Fisher Investments Shareholder Engagement Policy and Sustainable Finance Disclosure

Shareholder Engagement Policy
(the "Policy")

Fisher Investments Luxembourg, Sàrl

July 2021

1. Introduction

1.1 Article 3g of the Shareholder Rights Directive II (EU/2017/828) (“SRD II”) requires institutional investors and asset managers to develop and publicly disclose an engagement policy that describes how they integrate shareholder engagement into their investment strategy.

1.2 Fisher Investments Luxembourg, Sàrl (“FIL”) delegates its portfolio management services, as well as other services covered by this Policy, to its parent company, Fisher Asset Management, LLC, doing business as Fisher Investments (“FI”), subject to FIL’s oversight.

1.3 In compliance with the requirements of SRD II (as transposed in Luxembourg), FIL has put in place and made publicly accessible this Policy describing how FIL, and FI on behalf of FIL, integrates shareholder engagement into FIL’s investment strategy.

1.4 This Policy describes how FIL and FI, on behalf of FIL:

      1. monitor FIL’s clients’ investee companies (the “companies”) on relevant matters (including strategy, financial and non-financial performance and risk, capital structure, social and environmental impact and corporate governance)

      2. conduct dialogue with the companies;

      3. exercise voting rights and other rights attached to shares of the companies;

      4. co-operate with other shareholders;

      5. communicate with relevant stakeholders; and

      6. manage actual and potential conflicts of interests in relation to such engagements.

2. Scope

2.1 Consistent with the scope of SRD II, this Policy relates to FI’s management of FIL’s client accounts on behalf of FIL, which invest in shares traded on a regulated market in the European Economic Area.

3. How FIL and FI engage on behalf of FIL’s clients

3.1 FI’s approach to shareholder engagement on behalf of FIL’s clients is described as follows:

FI is an active investment manager on behalf of its and its affiliates’ clients that engages with companies as part of its fundamental analysis and to clarify or express concerns over potential environmental, social or governance (“ESG”) issues at the firm or industry level.

      1. FI holds meetings with company management as necessary to discuss pertinent issues FI feels are critical to analysing the company or better understanding peers or relevant industry factors. Information uncovered during engagement as part of FI’s fundamental analysis can impact its investment decisions and stock determinations. Depending on the issue, FI may engage in additional meetings with company management, intervene in concert with other institutions on the issue or meet with appropriate members of a company’s board. FI commonly engages with company management on proxy voting issues, particularly when Institutional Shareholder Services, Inc. (“ISS”) is in disagreement with company management. To encourage a real-time, active engagement dialogue, FI prefers either a phone call or in-person meeting with the company.

      2. FI has dedicated staff that works to identify ESG risks and opportunities and conducts engagement with companies. FI utilizes a combination of qualitative and quantitative information to generate a focus list of potential ESG engagement opportunities. The list is further vetted based on bottom up company research. As part of the engagement process, FI reviews a wide range of materials, which may include: analysis from FI’s ESG research providers, company financial and sustainability disclosures, research from responsible investment network partners and relevant NGO reports.

3.2 Monitoring of companies

      1. FI monitors FIL’s clients’ holdings on an ongoing basis, and engagements are considered whenever concerns arise related to a company’s business. Engagements may also be considered when FI’s third party ESG ratings provider significantly downgrades a company’s rating; a company’s activity results in it being assigned a red flag (severe controversy); FI decides against buying a security in an ESG portfolio for ESG-related reasons; a holding no longer complies with FI’s ESG screens; or FI seeks to learn more about an upcoming proxy vote.

3.3 Dialogue with companies

      1. FI’s experience shows stewardship concerns are usually best resolved by direct contact with company officials—whether at the board or management level. Escalating an issue beyond that point depends on the materiality of the issue, the company’s responses to past communications and whether FI believes such engagement is in the applicable FIL’s clients’ best interests. Corporate engagements may consist of letters, emails, conference calls, or in-person meetings with company representatives. Each engagement has a defined objective and may include a plan for follow up with the company. When appropriate, FI monitors the company’s progress and records milestones along the way.

3.4 Voting rights and other rights

      1. FI has policies in place to monitor corporate actions and, if authorized and directed in the applicable investment management agreement or confidential client agreement, ensure the exercise of voting rights.

      2. To the extent FIL is authorized and directed to vote proxies on behalf of a client pursuant to the confidential client agreement, FI, on behalf of FIL, utilizes ISS as a third-party proxy service provider. ISS is one of the largest providers of corporate governance solutions with services including objective governance research and analysis, proxy voting and distribution solutions. When FI votes proxies on behalf of FIL’s clients, FI evaluates issues and votes in accordance with what FI believes will most likely increase shareholder value. FI frequently engages with company management on proxy voting issues.

      3. FI’s Proxy Voting Policy is available on request.

      4. FI’s Corporate Actions Elections Policy is available on request.

3.5 How FI, on behalf of FIL’s clients, co-operates with other shareholders

      1. Consistent with the investment strategies FI has implemented for FIL’s clients and associated confidential client agreements, FI generally engages companies on an individual basis. However, there may be circumstances where, consistent with the investment strategy and FI’s policy of seeking to preserve or enhance the value of FIL’s clients’ investment in the company, it is appropriate for FI to lead or participate in initiatives collectively with other investors in the company with a view to effecting change in the company that is in the best interests of FIL’s clients.

3.6 Communication with relevant stakeholders

      1. Neither FIL nor FI systematically communicate with stakeholders of companies regarding the investment decision. However, as part of FI’s due diligence on a company, FI, on behalf of FIL’s clients, may review publications or participate in events that may also be attended by other stakeholders. In addition, FI, on behalf of FIL’s clients, occasionally participates in collective engagements with other shareholders (as described in Section 3.5), which may include representatives from stakeholder groups.

3.7 Conflicts of Interest

      1. FIL and FI have adopted effective written conflicts of interest policies and have put in place procedures and measures for the prevention or management of conflicts of interest including where such conflicts may arise due to how FI, on behalf of FIL’s clients, engages with companies FIL’s clients are invested in.

4. Disclosure of FIL’s, and FI’s on behalf of FIL, engagement activities

4.1 SRD II requires that FIL either (i) on an annual basis, disclose how this Policy has been implemented, including a general description of voting behaviour, an explanation of the most significant votes and the use of the services of proxy advisors, as well as how FIL, or FI on FIL’s behalf, cast votes in the general meetings of companies in which FIL’s clients hold shares (collectively “Periodic Disclosure”) or (ii) disclose a clear and reasoned explanation why FIL has chosen not to publish such Periodic Disclosure.

4.2 Neither FIL nor FI votes proxies on behalf of FIL’s clients unless an FIL client authorizes and directs FIL to do so and FIL accepts such responsibility. As of the date of this Policy, no FIL clients have provided such authority and direction. Therefore, FIL has no Periodic Disclosure to disclose. Should any FIL clients authorize and direct FIL to vote proxies, and FIL accepts such responsibility, FIL will publicly publish the applicable Periodic Disclosure for such FIL clients.

4.3 If an EU regulated life insurance company or occupational pension scheme (in each case an "Institutional Investor") is an FIL client, such Institutional Investor will be provided at least annually with the specific information prescribed in Luxembourg’s transposition of SRD II.

4.4 Where the information to be disclosed in accordance with Section 4.3 is publicly available, FIL shall not be required to provide that information to the relevant Institutional Investor directly.

5. Review of the Policy

5.1 This Policy will be reviewed and updated on at least an annual basis, and altered from time to time as appropriate. The latest version of this Policy will be available on FIL’s website

Sustainable Finance Disclosure Regulation

To comply with the Sustainable Finance Disclosure Regulation (Regulation EU/2019/2088) as amended (“SFDR”), Fisher Investments Luxembourg, Sàrl (“FIL”) has provided the below disclosure describing various policies related to sustainability and environmental, social and governance (“ESG”) factors, as well as information on ESG oriented strategies FIL has available to high net worth private clients (“private clients”). Because FIL delegates its portfolio management services to its parent company, Fisher Asset Management, LLC, doing business as Fisher Investments (“FI”), subject to FIL’s oversight, such policies and strategies are implemented by FI, but apply to FIL’s services provided to FIL’s private clients.

Information on how FI Integrates Sustainability into the Investment Decision-Making Process (SFDR Article 3)

FI generally evaluates and integrates Sustainability Risks and ESG factors at multiple stages throughout the investment process. “Sustainability Risk” is defined by SFDR as an environmental, social or governance event or condition that, if it occurs, could cause a negative material impact on the value of the investment.

Top-Down Investment Process

Sustainability Risks and ESG factors are among the many drivers considered by FI’s Capital Markets Analysts and FI’s Investment Policy Committee (“IPC”) when developing country, sector and thematic preferences. Environmental regulation, social policy, economic and market reforms, labour, and human rights are among the ESG factors assessed when determining country and sector/industry allocations and shaping an initial prospect list of portfolio positions.

FI’s IPC, with the assistance of FI’s Securities and Capital Markets Analysts, determines the materiality of the ESG considerations based on the exposure among publicly-traded companies in these categories. Higher materiality could imply larger ESG-related risks or opportunities, and may influence sector and country weight preferences as well as individual stock selection. The investment strategy and positioning reflects FI’s outlook over a 12-18 month horizon.

Bottom-Up Investment Process

FI’s Securities Analysts perform fundamental research on prospective investments to identify securities with strategic attributes consistent with FI’s top-down views and competitive advantages relative to their defined peer group. The fundamental research process involves reviewing and evaluating a comprehensive set of qualitative and quantitative data, including ESG factors, prior to purchasing a security. Factors considered in all portfolios include, but are not limited to: shareholder concentration, corporate stewardship, environmental opportunities & liabilities, and human or labour rights controversies. FI would choose not to invest in companies when, in its opinion, security level ESG issues: (i) violate a client mandated ESG policy, (ii) present an inordinate risk to a company’s operational or financial performance or (iii) appear to present undue headline risk to share price performance.

Principal Adverse Sustainability Impacts Statement (SFDR Article 4)

Summary

FI considers principal adverse impacts of its investment decisions on Sustainability Factors. “Sustainability Factors” as defined by SFDR means environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters.

Description of Principal Adverse Sustainability Impacts

FI considers many indicators when assessing adverse sustainability impacts within the investment decision-making process. FI’s IPC, with the assistance of FI’s Securities and Capital Markets Analysts, determines the materiality of adverse sustainability impacts when developing country, sector and security preferences. FI’s investment strategy and positioning reflects FI’s outlook over the next 12-18 months. Determinations on the materiality of ESG factors by FI’s IPC are generally assessed over this same timeframe.

Further, this fundamental research process involves reviewing and evaluating qualitative and quantitative sustainability-impact data prior to purchasing a security. Factors considered in all portfolios include, but are not limited to: shareholder concentration, corporate stewardship, environmental opportunities & liabilities, and human or labour rights controversies. FI would choose not to invest in companies when, in its opinion, security level ESG issues: (i) violate a client mandated ESG policy, (ii) present an inordinate risk to a company’s operational or financial performance or (iii) appear to present undue headline risk to share price performance.

Specific to FIL’s strategies that promote environmental or social characteristics (such as FIL’s ESG-oriented strategies), which for SFDR purposes are considered to be an Article 8 “financial product” (“ESG Strategies”), additional adverse sustainability indicators are used as screens to increase minimum ESG standards, ensure compliance with global norms, and to ensure investments do no significant harm.

Description of Policies to Identify and Prioritise Principal Adverse Sustainability Impacts

FI’s IPC is responsible for adherence to FI’s sustainability-related policies and activities to identify and prioritise principle adverse sustainability impacts. FI uses various databases and information vendors to aid and augment its proprietary internal ESG research and to identify and measure principle adverse sustainability indicators. These sources include MSCI ESG Research (including ESG Ratings, Business Involvement Screening, Controversies & Global Norms, Sustainable Impact Metrics, and Carbon Metrics), Morningstar/Sustainalytics ESG Risk Ratings, Morningstar Sustainability Fund Ratings, Bloomberg, Institutional Shareholder Services, Inc., and FactSet. Prioritisation of principal adverse sustainability impacts is made by FI’s IPC, with the assistance of FI’s Securities and Capital Markets Analysts, based on an assessment of the materiality of adverse sustainability impacts over FI’s outlook period (next 12-18 months).

Engagement Policies

FI is an active investment manager on behalf of its and its affiliates’ clients that engages with companies as part of its fundamental analysis and to clarify or express concerns over potential ESG issues at the firm or industry level.

FI holds meetings with company management as necessary to discuss pertinent issues FI feels are critical to analysing the company or better understanding peers or relevant industry factors. Information uncovered during engagement as part of FI’s fundamental analysis can influence its investment decisions and stock determinations. Depending on the issue, FI may engage in additional meetings with company management, intervene in concert with other institutions on the issue or meet with appropriate members of a company’s board. To encourage a real-time, active engagement dialogue, FI prefers either a phone call or in-person meeting with the company.

FI has dedicated staff that works to identify ESG risks and opportunities and conducts engagement with companies. FI utilises a combination of qualitative and quantitative information to generate a focus list of potential ESG engagement opportunities. The list is further refined based on bottom up company research. As part of the engagement process, FI reviews a wide range of materials, which may include: analysis from FI’s ESG research providers, company financial and sustainability disclosures, research from responsible investment network partners and relevant NGO reports.

A more complete description of these activities can be found in FIL’s SRD II Shareholder Engagement Policy.

References to International Standards

FI became a signatory to the PRI (Principles for Responsible Investment) in 2014. FI provided a response to the UK Financial Reporting Council Stewardship Code in 2018, and the same year Fisher Investments Japan, a wholly-owned subsidiary of FI, became a signatory of the Japanese Stewardship Code. FI also participates in the UN Global Compact and is a signatory to the Climate Action 100+, the Task Force on Climate-related Financial Disclosures (TCFD) and the CDP.

Suitability-related disclosure (SFDR Article 10)

FIL makes available to its private clients certain ESG Strategies. Further information about these ESG Strategies can be found in the links below.

All World ESG

Fixed Income Government/Corporate ESG

Global ESG

Global SRI/VBI

As part of FIL’s offered services, a private client may place one or more restrictions on such private client’s portfolio that may promote an environmental or social characteristic (“ESG restrictions”) in order to tailor the portfolio to such private client’s ESG preferences. In such circumstances, even though such private client may not have an ESG Strategy implemented in such private client’s portfolio, the application of ESG restrictions will treat such private client’s portfolio as a “financial product” that promotes an environmental or social characteristic.

Unfortunately, because restrictions applied to each private client’s portfolio are unique to a private client’s preferences, FIL is unable to provide SFDR Article 10 disclosure on each private client’s portfolio that includes ESG restrictions. However, if a private client has placed ESG restrictions on such private client’s portfolio, FI will utilize internal resources or external data providers (such as MSCI ESG Research) to identify securities that meet the client’s restriction preferences. After a client makes a specific request in writing, restrictions are placed and monitored on a best efforts basis to ensure restricted securities are not purchased in client portfolios.

Unless a private client has an ESG Strategy implemented in such private client’s portfolio, (i) the only environmental or social characteristic promoted in such private client’s portfolio will be the restriction requested by the private client and (ii) the benchmark index by which such strategy’s performance is measured against will not be consistent with a private client’s ESG restrictions. However, such private client will receive information in regarding the benchmark index and information on where to find the methodology for such benchmark index in such private client’s Investment Portfolio Recommendation.

Periodic Reports (SFDR Article 11)

Beginning in 2022, FIL’s private clients with portfolios that implement an ESG Strategy will receive in periodic reporting delivered to them a description for how any environmental or social characteristics promoted in the ESG Strategies were met. Such description will also be made available on this webpage.

Amendments to this Disclosure

It is noted that the regulatory technical standards (“RTS”) to specify the details of the content and presentation of the information to be disclosed under SFDR is not expected to be effective until January 2022. The European Commission has recommended that from the effective date of SFDR, firms are recommended to comply with the specific disclosure obligations in SFDR that are reliant on the RTS on the basis of a high-level, principles-based approach. FIL therefore seeks to comply on a best efforts basis with the relevant disclosure obligations and provides this disclosure as a means of achieving this objective. Once the RTS become effective, FIL will update this disclosure to comply with the RTS.

Should any changes be made to this disclosure in the future (e.g., once the RTS is effective or in light of additional guidance from regulators), a clear explanation of such changes will be published here.