EFG Hermes Asset Management – Stewardship Policy & Guidelines
 

1. Engagement
EFG Hermes Asset Management sees engagement with investee companies as a key aspect of ESG integration as it enables the proactive management of ESG factors. It is through supportive and constructive dialogue with the management of our investee companies that EFG Hermes Asset Management can exercise its stewardship responsibilities and encourage organisational change where warranted. We continually seek to exercise the highest standards of stewardship across all our investment activity and as such we draw on internationally-accepted best practice principles, including of the revised UK Stewardship Code (2020), to guide our approach.
 

We believe that our investment professionals are in the best position to evaluate the potential impact that ESG issues or the outcome of a given proposal will have on long-term shareholder value. As such, responsibility for our engagement activities rests with our investment professionals, and they are fully integrated into our investment processes. Thus, our engagements focus on issues that could have a material financial impact with priority given to the largest holdings of a particular strategy and/or investments facing a material ESG concern, as determined by investment professionals and the outcomes of the respective ESG Scorecard.
 

The typical process through which EFG Hermes Asset Management engages with companies is:
 

Step 1: set the scope and purpose of engagement, identifying clear objectives and the outcome that EFG Hermes Asset Management wants to achieve through the engagement.
 

Step 2: determine the annual milestones and targets that will be used to track progress of engagement(s).
 

Step 3: outline the method(s) of engagement that EFG Hermes Asset Management will pursue with investee companies through – either direct engagement or through a collective vehicle. If the collective engagement route is chosen, then EFG Hermes Asset Management defines the most appropriate collective vehicle and the role it will play.

Step 4: enter dialogue with investee companies’ management on the defined topics of engagement. Dialogue is maintained through the following channels:
- Regular meetings and visits
- Questionnaires (annual or more regular)
- Telephone calls (individual and conference)

Step 5: follow up routinely with investee company management and record progress against objectives, milestones and targets.

Step 6: regularly report on engagement activities, outcomes, and progress against targets/milestones to investors through preferred means.

Step 7: if the actions taken by the investee company after engagement are considered insufficient against the objectives and milestones agreed, then EFG Hermes Asset Management will consider what escalation strategies it will adopt, including but not limited to: contacting the company’s Board directly, issuing a public statement, voting, submitting resolutions or – in extreme cases, only after ongoing engagement dialogues and escalation strategies have failed to result in the desired changes within investee companies, will EFG Hermes Asset Management consider reducing its investment or divesting altogether.

2. Voting
Where the power to vote proxies or to take shareholder actions on other corporate actions has been delegated to EFG Hermes Asset Management, we vote proxies and act in the best interest of our clients based on what we believed will maximize shareholder value as a long-term investor, all in accordance with our Proxy Voting and Corporate Action Policy.

Our investment professionals play a central role in formulating vote recommendations, as they are in the best position to make informed judgement calls based on their research of the company and specific assessments.

Where a client delegates responsibility for proxy voting to us, we will report on all voting activity undertaken on their behalf as such frequencies as they require. Information on how EFG Hermes Asset Management voted securities within a reporting period and information regarding the rationale for proxy-voting decisions in a client’s portfolio may also be provided upon request. We generally view the clients’ voting records as their property, rather than ours. To encourage greater transparency in the industry, we will seek to provide a summary of our voting records at least annually in a format and level of detail that we see appropriate and in line with the requirements or limitations set by our clients. Where required by law, we always disclose detailed voting records.

In situations where voting is sub-contracted to a proxy organisation, then EFG Hermes Asset Management encourages the proxy organisation to adopt voting practices that contribute in the same way. We request regular reporting on all voting activity that is delegated to proxy organisations, including information on how voting responsibilities are exercised across all securities and the rationale(s) behind this.