Liontrust Responsible Capitalism Report 2024 - Flipbook - Page 62
ENGAGEMENT
As part of the investment process, the Multi-Asset team sends
questionnaires to managers to understand the risk-return profile of
the funds they manage. The team undertakes a questionnaire on
two levels:
At the fund level, the Multi-Asset team looks at how ESG is integrated
in practice and by whom. It is particularly interested in the investment
managers’ aptitude in incorporating ESG considerations into their
research process and how these are defined. The team explores
ways in which the potential investments engage and how they set
milestones with their underlying holdings, among other aspects.
• At the company level
• At the manager level
This assessment helps the Multi-Asset team group portfolios by level
of risk and by volatility type, resulting in a range of target risk
portfolios available to clients.
The team also investigates ESG-related components about the
manager and the management group, asking questions on:
Structure
(including the use
of screening and
level of resource)
Strategy
(including the
use of tools and
engagement)
Support
(including links
with pay and
compliance)
These questions focus on how managers consider ESG when
making investment decisions. The questionnaires are designed to
be as objective as possible, to gauge how the Multi-Asset fund
partners are building their ESG capability and how this is being
integrated within individual funds.
Company
What the group does Date
REIT- (Real Estate
Primary Health
Properties (PHP) Plc. Investment Trust)
specialising in the
rental of healthcare
facilities.
31/10/2022
Once the Multi-Asset team has responses to these questionnaires,
it undertakes engagement with fund managers to understand better
how the asset management company operates, how the manager
runs the fund(s) and what the potential risks and opportunities
(or exposures) are for the fund, the manager(s) and the asset
management company. This enables the Multi-Asset team to
determine the risk profile of the fund(s).
For the ESG-related questions, the team speaks with the fund
managers of the respective fund(s) and/or an ESG or Responsible
Investment representative from the asset management company.
This helps reveal how management firms are incorporating ESG
across their processes, what their priorities are and what current
challenges they face.
In addition to the Multi-Asset team’s analysis of the fund’s ESG integration
process, it engages with the managers during regular updates on
portfolio positioning and performance. As well as discussing examples
of where the manager has taken an active stance on a particular
ESG issue, the Multi-Asset team also identifies companies that may
be involved in controversies or which might have a sub-optimal
ESG rating. It then explores why the manager has conviction in a
specific holding and why the holding remains in the portfolio.
The team (or the Responsible Capitalism team on behalf
of the Multi-Asset team) also undertakes engagement with
various holdings.
Discussion topic
Discussion points / outcomes
Succession
Planning.
The team engaged PHP regarding the impacts to the Group
should the CEO step down. PHP believes it would be sufficient to
have the Chairman remain in place an additional year and have
the CEO become a NED (who would not be independent.) PHP
stressed its 3 existing NEDs are highly experienced and would
help provide continuity. The Group has also spent time developing
internal candidates (mainly the CIO).
Remuneration.
On Remuneration, the team asked about the suitability of the
proposal for pay for a new CEO. PHP’s Remuneration Committee
will work with consultants on an appropriate package including
LTIP and will benchmark for comparison against peers. The team
recommended that if the CEO steps down, that the Group also
consults with proxy advisor, ISS, about its proposal.
62 - Responsible Capitalism Report 2022