Liontrust engagement and voting report 2021 - Flipbook - Page 24
The Sustainable Investment team has used voting to promote and
effect high-quality disclosure on social and environmental issues
since 2001. Since its range of funds invests in companies that are
leaders in sustainability, it encountered fewer proposals related
to social and environmental resolutions. In 2021, of the eight
proposals relating to social and environmental reporting, the team
supported six (75%). The two proposals they voted against were
those put to American Tower Corporation and Paypal Holdings
Inc respectively on establishing a human rights oversight committee
and to report on whether written policies or unwritten norms
reinforce racism in company culture. We thought both proposals
were overly subscriptive: we believe operational initiatives are
best left to the discretion of management, provided they represent
appropriate policies and procedures and reflect the best interests
of shareholders.
Fixed Income
Liontrust has two fixed income teams: the Sustainable Fixed Income
Investment team and the Global Fixed Income Investment team.
Both teams vote on corporate actions in relation to their portfolio
holdings, which may involve minor amendments to existing
indentures or, on occasion, decisions on accepting terms for tender
arrangements.
The Liontrust Sustainable Fixed Income team’s focus is predominantly
on investment grade issuers and, given the size of assets under
management in corporate bonds, it is unlikely to be invited to initial
discussions on transactions and the structuring of new corporate
bond issues. The team does engage with its holdings in ESG
aspects and on any controversies that have arisen. For example,
the team engaged directly with water utility companies to
gain a better understanding of how ESG risks are being
managed. More specifically, questions were raised with
a focus on combined sewer overflows, health & safety
incidents, monitoring and budgeted maintenance.
The team also engaged with telecommunication
companies on data privacy breaches and customer
satisfaction, and with banks to gain a better
understanding of corporate governance, executive
pay and how ESG risks are managed, with a focus on
environmental factors. All engagement ultimately initiates
from the science-based targets set by international treaties
such as the Paris Agreement.
As part of the Liontrust Global Fixed Income
team’s process, it judges whether a company is
an attractive long-term investment by analysing
factors which they call “PRISM”. The ‘S’ in
the PRISM research framework stands for
Sustainability in relation to environmental and
social factors. The team seeks sustainable
24 - Liontrust: Engagement and Voting Report 2021
investments in all senses: investing in issuers that can service their
debt beyond the maturity of any bonds purchased and not be
subject to large contingent liabilities or technological disruption.
The ‘M’ stands for Motivation: in assessing how the interests of
the managers and owners of a company are aligned with bond
investors. Effectively, this is about good governance. The team’s
preference is for considerable alignment, with owners and
management invested in the success of their enterprise for the long
term and whose motivations are aligned with those of bondholders.