Liontrust engagement and voting report 2021 - Flipbook - Page 13
Controversies
All Liontrust investment teams are alerted to controversies about
holdings within their funds through MSCI. In some cases, the issue will
be discussed with Liontrust’s Stewardship Manager or the company
directly to better understand a matter.
The Sustainable Investment team has its own approach on
assessing controversies that feeds into its investment process. Once
the team is aware of the controversy, it analyses the seriousness
of the allegations made and how the business is responding. This
provides the context for engagement with the relevant stakeholders.
In 2022, the Governance and Stewardship team will more
proactively engage fund managers on controversies that are
considered ‘severe’ by MSCI.
The team initially downgraded Kingspan’s sustainability rating (in its
proprietary matrix) from A1 to A4 in December 2020, which was a
significant reduction in terms of management quality. This meant the
team viewed the company as higher risk and its weighting in the
portfolio fell substantially as a result. The team’s view at that stage
was to reserve final judgement until after the Inquiry concluded
and it could discuss the findings and recommendations with the
company’s management and other parties.
Outcome example of the Sustainable Investment team process
As part of continuing engagement, the team requested a meeting
with the new Chairman to understand his view of how the culture
had changed and needed to change further towards greater safety.
This was not forthcoming, however, which was disappointing given
the large holding and long-term support of the business. This lack
of engagement has prevented the team from improving neither
Kingspan’s rating from A4 nor its management quality rating.
Kingspan: The team has invested in Kingspan for more than 15
years and has held the company in high regard for the benefits its
products bring, playing a key role in energy efficiency in buildings
and therefore the reduction of carbon dioxide emissions. Revelations
from the Grenfell Tower Inquiry, however, raised concerns about the
culture and controls within the insulation business.
Liontrust: Engagement and Voting Report 2021 - 13