Not responsible? Time to think again!
Taking a more active interest in how the companies we invest in are run can have a long-term benefit for investors
3 min read
02 Jun 20203 min
04 Nov 2019Speaking at the inaugural Thomas Coutts Lecture as part of Coutts entrepreneur month, Baroness Karren Brady, CBE, reflects on the key characteristics that make an entrepreneur.3 min
In recent years, shareholders have become more vocal about how the companies they own shares in behave.
Executive pay has grabbed the headlines, but there are a lot of other issues around environmental, social and governance practices – often abbreviated to ESG – where shareholders can have a positive influence.
The benefits of a positive view
There is significant evidence that being an active and responsible shareholder is a key ingredient in managing long-term returns. This is based on the idea that companies that are well-governed and effectively manage social and environmental issues are more likely to have sustainable business models.
Responsible investing fits naturally with our investment principles. For example, we focus on investing in quality companies that should display the hallmarks of a well-run organisation. When we invest directly in a company, ESG factors help shape our overall view and are considered in our analysis of its performance. If we decide to invest, we start to use the voting rights that come with share ownership and engage directly with company managers, where appropriate.
Taking an active role
We draw on the specialist skills of Hermes EOS to inform our voting and engagement activity.
Voting is an important cornerstone of effective stewardship. Exercising a right to vote is one of the most effective tools we have as shareholders to influence the companies in which we invest directly on behalf of our clients. Our voting is guided by our Responsible Ownership Principles, which outline what we expect of listed companies and what they should expect from us.
Engagement means talking to the people who run a company to encourage positive change in relation to ESG issues. We prefer to engage privately, with support from Hermes EOS, as we believe this is more effective than public engagement. Issues raised may relate to risk, performance and corporate governance to encourage responsible behaviour.
Being informed and engaged shareholders is a priority for Coutts. Good stewardship is integral in the values of our business and has the potential to improve long-term performance of the investments we make on behalf of our clients.
As a responsible investor, Coutts engages with the companies it directly invests in to influence their environmental, social and governance practices. This fits with our investment principles as long-term investors in quality companies.
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