From Tenant To Active Owner

From Tenant To Active Owner

Martin Currie privately engaged with over 250 publicly traded companies on Environmental, Social and Governance practices in 2017. The details of this activity, its outcomes and our general approach to engagement are now available in our third annual Stewardship Report.

Last year was busy for Martin Currie on private and collective engagements. We saw the commencement of an initiative on cybersecurity in the financial, healthcare and retail sectors and signed up a new joint project on corporate tax responsibility.

In our role as an active manager of concentrated portfolios, such engagement is core to our process. We take a holistic look of the publicly traded companies we invest in, evaluating all material information whether quantitative or qualitative.

John Pickard, Head of Investment at Martin Currie, says: “We find it somewhat curious that there are still sceptics when it comes to the merits of integrating ESG in the investment process. We believe stewardship is about thinking very broadly about what drives company performance and using the tools at our disposal for that purpose. ESG would not be material to a company’s performance unless stakeholders differentiated between good and bad practice.”

Below are a few concrete examples of Martin Currie’s stewardship from the report:

Environment: A large shareholder of a U.S. oil and gas company put forth a proposal that the Board of the company issue a report outlining climate change policies. In agreement with this shareholder, Martin Currie met with the oil and gas company to outline why this proposal would be important to shareholders. Martin Currie voted in favor of the proposal, it received a majority support from investors and since the voting, the company published a climate risk report.

Social: After reviewing a report from the China Labor Watch (CLW), it was brought to Martin Currie’s attention that this Taiwan-based hardware company had poor working conditions for its employees. Martin Currie met with the company’s Chief Financial Officer and Director of Finance to learn of the specific measures the company is taking to improve conditions. The company has a clearer approach and improved overall labor conditions, resulting in a lower staff turnover rate directly impacting the bottom line.

Governance: Martin Currie, a holder of a large UK financials company, engaged with the publicly traded company about a newly appointed Board of Director. This director, already holding two additional external roles, did not seem to have capacity to dedicate sufficient time to the company’s very large and complex business. After expressing concerns to the financials company, the director reviewed his/her position with the Board and decided to resign.

2018 Outlook: While there are many ESG issues on Martin Currie’s radar screens, the report notes four that are bound to flash with a steady light due to their materiality:

·        Pressure to improve Carbon disclosure

·        Heightened focus on Cybersecurity

·        Increasing integration of Sustainable development goals

·        Clearer path towards Sustainable financial system