1Protect and enhance the value of clients’ assets through engagement with companies
2Encourage business and management practices that support sustainable financial performance over the long-term
3Provide specialist insight on environmental, social and governance (ESG) considerations to all investment strategies, whether indexed or actively managed.
This overlay approach ensures that KGH can most effectively use its voice as a long-term, actively engaged shareholder to protect the economic interests of our clients.
To us, it’s not a matter of compliance. Corporate governance is a matter of the quality of leadership provided by the board of directors and the quality of management delivered by the executives. We believe that companies with sound corporate governance practices, including how they manage the environmental and social aspects of their operations, offer better risk-adjusted returns over time.
We engage in a constructive manner. Our aim is to build mutual understanding and ask questions, not to tell companies what to do. Engagement is core to our stewardship program as it helps us assess a company’s approach to governance in the context of its specific circumstances. To that end, we engage with about 1,500 companies a year on a range of ESG issues. We meet with executives and board directors, communicate with the company’s advisors, and engage with other shareholders where appropriate. Engagement helps better inform our voting and investment decisions.
We undertake proxy voting as our broadest form of engagement . Every year, we vote globally at more than 15,000 shareholder meetings, on over 130,000 proposals . Our starting position is to support management. We generally prefer to engage in the first instance where we have concerns, and give management time to address or resolve the issue. We vote against management proposals if the company is unresponsive or seems not to be acting in the long-term interests of shareholders.
We believe that the best companies strategically manage all aspects of the business — it’s a matter of operational excellence. ESG considerations are integral to our investment stewardship activities. Our clients are long-term investors and it is over the longer term that ESG risks and opportunities tend to be material and have the potential to impact financial returns. The best companies ensure that their investors, as well as other constituents of the company, have enough information to understand the drivers of, and risks to, sustainable financial performance. KGH Investment Stewardship team supports the investment teams to integrate material ESG considerations in their investment analysis.
Voting guidelines, reports and position papers
Our voting guidelines are just that — guidelines intended to help companies understand our thinking on key governance matters. They are the benchmark against which we assess a company’s approach to corporate governance and the items on the agenda for the shareholder meeting. Our guidelines are applied pragmatically. Our vote decision is taken to achieve the outcome that we believe best protects our clients’ long-term economic interests. The guidelines are reviewed annually and updated as necessary to reflect:
- Changes in market standards
- Evolving governance practice and
- Insights gained from engagement over the prior year.
We report on our voting and voting-related engagements every quarter and publish our full voting record annually. Twice a year, we publish a more detailed report on our thematic, ESG performance and event-driven engagements. These semi-annual reports also outline our engagements relating to the governance policy framework, our public speaking activities and insights gleaned from thematic research on ESG topics. We intend to help shape the policy debate by publishing research reports on ESG topics and position papers on emerging trends. We also publish statements of support for market stewardship codes. Collectively, these guidelines and reports provide a sense of the breadth and depth of the work KGH Investment Stewardship team undertakes to help protect and enhance the value of the assets our clients’ have entrusted to us to help them achieve their long-term financial goals.