 by the Financial Reporting Council (‘FRC’) with the aim of enhancing the long-term returns to shareholders via improvements in the quality and quantity of engagement between investors and companies. The UK Stewardship Code 2020 is a substantial and ambitious revision to the 2012 edition of the Code. The new Code establishes a clear benchmark for stewardship as the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits to the economy, the environment and society.

The purpose of this document is to explain how Brown Shipley and its parent Quintet Private Bank (‘Quintet’) align business decisions and practices to the UK Stewardship Code 2020.

Principle 1 – Signatories’ purpose, investment beliefs, strategy, and culture enable stewardship that creates long- term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.

Brown Shipley has integrated responsible investing principles into our policy framework and decision-making process. Our ambition is to be a responsible member of the society in which we live and work. Our investment strategy and, as a result, our investment management decisions are designed around our clients’ personal and financial circumstances, their immediate and long-term goals, their attitude to risk, and their ethical preferences.

Our core offering brings together wealth planning and investment solutions to create a long-term wealth management plan. We also offer lending solutions that help clients to achieve the best results for them and their families. As a company, our goal is to be a trusted fiduciary of family wealth and serve clients through several generations. Our worth is measured by the impact we deliver in the long-term.

Brown Shipley and its parent Quintet maintain detailed policies and governance to integrate stewardship and Environmental, Social and Governance (‘ESG’) considerations into our processes.

Quintet has a formal Responsible Investing (RI) governance structure that includes a RI Board and a RI Committee. Oversight of the RI Policy lies with the RI Board, while the day-to-day activities and decision making are delegated to the RI Committee. The RI governance structure is demonstrated below:

Responsible Investment Governance Structure

Principle 2 – Signatories’ governance, resources and incentives support stewardship.

Principle 3 – Signatories manage conflicts of interest to put the best interests of clients and beneficiaries first.

Brown Shipley seeks to act in the best interest of its clients at all times. The fact that we can meet a wide range of client needs at all stages of the financial planning cycle is valuable to our clients. This vertically integrated value chain also carries some inherent conflicts of interest. We manage these in accordance with our Conflict of Interests policy and related procedures.

Brown Shipley has implemented steps to manage conflicts of interest in line with our Conflict of Interest Policy. Should a conflict of interest or potential conflict arise, our employees are required to report this to a Compliance Officer. An identified conflict of interest is recorded in a register, and Brown Shipley will carry out necessary steps in order to mitigate the conflict, and where mitigation is not possible, notify the client.

Training on conflicts of interest is provided annually to all relevant employees as part of Brown Shipley’s Compliance Awareness Programme which tests both their understanding and application of key principles.

At Brown Shipley, we apply a forward-looking approach to the identification and management of macro-economic and sector-specific risks, along with forthcoming legal and regulatory initiatives. Our fund managers and research analysts monitor markets on a daily basis. The investment team analyses risks and developments in economies and individual companies. They analyse the impact of market events and develop strategic responses to issues.

Principle 4 – Signatories identify and respond to market-wide and systemic risks to promote a well-functioning financial system.

Principle 5 – Signatories review their policies, assure their processes and assess the effectiveness of their activities.

We regularly review our internal processes to ensure they are in the best interest of our clients. On an annual basis, we review our key risks and test our methods to control and mitigate those risks. This involves key stakeholders outlining the main risk we face and identifying the policies and procedures we have in place to manage them. We then have individuals submit evidence that those policies and procedures are performed as intended and address the risks. If we identify gaps where a risk is not addressed adequately, then we take action to introduce new controls to prevent harm to our clients or other stakeholders.

Brown Shipley applies stewardship to discretionary portfolio management (assets managed for end-clients on a discretionary basis), advisory (clients who receive advice and make their own investment decisions), and fund management (assets managed through Brown Shipley’s mutual funds).

Brown Shipley has a team of relationship managers that assess clients’ personal and financial circumstances on an annual basis to ensure their investments are suitable. This includes understanding their risk tolerance and capacity for bearing losses in the context of their financial objectives and needs.

Brown Shipley publishes fund factsheets and investment updates on a regular basis to keep clients updated with performance of assets and macroeconomic climate. We frequently communicate our global investment outlook through daily, weekly, monthly and annual Counterpoint publications.

Principle 6 – Signatories take account of client and beneficiary needs and communicate the activities and outcomes of their stewardship and investment to them.

Principle 7 – Signatories systematically integrate stewardship and investment, including material environmental, social and governance issues, and climate change, to fulfil their responsibilities.

Brown Shipley believes that investors can make better investment decisions if ESG factors and responsible business practices are an integral part of the investment process. ESG integration provides a fuller picture of the opportunities and risks related to individual investments and a portfolio as a whole.

Brown Shipley and Quintet have developed minimum ESG requirements for all investments and formalised our approach, governance and procedures in the RI Policy. The minimum ESG requirements have been derived from relevant laws, our view on what constitutes being a good corporate citizen, and internationally recognised standards such as the United Nations (UN) Global Compact principles.

With RI Policy, Brown Shipley looks to invest in companies with positive ESG and sustainability practices. We exclude companies from our investment portfolios if they violate our minimum ESG requirements and cannot commit to changing within a timeframe set by Brown Shipley.

Brown Shipley makes direct investments into equities and bonds within the Brown Shipley funds and private client portfolios. Where suitable, we also utilise third party funds to achieve investment exposures to asset classes.

Research and selection of third party funds is conducted by Brown Shipley and the Group Fund Selection Team. The research and fund selection processes developed by this team are subject to governance of Brown Shipley. We aim to select funds that we believe will add value to our clients’ portfolios. The fund selection process combines both quantitative and qualitative analyses based on a number of factors that have impacted past performance, as well as those that can have a potential impact on future performance. We require third party funds to meet a number of criteria. This includes demonstrating a consistent approach is applied to investment decisions, sufficient resources are allocated to the investment manager, an adequate risk control framework is in place; and, importantly, the fund can meet its objective.

We conduct on-going monitoring to review the performance of funds. In addition, where there are any concerns identified at any point in between annual reviews, we will investigate immediately.

Principle 8 – Signatories monitor and hold to account managers and/or service providers.

Principle 9 – Signatories engage with issuers to maintain or enhance the value of assets.

Brown Shipley’s RI policy emphasises our ability to create positive change by being active shareholders, which we believe to be consistent with improving long-term investment returns for our clients. Engagement with companies is a vital part of this.

All of our investment activities are undertaken with a focus on the long-term interests of our clients. Since we represent a diverse group of clients, we invest in a wide range of companies. As many of these companies are large, our holdings may be small relative to the size of the firm. To be effective in engaging with these companies, we pool our influence with other like-minded investors. Engagement is managed by our parent company. Quintet uses the services of specialised external service providers who conduct engagement and voting on the group’s behalf.

We seek to be an active shareholder and positively influence the behaviour of the companies we invest in. “Active ownership” refers to voting at shareholder meetings and “engagement” refers to dialogue with companies to bring about change.

Quintet works with an engagement partner who has expertise in this area and represents multiple investors. This provides us with better access and more influence. Engagement with issuers can take the form of letter writing; phone calls, or face-to-face meetings. The four main aims of our engagement are to:

Use our influence to improve the investment case;
Verify information related to concerns voiced by media or research reports;
Use our influence to try to resolve any issues that Quintet considers to be in violation of our minimum ESG requirements; and,
Use our influence to encourage companies to improve their ESG practices and related disclosures, thereby adding to sustainable long-term value creation that also benefits society as whole.

Principle 10 – Signatories, where necessary, participate in collaborative engagement to influence issuers.

Principle 11 – Signatories, where necessary, escalate stewardship activities to influence issuers.

Brown Shipley and Quintet escalate stewardship activities via engagement with issuers and voting, which are carried out by specialised partners. Through our engagement partnership we have excellent access to companies’ senior management so that we can escalate issues. Our engagement partner will develop formal plans to influence to companies’ policies, performance and risks related to the environment, social and ethical issues, governance, as well as strategy, risk management, and communication.

Brown Shipley exercises our rights and responsibilities through Quintet, where we work with a specialised voting partner who provider voting services. This includes research and recommendations on the matters put to shareholders for a vote, collection of the ballots for Annual General Meetings (‘AGMs’) and Extraordinary General Meetings (‘EGMs’), and casting the actual votes as part of the voting process.

The voting is monitored by the Quintet Voting Committee, which has the authority to decide whether or not to vote and whether or not to follow recommendations from the voting partner. We publish an Active Voting Report so that our clients and stakeholders can see how many companies we engaged with and how we voted in company meetings.

Principle 12 – Signatories actively exercise their rights and responsibilities.

Our Commitment to the Financial Reporting Council’s Stewardship Code 2020