STEWARDSHIP ACCOUNTABILITY FORUM 24 November 2015
STANDARD LIFE INVESTMENTS Keith Skeoch, Chief Executive Officer Mike Everett, Governance & Stewardship Director Amanda Young, Head of Responsible Investment
STEWARDSHIP Long-term relationship Clients Companies Stakeholders Built on accountability, engagement and trust Reputation earned over a long period Central to our Investment Proposition Good for our clients The right thing to do
STANDARD LIFE INVESTMENTS’ HERITAGE Cadbury Report 1992 Institutional Shareholders Committee Code 2009 UK Stewardship Code 2010 Kay Review 2013 Building Momentum for Effective Investor Stewardship
CONTINUING JOURNEY Increasing shareholder rights Increasing societal and policy maker expectation Increasing client demand Increasing global exposure Broadening focus across capital structure Alternative investment propositions
TWO TEAMS, ONE VISION, SIMILAR MISSIONS Governance & Stewardship team Responsible Investm ent team To act in the best interests of our clients and to To be the industry leader in responsible seek to protect and enhance the value of their investment, contributing to a sustainable world and a better financial future for our customers investments in accordance with our Governance and Stewardship principles and policy guidelines Role Role • To exercise the rights attached to the ownership of • To research, analyse and engage on environmental and social issues that have a securities by our clients bearing on SLI’s client portfolios. • To mitigate the risks to client portfolios by a process of analysis and engagement with • Foundations in the UN Global Compact companies on matters of Governance and Employment issues Stewardship Human rights & community issues • To exercise influence in matters of public policy Environmental matters and regulation where these relate to Governance and Stewardship and the interests of our clients Anti-corruption • To be accountable to our clients for our activities undertaken on their behalves
ESG ENGAGEMENT: TWO DIFFERENT SKILL SETS Dialogue on m aterial ESG Dialogue on m aterial ESG issues issues Responsible Responsible Governance & Governance & Investment Team Investment Team Stewardship Team Stewardship Team Enhanced ESG Enhanced ESG Understanding Understanding Add value Add value Com pany Com pany Com pany Com pany Operational level Operational level Board Level Board Level Investm ent Process Investm ent Process
GOVERNANCE & STEWARDSHIP Contributing governance insights to the investment process Analysis of issues including governance change Helping fund managers take account of governance risk– governance health warning Focused engagement programme Exercising investor responsibilities Oversight of voting globally Principles & Policy Guidelines ISS proxy voting platform Attending Annual General meetings Our broader role Encouraging best practice Taking part in membership organisations Contributing to the policy debate
ENGAGEMENT Standard Life Investments approach to engagement To hold companies to account To promote high standards and best practice Engagement Summary 2014 Topics covered include Reputational risk 16% Meetings & other engagements 245 Nominations process 45% Remuneration Voting engagements 209 Accounting and Auditing 39% Remuneration consultation 88 Collective engagement Source: Standard Life Investments, 31 December 2014
VOTING SUMMARY Graphic Breakdown of Votes against Board Reasons for Votes Against Recommendations* US (23%) 12% 10% Board Matters (12%) 23% UK (15%) 25% 5% Pacific Basin (24%) Remuneration and Share Schemes (35%) 22% Europe ex UK (22%) 35% 16% Other (28%) Canada (5%) 28% Pre-emption/Dilution Matters 24% Rest of World (10%) (25%) *Excluding Japan We have excluded Japanese votes against management recommendations from the tables as the figures are disproportionately high when compared to other geographical regions and also when compared to other reasons for votes against. This is due to our high instances of votes against board matters in Japan. The issue that dominates the Japanese market is board independence. Although efforts are being made by many investors and corporate bodies to effect change, independent representation on Japanese boards remains low when compared with the UK and US markets. It is our policy in Japan to vote against director elections in situations where the board does not have at least two unaffiliated outsiders, although we will not vote against key executives or independent directors. In 2014, the shares we manage on behalf of our clients were voted against management recommendations on 296 resolutions at Japanese shareholder meetings. Of these resolutions, 92% of votes against management recommendations related to director elections Source: Standard Life Investments, 31 December 2014
2014 ENGAGEMENT AND VOTING HIGHLIGHTS Engagement Voting Sports Direct Barclays RSA Burberry Glencore Hellerman Tyton Implenia Severfield International Consolidated Pfizer Airlines Afren Ryanair Vedanta Samsung Engineering Micro Focus International HSBC Holdings Royal Dutch Shel l
BUILDING AN INTEGRATED MODEL Integration of environmental & social matters Ethical Ethical Focus on products products Add Value change philosophy Analysis of risk and opportunity
DEFINING AND INTEGRATING ESG Environmental, social and governance factors Assessing performance, risks and opportunities Part of our investment process Use the “Focus on Change” investment philosophy Not about exclusions being good stewards of our clients money Cyber Clim ate Health & Access to Board Culture Obesity Rem uneration security Change safety independence Medicines Labour Board Freedom of Clean Corruption Biodiversity Tax issues Auditors rights diversity Association technologies
EXAMPLES OF ENGAGEMENT 2014 Arctic Drilling London Mining* Water risks in Tax Avoidance Bribery and BNP Paribas shale operations corruption Anadarko GSK Living wage Cineworld Im pacts on Freedom of biodiversity / Product recalls expression and indigenous peoples General Motors data privacy Soco Telenor Labour disputes Lonmin Health and safety in textile industry Genetically ABF m odified crops BASF Stranded Assets Glencore * Now in administration as a result of operations in Sierra Leone Source: Standard Life Investments
GOVERNANCE & STEWARDSHIP TEAM We have a dedicated team that focuses on developing and implementing best practice standards. Our team was established in 1992 and is regarded as one of the leading teams in the governance and stewardship arena. Guy Jubb Alison Kennedy Jonathan Cobb Mike Everett Global Head of Governance & Governance & Stewardship Director Governance & Stewardship Director Governance & Stewardship Director Stewardship Douglas Wilson Joanna McNeill Nicola Robertson Claire Leighton Nick Duncan Governance & Stewardship Governance & Stewardship Governance & Stewardship Process Governance & Stewardship On Governance and Stewardship Manager Manager & Controls Manager Desk Support Manager 1
RESPONSIBLE INVESTMENT TEAM Head of Responsible Investm ent Responsible Investm ent Analyst Head of the Responsible Investment Team Analyst in Responsible Investment Team 4 th year investment experience at Standard Life Investments, 3 rd year investment experience at Standard Life Investments, 18 years experience in the industry. 11 years experience in the industry. Specialist experience includes extensive know ledge of Specialist experience of assessing and m anaging ESG risks w ithin com panies. Key focus on anti-bribery & corruption responsible investm ent strategies, trends and them es; high level engagement and integration expertise. Key focus on Am anda Young Andrew Mason labour issues. Master of Arts (Hons), Diploma in Sustainable Business, ESRA Certificate BSc (Hons), SFA Representative Member of FTSE ESG Advisory Committee ex-UKSIF Board Director for six years Responsible Investm ent Analyst Responsible Investm ent Analyst Analyst in Responsible Investment Team Analyst in Responsible Investment Team 3 rd year experience at Standard Life Investments, 5 years 2 nd year investment experience at Standard Life Investments, 5 experience in the industry. years experience in the industry. Specialist experience of quantifying and valuing environm ental Specialist experience in com pany analysis, engagement and externalities and building integration valuation m odels. Key integration. Key focus on hum an rights Alix Chosson Rebecca Maclean focus on environm ental m atters MA (Economics & Finance), MA (Portfolio Management) BA, MA, Passed all three levels of the CFA Program Responsible Investm ent Graduate Graduate in Responsible Investment Team 1 st year experience at Standard Life Investments and in the industry. Specialist academ ic know ledge of environm ental cost benefit analysis and clim ate change m odelling MA Joint Honours (Philosophy & Economics) Katharina Lindm eier
STEWARDSHIP ACCOUNTABILITY FORUM 24 November 2015
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