Active ownership is the use of shareholder rights to maximise shareholder value. The Inflection Point team works with portfolio managers to exercise shareholder rights and to leverage La Française’s influence as an investor. The team engages with companies and provides vote recommendations to maximise the long-term financial value of the investments.
The Role of Institutional Investors
A Stewardship Code sets standards for institutional investors to engage with the companies they own and aims at improving the quality of dialogue between investors and companies in order to help improve long-term risk-adjusted returns. In this context, a key objective of a Stewardship Code is to make investors more accountable to their clients and beneficiaries. The UK has been a leading market in promoting best practice by setting voluntary standards. In France there is no Stewardship Code yet. However, it is the fiduciary duty of asset management firms like La Française to decide the extent of monitoring and engagement with their portfolio companies.
In February 2015, La Française committed as international signatory to Japan’s Stewardship Code. The 7-point Code, capturing a set of principles detailing sound approaches to responsible investment, was developed by the Japanese government who convened an expert committee during 2013 and was launched in February 2014. The Code is regularly reviewed and updated.
Voting and Engagement
High quality corporate governance contributes to long-term company performance. Good governance practices cover issues such as board composition and effectiveness, the role of board committees, risk management, remuneration and relations with shareholders. Inflection Point provides information to portfolio managers on corporate governance and offers voting recommendations for certain topics, in particular shareholder resolutions and ESG-specific resolutions.
Inflection Point, together with LFAM, has developed a Custom Policy in cooperation with Institutional Shareholder Services (ISS), the proxy voting firm. The LFAM Custom Policy is based on ISS’s Sustainability Policy and includes special voting instructions for Carbon Disclosure Project (CDP) non-disclosure, lack of Board diversity and lack of shareholdings by the Chief Executive.
La Française Asset Management carries out engagement with investee companies on strategic, financial and ESG issues. Inflection Point helps in designing an engagement policy and manages individual engagements, especially for the Emploi Durable investment strategy.
Inflection Point regularly works with other investors on joint engagement activities. Current engagement initiatives comprise:
- Institutional Investor Group on Climate Change (IIGCC): Climate 100+
- UN Principles for Responsible Investing (UN PRI): Water risks in agricultural supply chains
- ShareAction: WDI – Workforce Disclosure Initiative
La Française Group recognises the importance of working alongside other investors not only on company-specific engagements but equally to seek solutions to social, environmental and economic challenges.
Many of today’s social and environmental challenges are systemic in nature; they cannot be addressed by governments, companies or investors acting in isolation. While climate change is most prominent, other challenges, such as income inequality, marine pollution, corporate tax avoidance and cybercrime demand co-operative solutions.
The Inflection Point team is active in a number of industry organisations on behalf of the Group to facilitate the policy dialogue (see 6.3 Memberships for details). For example, La Française Group is a member of the UNEP FI Investment Committee represented by Inflection Point’s Managing Director.