Stewardship

Introduction We regard stewardship as integral to our investment process. As a discretionary manager, we are responsible stewards of the capital our clients entrust to us. We encourage better transparency, sustainability and corporate governance in our investee companies with the aim to reduce risk and provide long-term value for our clients.

Effective stewardship means actively monitoring investment, exercising ownership rights and constructively engaging and challenging on matters that can have a material impact on our client’s investments. We believe that companies conducting their business in a responsible and sustainable manner are more likely to succeed over time, benefiting both our clients and society as a whole.

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// Reporting transparency

// Leadership effectiveness

// Environmental, Social and Governance (ESG)

Active monitoring

We actively monitor and review the companies and third-party funds we invest in, as part of our investment process. The specific characteristics we monitor include, but are not limited to:

// Financial and operational performance

// Quality and credibility of strategy

// Capital structure

We review company information, including the financial statements and the research conducted by our proxy-voting service provider. We also meet with companies that we are significantly invested in order to improve our understanding of their business, their strategy and their commitment and approach to ESG values.

The desired outcome of this thorough monitoring activity is to reduce our risk, improve investment performance and ensure our clients best interests are maintained.

Environmental, Social and Governance (ESG) integration

Our ESG values are woven into our centralised investment process as an integral decision-making factor. We believe this helps us reduce risk and allows our clients to benefit from improved investment performance. When investing in direct equities we take a bottom up approach to considering ESG in our due diligence process. We undertake our own research to assess ESG risks and opportunities, in conjunction with external ESG data sources. This assessment and monitoring continues throughout the lifespan of the investment, including regular ongoing manager review meetings.

Funds managed by third parties make up a significant portion of our client’s investment portfolios. When selecting funds, we seek to understand how managers consider and incorporate ESG factors into their investment decisions, looking beyond whether they have ESG policies in place, or not. As part of this process, we require evidence to support the data provided to us.

We have also launched our own Responsible Investment Service, which actively seeks to invest in funds that provide solutions to sustainability issues, or that have strong corporate policies and outputs relating to ESG criteria.

// ESG issues can be broad and varied. Examples include:

/ Environmental: Greenhouse gas emissions, climate related risks, resource depletion (including water, waste management and recycling), pollution, biodiversity loss or deforestation.

/ Social: Human rights, labour rights and standards, inequality, supply chains, local communities, conflict, living wage, health and safety, employee relations.

/ Governance: Executive pay, bribery and corruption, board diversity and effectiveness, shareholder protections and rights, tax strategy, transparency, corporate culture.

Climate Change

We view climate change as a critical investment issue. We consider material climate-related risks and opportunities in our investment analysis and decisions making process. We are in support of improving disclosures regarding climate-change risks, by both our investee companies and third-party fund managers.

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Stewardship Policy

Engagement

Where we identify ESG issues that could affect the long-term value of an investment, we will seek to engage with the company in question. Areas where we may intervene include, but are not limited to, situations where we have concerns about a company’s strategy, performance, governance, remuneration, environmental practices, or social impact. The focus of any engagement is to reduce risk and/or improve investment performance.

Our engagement can take a number of forms, including management meetings, written correspondence and discussions on voting issues. Our ability to engage with companies can be limited, as the proportion of shares we hold in companies is generally lower than that of larger asset managers. With this in mind, we take a risk-based approach to engagement activity, considering the magnitude of risk and size of holding.

Engagement activities can be resource intensive and under certain circumstances it may be appropriate to sell investments that have material adverse ESG issues, rather than engaging with the company in question. We set objectives for our engagement activities and track progress relative to these, on an ongoing basis if necessary.

We expect our third-party fund managers to establish and apply their own voting and engagement policies. As part of our due diligence process, we assess companies’ compliance with the UK Stewardship Code (where applicable), including their records regarding engagement, voting and the transparency of their stewardship activities. Where we identify that a third-party fund manager’s stewardship or ESG integration approach is not meeting our standards, we will either engage with them to try and improve their approach or divest from the fund.

Our approach to collective engagement with other investorsWhere we deem it appropriate and effective, we will engage with a company on a collective basis with other investors. The purpose will generally be to escalate any concerns we might have. Any such engagement would be on a case-by-case basis.

Voting

Company shares usually carry voting rights and as a responsible investor we use these rights to vote on items raised at general and extraordinary shareholders meetings, where appropriate. As the voting reflects our investment approach, discretionary clients’ holdings on our buy list, held in nominee accounts, will vote in accordance with our decision.

We employ a third proxy-voting service that provides in-depth research on corporate governance issues and voting recommendations. However, we retain voting discretion and will always act in the best interest of our clients.

Reporting on our engagement and voting activities

We publish our voting activities on a quarterly basis on our website. We do not typically disclose the identities of the companies we have engaged with, although we may provide case study examples on an ad hoc basis.

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Stewardship Policy

How we approach conflicts of interest related to engagement

Our Conflicts of Interest Policy can be provided on request. Examples of how we would potentially manage conflicts related to our stewardship activity are set out below:

a. The conflict: A client is a director of a company in which we invest and engage with. There is a risk that a conflict of interest could influence our judgement when undertaking stewardship activities related to this company.

How we manage the conflict: If this conflict were to arise, it would be reported to the Investment Committee and a management plan would be put in place, with oversight from the compliance team. In this scenario, that could involve ensuring that no engagement activity or voting decisions are made by the staff member that has the relationship with the client. Furthermore, if we believed that the arrangements put in place were insufficient for us to be reasonably confident that our clients could not be damaged, we will avoid such conflict.

How we manage the conflict: Controls are in place to ensure that staff member’s outside business interests are declared and properly supervised. There is an escalation policy ensuring that conflicts of interest are reviewed by sufficiently senior management of the firm.

b. The conflict: A staff member may have a personal relationship with a company we are engaging with or voting on. There is a risk that a conflict of interest could influence our judgement when undertaking stewardship activities related to this company.

How we manage the conflict: The internal corporate governance of Brooks Macdonald is outside of the remit of this policy and will not be taken into consideration in any voting or engagement activity relating to an investee company.

How we manage the conflict: Any staff member that comes into contact with inside information must record the information on an insider log, as required by market-abuse regulation. That staff member is then prohibited from trading/dealing in the relevant security (or related securities), encouraging others to deal in the security (or related securities), or disclosing the information to anyone else.

c. The conflict: Issues may arise from the fact that Brooks Macdonald Group PLC is a listed company and subject to the principles of the UK Corporate Governance Code. The direction of our voting and engagement activities may not be consistent with the corporate governance arrangements of Brooks Macdonald, under some circumstances.

d. The conflict: In the course of our monitoring and engagement with company management, specific members of staff can become insiders (i.e. receive non-public, price sensitive information).

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Our Stewardship Policy is owned by our Investment Committee and reviewed annually, or as required.

Stewardship Policy

Important information

Brooks Macdonald is a trading name of Brooks Macdonald Group plc used by various companies in the Brooks Macdonald group of companies.

Brooks Macdonald Asset Management Limited is regulated by the Financial Conduct Authority. Registered in England No 3417519. Registered office: 21 Lombard Street, London, EC3V 9AH. Brooks Macdonald Funds Limited is authorised and regulated by the Financial Conduct Authority. Registered in England No. 5730097. Registered office: 21 Lombard Street, London, EC3V 9AH. Brooks Macdonald Asset Management (International) Limited is licensed and regulated by the Guernsey Financial Services Commission. Its Jersey Branch is licensed and regulated by the Jersey Financial Services Commission. Brooks Macdonald Asset Management (International) Limited is an authorised Financial Services Provider, regulated by the South African Financial Sector Conduct Authority. Registered in Guernsey No 47575. Registered office: First Floor, Royal Chambers, St. Julian’s Avenue, St. Peter Port, Guernsey GY1 2HH. Brooks Macdonald Retirement Services (International) Limited is licensed and regulated by the Jersey Financial Services Commission. Registered in Jersey No 106423. Registered Office: Liberation House, Castle Street, St. Helier, Jersey JE2 3AT.

More information about the Brooks Macdonald Group can be found at www.brooksmacdonald.com.

MAR20