We strive to be responsible stewards of our clients' assets within a framework of good governance and transparency
As an active investor and manager of substantial global equities, fixed income and real estate assets, we proactively seek to capture opportunities that help deliver sustainable growth and returns for our clients. Being a responsible investor is integral to our business proposition and defines how we act in the marketplace. Core to our investment philosophy is the belief that effective stewardship benefits companies, investors and the economy. Well managed companies that look to the future are better positioned to navigate the risks and challenges inherent in business and achieve sustainable performance and long-term value creation.
Established in 1998, Columbia Threadneedle’s global Responsible Investment (RI) team of 14 is embedded in the investment department, located in London and Minneapolis. The team includes experts in RI analytics, Environmental, Social and Governance (ESG) research and integration, stewardship and engagement, proxy voting, sustainable outcomes and thematic RI research. The team works alongside our portfolio managers and analysts on the integration of material ESG analysis into our research and investment process, company engagement, proxy voting, ESG policy issues and client reporting. This capability and culture also allow us to innovate and deliver unique solutions for our clients. In addition to our range of funds, we provide segregated solutions for clients seeking alignment to certain sustainable thematic outcomes or otherwise requiring RI considerations to be more clearly reflected in investment selection and portfolio construction.
As at end 31 December 2019 we manage approx. US$30 billion in RI assets across equities, fixed income, commodities, real estate and infrastructure. Our outcome-oriented solutions are informed by our sustainable outcomes framework, which helps us assess the extent to which a company’s or issuer’s products and services provide solutions to global socioeconomic challenges (see next page). We subscribe to and are a signatory to the United Nations-backed Principles for Responsible Investment (PRI). The PRI frames our approach globally, with high level implementation of the principles as follows:
1. We incorporate Environmental, Social, Governance (ESG) issues into investment analysis and decision-making processes.
We have an integrated approach to responsible investment and ESG research that is embedded within our investment approach, and is supported by our culture of collaboration, sharing of research and ideas, and robust debate. In developing our understanding of a business, we consider its approach to managing environmental, social and governance issues, as well as any controversies that may have arisen.
Supporting this effort, in March 2019 we launched an innovative responsible investment ratings system that combines an assessment of a company’s financial stewardship with a view on how well it manages its Environmental, Social and Governance risks. By combining both aspects into a single, forward-looking company rating from 1 to 5 this proprietary tool reflects our conviction that prudent management of financial and ESG factors is important to a company’s ability to create long-term, sustainable value.
Utilising data science and cloud computing, our RI ratings provide our global investment teams with a more robust responsible investment framework and enhanced analysis of over 5,500 listed equities across the world, complementing our existing fundamental research. An evidence-based and forward-looking ratings system, it provides them with further insight into a company’s leadership, governance, culture and operational standards of practice, focusing on issues that are material to long-term performance. This unique tool enhances our ability to evaluate investments on behalf of all our clients and puts real-time, actionable intelligence in the hands of our analysts and portfolio managers.
2. We are active owners and incorporate ESG issues into our ownership policies and practices.
We actively vote on our shares globally and have a thorough internal dialogue as well as corporate dialogue globally. We follow regional voting principles and consider local market practice.
KEY INDUSTRY ASSOCIATIONS
- Founding member of the United Nations-backed Principles for Responsible Investment (PRI) and signatory to the UK Stewardship Code.
- Active participant in a range of key industry initiatives including Investment Association committees, ICMA’s Social Bond Principles, SASB working groups, PLSA Stewardship Advisory Group.
- Commercial partnerships with Big Issue Invest, INCO, Carbon Trust and Sustainalytics
3. We seek appropriate disclosure on ESG issues by the entities in which we invest.
We place substantial value on transparency by companies and encourage greater transparency in our dialogue around ESG performance.
4. We promote acceptance and implementation of the Principles within the investment industry.
We actively participate in external forums and discussions where relevant and are actively involved with the PRI secretariat.
5. We work together to enhance our effectiveness in implementing the Principles.
We are committed to meaningful collaboration with other investors in company dialogue and wider ESG related issues. We consider consistency of purpose and conflict of interest policies.
6. We report on our activities and progress towards implementing the Principles.
Columbia Threadneedle reports annually in EMEA and in the US on our progress in responsible investment both to clients and to the PRI. Our annual PRI submissions are publicly available. In addition, regional policies can be viewed on our website. As a PRI signatory we are assessed annually on how we incorporate ESG issues into investment practices across asset classes. In 2019 Columbia Threadneedle was awarded a clean sweep of A and A+ ratings, as set out in the table below.
2019 PRI ratings
Our approach to engagement and voting is based on collaboration between our portfolio managers, analysts and RI team members. Engagement ensures investee companies and issuers are accountable and enhances our understanding of their exposure to risks and opportunities. In practice, engagement covers a broad range of issues, and regularly relates to ESG and sustainability matters. The decision to engage on certain issues considers factors including our assessment of the significance to the company, the risks to our clients, relative holdings, scope to effect change and opportunities to collaborate.
We actively vote in over 50 markets globally both as an extension of our engagement and in signaling support or concerns about a company’s practices and proposals. Final votes are cast identically across all mandates for which we have voting authority.
Decisions are made by the RI team following discussions with portfolio managers and analysts and are disclosed on our website. We also provide fund-specific reports to our clients.
As an active manager, we do not outsource voting to third parties. We carry out proxy voting in all markets, in accordance with our corporate governance and proxy voting principles and our proxy voting policy. Our highly engaged and principled approach sees us regularly opposing items where proxy voting advisers are more lenient and supporting where they are more aggressive. We regularly withhold support from individual directors and cast dissenting votes based on pay-related concerns. More recently in EMEA we have adopted a systematic approach to voting and engaging on executive pensions. We have signaled that from 2020 we will take a more systematic approach to voting on gender diversity at senior management as well as board level. During 2019 we voted at 1,022 company meetings, registering dissent against one or more resolutions at 53% of those meetings. We publish our voting decisions seven days after the relevant general meeting and our proxy voting activities are published on our website.
Columbia Threadneedle Proxy voting 2019
Source: Columbia Threadneedle Investments, ISS ProxyExchange, 31 December 2019.
Our clients increasingly want to understand and measure how capital allocation decisions are supporting delivery of the United Nations' Sustainable Development Goals (SDGs). The SDGs provide investors across all regions with a thematic framework around which public policy, reform and development priorities will be focused, catalysing demand for innovation and new or increased investment. They also help businesses align with global priorities: companies can use the SDGs as an overarching guide to shape and steer the development and implementation of their own strategies. Translating the SDGs to investment opportunities provides us, our clients, and the wider industry, with a compelling means to contribute to sustainable development whilst aiming to achieve positive financial returns. We look to identify and categorise companies based on commercialised outputs, products and services addressing major social and economic needs. This approach helps capital to flow towards issuers delivering positive change and offers earnings growth and financial return – giving force to the notion of 'doing well by going good'.
Buildings are on the front line in the fight against climate change, as real estate consumes around 40% of the world’s energy and contributes up to 30% of its annual greenhouse gas emissions4. With the UK committed to cutting its carbon emissions by 80% by 20505, the country’s real estate owners have an important part to play in achieving this reduction.
Investing responsibly in real estate is complementary to our core objective of delivering strong risk-adjusted returns for clients.
Key to our approach is an understanding of the environmental and social risks posed by real estate assets. We focus on mitigating those risks and seeking continuous improvement by assessing the environmental and social impacts throughout the lifecycle of our property assets. This approach is ingrained within the day-to-day activities of our business.
1. Property investment (asset acquisition )
Our fund managers carry out forensic due diligence and comprehensively survey all properties considered for acquisition. They look at factors including energy performance/MEES (minimum energy efficiency standards), environmental risks/impact (including flood risk), and areas for potential improvement in terms of sustainability performance.
2. Strategic asset management
Our asset managers develop unique strategies to add value to every building we manage. They consider areas including environmental, energy and water efficiency, waste management and sustainability best practices. They also look at ways to promote health and well-being and community engagement. Finally, our asset managers seek opportunities to promote information sharing and co-operation with tenants, to enable sustainability strategies to be jointly implemented by the occupier and the management team.
3. Refurbishment and building improvement
Refurbishments carried out by our asset managers offer the greatest potential to improve the environmental and social impact of our buildings. Our Refurbishment Guide promotes high sustainability standards, and construction projects incorporate a set of minimum requirements relating to: environmental management; building quality and flexibility; health and well-being; energy efficiency; transport; water; building materials; waste management; and ecology and pollution.
4. Property management
We are active managers who seek to continually improve the day-to-day environmental impact of our buildings while maintaining high levels of occupier satisfaction and engagement. This is achieved by dedicated Oversight Managers who collaborate with third-party managing agents to deliver objectives aligned to clearly defined targets set out in our Sustainability Road Map (see next page). Oversight Managers are also responsible for monitoring health and safety on all our properties, ensuring oversight through monthly reporting, meetings, and independent annual audits.
5. Risk and governance
Our Real Estate team benefits from rigorous risk and governance controls. We have an integrated Real Estate Governance team providing ‘first line’ risk and governance oversight. The team also has a liaison function with Group Investment and Operations Risk and Compliance (‘second line’ functions), and with Audit (‘third line’) as required. Our investment and management process controls are also independently audited on an annual basis as part of our company’s ISAE reporting obligations.
- Energy management and reduction: target 10% reduction in energy use by 2024.
- Greenhouse gas: target 15% reduction in GHG use by 2024. Energy procurement: target 95% of directly managed property to have green energy tariffs by end 2019.
- Waste management: target 95% of directly managed property to have zero waste to landfill by end 2019.
- Community: identify opportunities to positively impact communities and stakeholders. Tenant engagement: undertake regular occupier satisfaction surveys.
- Our real estate funds are independently assessed against the Global Real Estate Sustainability Benchmark. Highlights achieved in 2019 include:
- Overall 8% improvement on 2018 scores across three funds.
- Overall score of 90 achieved by our Low Carbon Workplace strategy, ranking 4th among a peer group of 16
- Overall score of 73 achieved by Threadneedle Pensions Limited Pooled Property Fund, ranking 25th among a peer group of 79.
- Overall score of 74 achieved by Threadneedle Property Unit Trust, ranking 23rd among a peer group of 79.