Liontrust Responsible Capitalism Report 2024 - Flipbook - Page 119
EXAMPLES OF SPECIFIC TYPES OF VOTES
Clients sometimes request examples of specific types of votes that
Liontrust’s investment teams have cast. During 2023, there were
examples of the following types of votes:
• A vote against the board: see the example above from – The Economic Advantage team for James Cropper’s AGM
– The Multi-Asset team for Pantheon Infrastructure’s AGM
• A vote against a shareholder resolution: see the example above
from – The Global Innovation team for Salesforce’s AGM
• A vote that was not in line with Liontrust’s voting policy: see the
example above from – The Global Fundamental team (UK) for Mears Group’s AGM
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
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 company for the long
term and whose motivations are aligned with those of bondholders.
• A vote that was withheld: see the example above from –
– The Global Fundamental team (Global) for Vertiv Holdings
AGM
OUTCOMES OF RESOLUTIONS
Liontrust monitors the outcomes of resolutions that it votes. For
reference, see the proxy voting examples above from the Economic
Advantage team and the Global Fundamental team.
FIXED INCOME AND VOTING
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 on ESG aspects and
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
SHARE/STOCK LENDING AND RECALL
Liontrust operates a share lending programme when it believes it is
in the best interests of investors or it is requested by clients. If stock
has been loaned, then the fund manager gives up the voting rights
and must recall the loaned stock to vote. Liontrust’s Responsible
Capitalism team aims to recall stock, whenever possible, through
the relevant custodian prior to a meeting deadline. The team also
restricts stock being loaned when it is aware of an upcoming
meeting.
ISSUES RELATING TO PROXY VOTING DURING 2023
During the year under review, Liontrust encountered a proxy voting
incident when one of the Group’s custodians transferred coverage
of the UK market to a sub-custodian. There were transition issues,
the most significant of which was that ballots were filed with ISS
by both the incumbent provider and the new sub-custodian. This
resulted in duplicated ballots.
These duplicated ballots impacted the voting cut-off date and
brought it forward over a weekend. The Group nearly missed the
cut-off deadline for casting a vote which was categorised as a
“significant” vote by Liontrust. As a result, the Responsible Capitalism
team engaged with ISS which took a proactive stance and liaised
with the custodian to ensure Liontrust’s votes were cast as the Group
had intended. ISS then investigated the issue retrospectively.
Liontrust also engaged directly with the custodian and sub-custodian
and asked the custodian to improve its processes so an event like
this would not be repeated.
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