Investment Stewardship
Artha FCL's Investment Stewardship team is core to Artha FCL's role as a fiduciary and asset manager. As stewards of our clients' assets, we are committed to constructive, long-term-focused engagement with the companies our clients are invested in.
Supporting long-term financial value creation
Investment Stewardship is part of how Artha FCL fulfils its fiduciary responsibility to our clients to advance their long-term economic interests. We do this through engaging with the companies our clients are invested in, voting proxies for those clients who have given us authority, and encouraging sound corporate governance and business practices as an informed, engaged investor. In our experience, companies that effectively manage material risks and opportunities in their business models, including those related to sustainability, are better positioned to deliver durable, long-term financial performance. High standards of corporate governance, and strong boardroom and executive leadership, enable companies to be resilient and adaptable through macroeconomic and societal challenges that can impact their financial performance over time.
Promoting sound corporate governance and resilient business models
Engagement is core to our stewardship efforts. Our engagement priorities reflect the themes on whichwe most frequently engage companies, where they are relevant, as these can be a source of material business risk or opportunity.
Board quality and effectiveness
Our investment stewardship efforts have always started with the board and executive leadership. We believe that the performance of the board is critical to the financial success of a company and the protection of shareholders’ interests over the long-term.
Strategy, purpose, and financial resilience
As one of many minority shareholders, Artha FCL cannot – and does not try to - direct a company’s strategy or its implementation. We engage on long-term corporate strategy, purpose and financial resilience to understand how boards and management are aligning their business decision-making with the company’s purpose and adjusting strategy and/or capital allocation plans as necessary as business dynamics change.
Incentives aligned with financial value creation
Appropriate and transparent compensation policies are a focus in many of BIS’ engagements with the companies in which we invest on behalf of clients. BIS looks to a company’s board of directors – typically a relevant committee – to put in place a compensation policy that incentivizes and rewards executives against appropriate and stretching goals tied to relevant strategic metrics, especially those measuring operational and financial performance.
Climate and natural capital
BIS engages with companies to better understand their approach to, and oversight of, climate-related risks and opportunities as well as how they manage material natural capital impacts and dependencies, in the context of their business model and sector.
Company impacts on people
In our experience, companies that invest in the relationships that are critical to their ability to meet their strategic objectives are more likely to deliver durable, long-term financial performance. By contrast, poor relationships may create adverse impacts that could expose companies to legal, regulatory, operational, and reputational risks. This is particularly the case with regard to a company’s workforce, as a significant number of companies acknowledge the importance of their workers in creating long-term financial value.
Approach Towards Sustainability of Artha FCL:
Our investment approach is informed by three principles:
Client Choice:
We start with the clientOur role is to listen to and deliver choice for our clients. Our clients choose their investment objectives, and they look to Artha FCL to meet their needs. We offer them choices across a wide range of index, ctive, and whole portfolio solutions. For clients asking how to mitigate risk and capture opportunities associated with sustainability-related trends (such as the low-carbon transition), or for clients asking for products with sustainability- or transition-focused objectives, we offer a range of options and choices in products, portfolio construction, analytics, and stewardship (Voting Choice). We continue to innovate for and with clients, responding to client demand.
Research:
We underpin our work with research, data, and analyticsResearch informs our investment decisions and product innovation. We research major structural trends shaping the economy, markets, and asset prices. We assess how these trends could affect long-term value and how they could unfold over time. The transition to a low-carbon economy is one trend that we research, because we see it having implications on macroeconomic trends, company financial prospects and business models, and portfolios.
Performance:
We seek the best risk-adjusted returnsWe seek the best risk-adjusted returns within the mandates clients give us. As a fiduciary, we manage material risks and opportunities that could impact portfolios, including those related to sustainability. When financially material, we incorporate environmental, social, and governance information alongside other information into our firmwide processes to enhance risk-adjusted returns.