Standard Life Investments (Corporate Activity)
SRI / Ethical Overview
At Standard Life Investments, our approach to responsible ownership is materiality focused, identifying the key issues affecting performance. We aim to be the industry leader in ESG, contributing to a sustainable world and a better financial future for our customers. Our approach centres on protecting and enhancing the investments held on behalf of our clients and includes the following:
• Materiality-driven analysis: Our dedicated Responsible Investment and Governance & Stewardship Teams provide robust analysis of the themes and trends that have the potential to impact financial performance.
• Sustainability ratings: We identify companies at the forefront of their industries (leaders) and those that are behind the market (laggards) in their management of sustainability issues.
• Systematic engagement: The active engagement with companies undertaken by our teams highlights risks and opportunities, and encourages greater transparency and accountability.
• Active voting process: We vote all shares for which we have voting authority except when otherwise instructed by the beneficial owner of these shares or, where, for practical reasons (such as share-blocking), this is not appropriate.
As of 30 September 2015, Standard Life Investments had £250.6 billion of assets under management. Our approach applies across the firm to varying extents as appropriate, based on the particular asset class. Within equity, fixed income and real estate, we had £141.1 billion assets under management. In addition to integrating ESG matters into our investment process, our in-depth analysis can also be applied across a range of dedicated responsible investment styles, including ethical products, sustainable & responsible investment (SRI) and impact investing solutions.
Our responsible ownership strategies apply to equity and fixed interest assets in all geographic regions.
SRI Policies (Primary strategy in bold)
- - No primary policy area
- ESG/SRI engagement Find funds and fund management companies that actively encourages higher 'environmental, social and governance' and/or 'sustainable and responsible investment' practices amongst investee companies - when positive change is aligned with the best interest of investors. This may apply to a single fund or a group of funds. Read fund literature for further information.
- Responsible Ownership policy for non SRI funds Find funds run by fund managers that apply Responsible Ownership or 'Stewardship' policies to all or most of their investment assets. This means that active involvement (e.g. voting, dialogue) with the companies they invest in across funds (not normally limited to ethical or SRI options.) Read fund literature for further information.
- Integrates ESG factors into all/most fund research Find fund management companies that research environmental, social and governance (ESG) issues when deciding whether or not to invest in a company. This typically applies to all funds, not only those which are promoted as being 'ethical' or 'SRI themed'. This is increasingly often used as a risk management tool.
- Vote all* shares at AGMs/EGMs This fund manager votes or aims to vote all* the shares they own at Annual General Meetings and Extraordinary General Meetings. A commitment to voting shares is a key indicator of 'responsible share ownership' - where fund managers consider - and express their views on - the key business issues effecting the companies they part own. (*Allowance is made for exceptional situations such as when shares are in the process of being sold.)
- In house responsible ownership/voting expertise Find fund / fund management companies where there is in-house expertise that enables the fund manager to make their own decisions on issues such as shareholder voting, setting of in-house guidelines - for example - particularly with regard to environmental, social and governance (ESG) issues.
- Responsible Ownership/ESG a key differentiator The fund managers have said they consider this area to be a key differentiator for their business
- UK Stewardship Code signatory Find fund managers that are signatories to the FRC UK Stewardship Code, which sets out a framework for constructive investor / investee relations where fund managers are encouraged to behave as responsible 'company owners'.
- Publish Responsible Ownership/Stewardship report Find fund management companies that publish information on their approach to responsible investment ownership - also known as 'Stewardship' - following the introduction of 'the Stewardship Code'. This sets out their approach to voting, dialogue with company management and any related activity. This is publicly available.
- Publish full voting record Find fund management companies that publishes a full record of how they vote at AGMs and EGMs. This information is publicly available.
- Review(ing) carbon/fossil fuel exposure for all funds Find funds / fund managers that are reviewing or have reviewed their exposure to carbon intensive industries including (but not only) mining, oil and gas companies. This work is being carried out in the context of climate change related concerns, and may often reference international agreements.
- Regularly lead collaborative ESG initiatives Find funds managed by fund management companies that regularly initiate or help run industry wide (collaborative) investor projects aimed at raising environmental, social and governance standards amongst investee companies.
- PRI signatory Find fund management companies that have signed up to the UN backed 'Principles of Responsible Investment' initiative.
SRI / Ethical Policy
In-Depth Research and Engagement
At Standard Life Investments, we pride ourselves on our in-depth analysis to ensure we fully understand our investments. Our multi-layered process consists of two complementary disciplines: in-depth research and company engagement. These activities are conducted in conjunction with our investment desks across Standard Life Investments and ultimately feed into our investment process.
We analyse ESG themes and trends on a global scale, which also includes a focus on a region or a sector particularly impacted. Using macroeconomic analysis of megatrends, as well as existing and future regulation and sector and company-specific risks, we determine the themes that are of greatest significance for our investments. We then use our ongoing engagement programme to encourage companies to change their behaviour where required and help them meet the high standards that we set.
Our ESG-focused teams undertake a systematic programme of engagement with companies in which we are or may become a shareholder. In 2015, Standard Life Investments conducted over 600 direct engagements with companies on ESG issues, including more than 100 direct engagement meetings conducted by the Responsible Investment Team on environmental, social or business ethics issues. Meeting directly with companies enables us to learn more about a company’s sustainability strategy and performance, appraise company management, encourage best practice on ESG issues and/or exchange views. Our approach is materiality focused, identifying the key issues affecting performance. Our engagement activities are prioritised by targeting six areas:
1. Financial exposure – our top holdings by financial value (both equity and debt) and geography
2. Weight of influence – where we hold a sizable portion of shares outstanding
3. Client-driven – based on specific requirements and concerns
4. Thematic engagement – engaging with companies exposed to recent trends
5. Poor performers – those in breach of international standard and conventions
6. Event-driven engagement – based on environmental or social events
In our ESG analysis, we assess the extent to which the financial value of an investment is impacted by ESG issues by considering their exposure to the relevant issue as well as their management of this exposure. Based on research and engagement with companies, the Responsible Investment Team scores companies on their policies, management systems, performance and reporting. These ratings benchmark companies against others in their sector using a proprietary, in-house assessment tool and are incorporated into our internal research platforms, together with detailed meeting notes and thematic research. In addition, if the Governance & Stewardship Team has significant concerns about a company, it initiates a health warning on that stock.
Further information on our engagement approach can be seen on our website at http://www.standardlifeinvestments.com/governance_and_stewardship/what_is_corporate_governance/engagement.html and http://www.standardlifeinvestments.com/sustainable_and_responsible_investing/engagement.htm
Standard Life Investments is a strong supporter of the principles of good stewardship that are set out in the Stewardship Code published by the Financial Reporting Council in July 2010, and updated in September 2012. We believe that it is mutually beneficial for companies and long-term investors such as Standard Life Investments to have a relationship based on accountability, engagement and trust. Such a relationship helps to ensure that each has a good understanding of the other's views and expectations and it enables us to exercise constructive influence as and when appropriate. We believe that this serves to enhance the long-term value of our clients' investments and to protect their interests when necessary.
Likewise, it is very important that we are accountable to our clients for our stewardship of their assets. Accordingly, we seek to have a transparent and open dialogue with them about how we engage with the companies in their portfolios. Their feedback helps to shape our views and approach. Our Responsible Investment Team publishes quarterly updates on our website, outlining emerging themes and topics and detailing the engagements undertaken, and our Governance & Stewardship Team produces an annual review outlining their activity. We also provide full transparency of our voting activity on our website. These can be found at: http://www.standardlifeinvestments.com/sustainable_and_responsible_investing/documents.html and http://www.standardlifeinvestments.com/governance_and_stewardship/what_is_corporate_governance/voting_disclosure.html. Our engagement and our voting records are audited annually by PricewaterhouseCoopers LLP. This demonstrates our commitment; we are one of the few teams that apply such rigor to our transparency.
We are signatories to the Stewardship Code. We comply fully with all the Code's principles in respect of our UK equity investments. We continue to take steps to strengthen our stewardship capabilities in line with the Code in respect of our European equity investments, and we also use our best endeavours to apply the spirit of the Code's principles in respect of our other global equity investments on a case-by-case basis. Please refer to http://www.standardlifeinvestments.com/governance_and_stewardship/the_uk_stewardship_code/index.html for further details.
Active Voting Process
Voting is the primary method by which we exercise our clients’ rights as shareholders and is the means by which boards of companies can formally be held to account. The Governance & Stewardship Team has oversight of all our voting globally. Standard Life Investments votes all shares for which we have voting authority except when otherwise instructed by the beneficial owner of these shares or, where, for practical reasons (such as share-blocking), this is not appropriate. We use our Global Voting Platform to achieve this.
We implement considered voting policies based on the Governance & Stewardship Principles & Policy Guidelines approved by our board when voting the shares we manage. Our Regional Voting Guidelines, covering all major regions of the world where we invest on behalf of our clients, are available on our website at http://www.standardlifeinvestments.com/governance_and_stewardship/what_is_corporate_governance/principles_and_policies.html. We apply our guidelines with appropriate professional care and flexibility, holding boards to account, engaging where necessary, and at all times representing the best interest of our clients.
Resources, Affiliations & Corporate Strategies
Our Responsible Investment and Governance & Stewardship Teams currently comprise 12 investment professionals with an average of 19 years of experience in the industry and an average of eight years at Standard Life Investments. These teams work closely together to help understand how companies are being managed, bringing very different skills and knowledge to the process. While the latter focuses mainly on board level issues, the former assesses whether the policies put in place at the top are implemented at the operational level. This level of resource and their different access points for engagement add considerable value to the investment process.
To facilitate this process, the teams meet regularly and share information across a broad range of issues. For example, the Teams have jointly developed a policy for voting on all environmental and social resolutions lodged at company AGMs and EGMs, ensuring that the Responsible Investment Team’s in-depth knowledge and expertise on environmental and social matters is integrated into the voting process managed by the Governance & Stewardship Team. The heads of both teams also meet bi-monthly to discuss wider strategic issues.
Team biographies can be found on our website at: http://www.standardlifeinvestments.com/sustainable_and_responsible_investing/our_team.html and http://www.standardlifeinvestments.com/governance_and_stewardship/our_team/index.html
The Responsible Investment and Governance & Stewardship Teams are active throughout Standard Life Investments, working closely across asset classes with all of our investment teams. The overall objective is to ensure every facet of ESG is integrated across our business, and our dedicated in-house resources are on-hand to provide advice and expertise to our Portfolio Managers and Analysts. Importantly, we have the buy-in from all our colleagues regarding ESG issues and the positive impacts this can have on our business as a whole, as well as on the performance of our clients’ investments.
Internal vs External Resources
The majority of our research and analysis of responsible investment issues is conducted internally by our Governance & Stewardship and Responsible Investment Teams. Currently, our main data providers are MSCI, Sustainalytics, Bloomberg, Institutional Shareholder Services (ISS) and IVIS. Further sources of idea generation include climate indices, CDP, MSCI, ATNI and ATMI, to name just a few. Our sources are under continual review to ensure we have access to the most appropriate, up-to-date research that supports our investment approach, processes and systems.
Internal research is supplemented by the use of the third-party ESG research providers, which provide screen-out tools for our ethical and SRI funds. However, our Responsible Investment Team reviews the analysis and will upgrade/downgrade companies if our analysis of the company differs from the provider's.
Within individual portfolios, ESG risk and opportunities is considered alongside other more traditional metrics and analysis. The appointed Portfolio Manager is ultimately responsible for investment decisions within their fund.
Participation and Dialogue
Standard Life Investments is active in the public debate about stewardship and sustainability. We are a signatory to the UK Stewardship Code and were a major contributor to its formulation. We support and are a signatory to the UN-backed Principles for Responsible Investment (PRI). We formally participated in the investor-led collaborations with fellow members of the PRI on anti-corruption strategies and water risks in the agricultural supply chain, and are currently members of three PRI Steering Committees:
- Human Rights in Extractive Industry, which focuses on collaborative engagement with extractive companies facing human rights risks
- Employee Relations, whose work identified a number of labour key performance indicators linked to financial performance that now form the basis of the PRI’s collaborative engagement initiative on employee relations
- Listed Equities, which aims to outline examples of best practices as to how ESG is integrated into the equity investment process
In addition, we are also part of Investment Leaders Group (ILG), a group of 11 leading asset managers and owners who have joined forces with the University of Cambridge in a three-year project designed to promote understanding of how investors can realise positive environmental and social outcomes alongside robust, long-term investment returns. The project is championed at the most senior levels in the member companies, including Rod Paris, Head of Investments at Standard Life Investments, with a view to integrating the research and best-practice recommendations across their businesses. The members collaborate with academics at the Cambridge Judge Business School on some of the most fundamental issues in responsible investment.
We also participate extensively in UKSIF, EUROSIF, ICGN, ECGI, Asian Corporate Governance Association, CBI Companies Committee, Conference Board, Investment Association’s Governance and Engagement Committee, Corporate Governance Forum, Global Investor Governance Network, Global Auditor Investor Dialogue, Extractive Industries Transparency Initiative and GRI. We take an active role in monitoring and seeking to influence European policy developments, visiting Brussels at least twice per year to meet with officials.
Furthermore, we are and have been involved in a number of public policy debates relating to both the role of government and business to promote Corporate Responsibility. These include:
- The European Commission’s consultation on human rights and information and communication technology
- The Equator Principles draft guidance
- The DTI Consultation Document on the Operating and Financial Review and Directors’ Report
These initiatives have provided useful opportunities to work with others to share information and collaborate on matters of common interest, and all of the insight gained is fed back to our investment teams via the ongoing communications described previously. The purpose of our participation is at all times to promote the development of an environment that enhances investment returns for our clients and derives insights for their benefit. Further details of the above and other initiatives can be found on our website at: