Fisher Investments Shareholder Engagement Policy and Sustainable Finance Disclosure

Shareholder Engagement Policy
(the "Policy")

Fisher Investments Luxembourg, Sàrl

August 2023

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, trading 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

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

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.

FI holds meetings with company management as necessary to discuss issues FI feels are pertinent to analysing the company or better understanding peers or relevant industry factors. Relevant information uncovered during engagement is incorporated into FI’s fundamental analysis. 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.

FI has dedicated staff who work 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.

3.1 Monitoring of companies 

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.

3.2 Dialogue with companies

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.

3.3 Voting rights and other rights

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.

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 partners with ISS to evaluate issues and votes with the best interests of FIL’s clients in mind. FI frequently engages with company management on proxy voting issues.

FI’s Proxy Voting Policy is available on request.

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

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

FI recognizes the importance of working together, and FI collaborates with other institutional investors to engage companies when FI believes doing so is likely to advance FIL’s clients’ interests, is consistent with FI’s and FIL’s policies and procedures and is permissible under applicable laws and regulations. FI seeks to have a clear objective for collaborative engagements. As involving multiple parties in an engagement can increase complexities, FI seeks to ensure all collaborative engagements follow the United Nation’s Principles for Responsible Investment’s “4 Cs” for success: commonality, coordination, clarity and clout. FI evaluates collaborative engagements as it would standalone engagements.

3.5 Communication with relevant stakeholders

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.

3.6 Conflicts of Interest 

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 

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.

Date of Publication: 29 December 2022

To comply with the Sustainable Finance Disclosure Regulation (Regulation EU/2019/2088) as amended (“SFDR”), Fisher Investments Luxembourg, Sàrl (“FIL”) has provided the below sustainability-related disclosures. FIL is authorised to provide portfolio management services and, in select jurisdictions, insurance intermediation services. FIL provides such services to high net worth private clients (“private clients”).

Information on Sustainability Risk Policies

Portfolio Management Services:

Because FIL delegates its portfolio management services to its parent company, Fisher Asset Management, LLC, trading as Fisher Investments (“FI”), subject to FIL’s oversight, such policies and strategies are implemented by FI, but apply to FIL’s portfolio management services provided to FIL’s private clients.

FI generally evaluates and integrates Sustainability Risks and environmental, social and governance (“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 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.

Insurance Intermediation Services:

FIL does not consider Sustainability Risk as part of its insurance advice. FIL recommends only insurance contracts, provided by its partner insurers, that include an invested mandate, as per FIL and its partner insurers agreement, managed by FIL’s asset management division. While ESG factors, including Sustainability Risk, are considered throughout the investment process for each invested mandate available in the insurance contracts (similarly to how Sustainability Risk is considered for FIL’s portfolio management services), the assessed degree of Sustainability Risk for each such invested mandate is currently the same, making the assessment of Sustainability Risk between potential insurance contracts meaningless.

Information on Integration of Sustainability Risk in FIL’s Remuneration Policy

Portfolio Management Services:

Given that FIL outsources the portfolio management function to FI, it is not envisaged that there will be scenarios where the consideration of Sustainability Risks is relevant to the functions performed by FIL staff. Accordingly, FIL does not anticipate factoring consideration of Sustainability Risks into the assessment of FIL’s staff members’ variable remuneration.

Insurance Intermediation Services:

Due to FIL not considering Sustainability Risk as part of its insurance advice, FIL does not anticipate factoring consideration of Sustainability Risk into the assessment of FIL’s staff members’ variable remuneration.

Disclosure of the Consideration of Adverse Impacts on Sustainability Factors

Portfolio Management Services:

No Consideration of Adverse Impacts of Investment Decisions on Sustainability Factors

Notwithstanding that the consideration of Sustainability Risks is integrated into FI’s investment decision-making process, by virtue of FIL’s size, FIL is not required and currently elects not to consider the adverse impacts of its investment decisions on environmental, social or employee matters, respect for human rights, or anti-corruption or anti-bribery matters (“Sustainability Factors”) in respect of all portfolios it manages. However, with respect to strategies that promote environmental or social characteristics or have a sustainable investment objective (an “ESG Strategy”), the sustainability-related disclosures provided below for each ESG Strategy describes how principal adverse impacts on Sustainability Factors are considered by FI, including to what extent the indicators listed in Table 1 of Annex I of the Commission Delegated Regulation (EU) 2022/1288 (the “SFDR RTS”) are taken into consideration by FI. Furthermore, for private clients who have one or more ESG Strategies implemented in their investment portfolio, such private clients will also receive pre-contractual disclosures related to their investment portfolio that will describe how principal adverse impacts on Sustainability Factors are considered by FI in their investment portfolio.

Insurance Intermediation Services:

No Consideration of Adverse Impacts of Insurance Advice on Sustainability Factors

When providing insurance intermediation services, FIL works exclusively with only certain insurance companies and recommends only insurance contracts that include an invested mandate managed by the asset management division of FIL. Because the invested mandates included in the insurance contracts recommended by FIL currently do not consider any adverse impacts on Sustainability Factors, FIL does not consider any adverse impacts such insurance contract may have on Sustainability Factors when providing insurance advice. Should the invested mandates available in the insurance contracts recommended by FIL expand to include those that consider adverse impacts on Sustainability Factors, FIL may begin to consider adverse impacts on Sustainability Factors in its insurance advice.

Sustainability-Related Disclosures

Portfolio Management Services:

FIL makes available to its private clients certain ESG Strategies that can be implemented in a private client’s investment portfolio. By implementing an ESG Strategy in a private client’s investment portfolio, such portfolio is considered to be an Article 8 financial product under SFDR, which requires certain portfolio-specific disclosures to be provided on FIL’s website. However, FIL considers the management of its private client’s investment portfolio to be confidential, and will not publish portfolio-specific sustainability disclosures on its website. Instead, FIL publishes the below information about the ESG Strategies at the model level, which will include SFDR periodic reporting on the performance of such ESG Strategies from a sustainability perspective.

Global Sustainable Equity Impact ESG

Euro Fixed Income ETF ESG

Global Total Return ESG

Global Total Return SRI

Global Total Return ESG ETF

Insurance Intermediation Services:

For any private clients who are interested in FIL’s insurance intermediation services, such private clients should go to the insurance contract provider’s website for any sustainability-related disclosures related to the insurance contracts FIL may recommend as part of its insurance advice.

Amendments to this Disclosure

Should any changes be made to this disclosure in the future, a clear explanation of such changes will be published here.

Implemented Changes

In January 2022, this disclosure was updated to reflect:

  • the postponement of the SFDR RTS effective date to January 2023;
  • SFDR Article 11 disclosures provided for the ESG Strategies;
  • adding disclosures regarding the Taxonomy Regulation; and
  • a change in FIL’s SFDR categorization methodology for private client portfolios.

In December 2022, this disclosure was updated to:

  • update the sustainability-related disclosures for the ESG Strategies to comply with the SFDR RTS;
  • remove the principal adverse impact statement that was originally posted to comply with SFDR on a high level, principles basis;
  • remove disclosures not required under SFDR or the Taxonomy Regulation (Regulation EU/2020/852); and
  • add disclosures for FIL’s insurance intermediation services.