Edward Bonham-Carter, Jupiter Asset Manager
Asset management firms looking to create benefits for their investors and the wider world need to exert influence on companies to “walk the talk” on governance issues.
“As an active asset manager running high conviction strategies, we use our underlying investments as an instrument of change,” said Edward Bonham-Carter, Jupiter AM’s director of stewardship and corporate responsibility and former vice chairman.
This involves efforts to ensure that any companies the fund house invests in are good long-term businesses, sustainable in the wider sense of the term.
“To achieve that, we hold discussions with companies and seek changes through voting. The goal is a better world and higher returns,” explained Bonham-Carter.
This is based on a view that it is necessary to protect the interests of all the stakeholders in the business for it to thrive and prosper.
Clear and realistic priorities
Jupiter AM believes the best approach to engaging companies starts with setting the priorities.
“We identify our top holdings, define our path of engagement and follow up with any voting,” said Bonham-Carter.
There is also a need to be realistic in expectations; investors cannot expect to see results overnight, especially when dealing with issues such as succession or decarbonisation, where the process could take years for change to manifest.
And any success in effecting the desired change won’t result in Jupiter AM shifting its focus. “We immediately switch to the next phase of our stewardship engagement,” said Bonham-Carter.
A collective effort
There is also often a need to influence the decisions of companies collectively with other interested parties.
This applies in scenarios where investors might need to leverage their voice on a company-specific issue, or work together with peers or other organisations when confronting systemic risks such as supply chain or climate change.
“Our stewardship conversations with companies focus on drivers of long-term value to protect our clients’ interests,” said Bonham-Carter. “Part of these duties involves approaching boards on how they are taking responsibility to understand ESG risks and opportunities.”
Over time, Jupiter AM has realised that companies can only prosper in the long term if they pay due heed to the needs of competing stakeholders within companies – customers, employees, executives and shareholders.
Focused on objectives
Yet the overall approach isn’t about box ticking. Jupiter AM studies all aspects of a business to take a considered view while keeping in mind all stakeholders to generate alpha.
Although there is no formula for mapping the path of engagement, Jupiter AM follows a certain discipline in assessing progress. “We have some outcomes and targets in mind, and we try to stick to them,” he added.
The process also involves speaking to an array of people, including non-executive directors and audit committees, as well as a separate meeting with the chairman to ensure the company has a medium to long-term vision.
“We don’t keep talking with companies for the sake of it. If the desired results are not achieved, there could be value destruction,” explained Bonham-Carter.