Active Ownership | Brown Shipley

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As a bank, we at Brown Shipley have adopted a responsible investment policy of which active ownership is an integral part. Our responsible investment policy emphasises our ability to create positive change by being active owners, which we believe to be consistent with improving long-term investment returns for our clients. Engagement with the companies in which we invest is a vital part of this. Moreover, active ownership is one of the six Principles for Responsible Investment [https://www.unpri.org/] of which our parent Quintet is a signatory.

All of our investment activities are undertaken with a focus on the long-term interests of our clients. This is the focus of our investment policy, and our active ownership policy is fully aligned with these beliefs.

Since we represent a diverse group of clients with diverse holdings across the investment universe, 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 believe that collective engagement is likely to achieve better results than efforts we might undertake on our own. We have therefore hired specialised external service providers to conduct engagement and voting on our behalf.

In cases where collective engagement or voting is not practical, we may undertake direct engagement ourselves.

Governance, Implementation, Scope

The Management Committee of Quintet (Brown Shipley is an affiliate of Quintet) is responsible for our investment activities, including our responsible investment activities, of which active ownership is part. With respect to active ownership, this policy includes:

Providing input on our priorities to our voting and engagement service providers,
Determining whether our priorities and principles require specific engagement or voting activities on our behalf,
Monitoring and reporting on the voting and engagement activities conducted on our behalf, and
Reviewing periodically the selection of external voting and engagement providers.

Brown Shipley’s Responsible Investment Policy applies to discretionary portfolio management (assets managed for end-clients on a discretionary basis), advisory (advice on assets of clients who ultimately decide themselves on their investments), asset management (assets managed through Brown Shipley’s mutual funds).

We will engage on behalf of both equity and fixed income securities held in investment funds we manage or in client accounts we manage or actively advise. Voting is of course restricted to equity securities.

Key engagement priorities

The full range of issues on which our service providers may engage incudes many different topics. This recognizes the increasing breadth of sustainability issues now material to the companies in which we invest. As we work with our service provider, it is important that our engagement focuses on the most critical areas, and we will work actively with our engagement provider in determining those priorities. For 2023, the focus includes the following areas:

Climate change: In the lead-up to COP 26, over 3,000 companies committed to achieve net-zero emissions. However, an analysis of the largest emitters in the world showed that while approximately 50% had net-zero goals, only 20% had short and medium-term emissions reduction targets and only 7% had targets aligned with the Paris Agreement goals. The emphasis of our engagement is therefore on matching long-term commitments with a Paris-aligned strategy and targets. We also support action to ensure that published financial accounts and political lobbying are similarly aligned. Engagement is now broadening out to include the banks, ensuring that their net-zero ambitions match those of asset managers. The Glasgow Financial Alliance for Net-Zero brought together a broad coalition of financial actors representing in aggregate $130 trillion of financial assets, including $57 trillion or approximately 50% of global assets under management. This broad commitment opens up the prospect of further collaborative and escalated engagements with companies. We will continue to support action at Climate Action 100. As the climate changes, and extreme weather events become more frequent and severe, it will be important for companies to demonstrate that they have a physical risk strategy.
Human and labour rights: As we continue to engage on this enduring priority theme, we will seek to ensure increased vigilance in the protection of human and labour rights during and following the coronavirus pandemic, which is exacerbating inequalities, increasing the risks of unacceptable working conditions such as modern slavery and low pay and limiting access to fundamental needs such as food and medicine, including effective coronavirus vaccines. We continue our focus on indigenous and community rights and on high-risk regions such as disputed territories or areas of conflict. We will further focus on digital rights in the virtual world, such as challenges to the right to data privacy, the right to freedom of expression and discrimination through the development of artificial intelligence. We will continue to promote corporate application of the UN Guiding Principles (UNGPs) on Business and Human Rights at 10 or UNGPs 10+ – the next decade of implementation of the UNGPs. We will also focus on escalated breaches of the UN Global Compact principles for human rights including considering voting against directors if not being adequately remediated.
Human Capital Management: The coronavirus pandemic has shone a light on employers’ treatment and engagement of their workforce. In 2022, we will focus our engagement with companies on providing fair wages and benefits so all can afford a decent living standard, as well as development and implementation of a human capital management strategy to promote best practice physical (including health and safety) and mental workplace wellbeing. Furthermore, we will continue our focus on diversity, equity, inclusion and representation; asking companies to develop a strategy and action plan to close the ethnic pay gap and achieve proportionate ethnic and gender representation at all levels. We will also challenge companies to expand their consideration of diversity metrics to include representation and equity for the e strategies should include articulation of culture and employee proposition to improve workforce loyalty and wellbeing.
Board effectiveness: To enhance the quality of board performance and corporate decision-making, we will focus on ensuring that boards make improvements to ethnic diversity that at least match the recent progress on gender diversity. The goal will be for the board to achieve representation that is reflective of the diversity of the stakeholders it aspires to serve. We will also ask boards to reconsider the lessons of the pandemic, including the possibility for more internationally diverse board appointments, enabled by more effective remote working practices. We remain committed to improving a board’s “software”, relating to how it functions, in addition to its “hardware” (relating to its composition and structure). The board should continuously monitor and assess the prevailing company culture to ensure it is in line with company’s purpose, strategy and values.

Key voting priorities

The primary focus of our voting decisions will be good governance of the organisation, including management of material environment and social risks. Governance structures that drive performance, create shareholder value and maintain a proper tone at the top are a key to mitigating risk and building long-term shareholder value. Boards that work to protect and enhance the best interests of shareholders are independent, have a record of positive performance, and have members with a breadth and depth of experience.

Our voting services provider has codified their approach to reviewing how boards are overseeing environmental and social issues. In instances where it is clear that a company has not properly managed or mitigated environmental or social risks to the detriment of shareholder value, or when such mismanagement has threatened shareholder value, we may vote against members of the board who are responsible for the oversight of environmental and social risks.

Reporting

As our Parent Company Quintet is a signatory of the Principles for Responsible Investment, we are committed to reporting on our active ownership policies and practices. In addition to our annual PRI Report, we will publish annually an overview of our engagement and voting activities. Our reporting currently consists of this policy, and will be updated periodically, prior to our first full active ownership report.

Conflicts of interest

In general, Brown Shipley exercises voting rights solely in the general interest of its clients, irrespective of its own interests, and in compliance with its guiding principles. Brown Shipley has introduced a procedure to anticipate, identify and manage potential conflicts of interest.

If exercising its voting right for a given company exposes Brown Shipley to a significant conflict of interest, the team responsible for the “exercise of voting rights” of Brown Shipley will refer the matter to the Head of Compliance, who will decide the appropriate measures, including the decision to participate in said company’s general meetings.

Read Brown Shipley's Active Ownership update here.

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