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RIL corporate engagement and governance
The Responsible Investment Leaders (RIL) range has an active corporate engagement and governance program which is overseen by the RIL Ethics Committee. We will be reporting regularly on the work undertaken in these programs.
2008 In Review
Corporate Engagement
The RIL corporate engagement approach is to focus on companies held within the portfolio. The RIL Ethics Committee identifies priority engagement themes, which are then implemented in partnership with the RIL manager panel. Our aim is to improve share price performance by assisting companies better manage risks and identify opportunities in areas of their business affected by social and/or environmental factors.
In 2008 the RIL Range continued its corporate engagement focus on Occupational Health & Safety, within an active program. In addition the Range has a focus on Access to Medicine and Climate Change policy.
Specific initiatives in 2008 included:
- Automotive Sector: There has been ongoing dialogue with Toyota Motor Corp in relation to their supply chain. This issue emerged from their sourcing of pig iron in Brazil, with one of their suppliers being reported as using bonded labour. Following immediate dialogue Toyota signed up to the Automotive Industry Action Group working group on the supply chains of the auto sector, with the aim of ensuring this incident would not occur again. Subsequently in partnership with Boston Common and other investors we have engaged in further to ensure Toyota promotes a high standard in their broader supply chain with regard to human rights and working conditions. In response to this engagement Toyota have agreed to share standards with suppliers in Q3 2009.
- Cotton supply chain: The issue of sourcing cotton from Uzbekistan has also emerged as a significant issue. Specifically the issue in relation to the 3 million Uzbekistan workers who grow and harvest cotton. There is evidence that as part of the workforce children are forced to work up to 3 months a year in the cotton fields. In relation to this one of our manager’s Boston Common has sent out a series of letters to a range of garment manufacturers raising the issue, and also informing them of the risk to their business and brand of sourcing cotton from Uzbekistan. Already companies like H&M and Marks & Spencer have committing to ensure that none of their cotton is sourced from Uzbekistan.
- Access to Medicines: The Responsible Investment Leaders funds have taken an active interest in improving the access to medicines in the developing world. Specifically that AMP Capital’s Sustainable and Responsible Funds have now become the sole Australian signatory to the Investor Statement on the Access to Medicine Index project. As part of the initiatives an Access to Medicines index has been created providing investors with an ability to assess and rank the top 20 largest pharmaceutical companies on a range of issues including: access to medicines, public policy, research on neglected diseases, patent and licensing policies etc.
- BP Tar Sands: There has been active dialogue with BP in relation to their entry into a Canadian tar sands program, which is seen to have a more significant environment footprint than conventionally derived fossil fuels.
- Climate Change Policy: Managers continue to take an active role in corporate engagement in relation to Climate Change policy and corporate response:
- Henderson has been actively involved in having dialogue with companies which are approved for investment within their Industries of the Future strategy to sign up for the Carbon Disclosure Project, with strong success in improving participation. The team has also been involved in a number of policy initiatives which in the climate policy/strategy space with investor briefings on “zerocarbon Britain” and the sustainability of the biofuels sector, together with an ongoing focus on climate change adaptation.
- AMP Capital has been actively involved with the Investor Group on Climate Change and writing a submission in response to the Australian Government Carbon Pollution Reduction Scheme Green Paper. Additionally an AMP Capital representative attended the Department of Climate Change Industry Roundtable in Canberra and presented on climate change and investment at the Australian Super Investment conference.
Corporate Governance
Followed up previous resolution in 2007 proxy season requesting management implement a “say on pay” process (which AMPCI RIL co-filed). In April 2008 the resolution was voted on by all shareholders of Waddell & Reed Financial receiving 49.5% of all votes cast. But despite this Waddell & Reed not interested in participating with Boston Common on the issue of executive pay. In November 2008 refiled (with AMPCI RIL co-filing) the “Say on Pay” resolution to be included in the 2009 proxy statement.
RIL governance
Two specialist committees - the Investment Committee and the Ethics Committee - monitor the managers and the asset allocations for each Fund, maintain the Funds' sustainability integrity, and oversee the overall operation of the Responsible Investment Leaders product range.
The Investment Committee is responsible for investment decision-making and financial performance, and performs four key tasks:
- determining the long term investment strategies of the Funds
- identifying the manager universe
- manager selection
- strategic asset allocation
The Investment Committee includes investment professionals from within AMP Capital and representatives from Mercer Investment Consulting and Edwards Benefits Advisors.
The Ethics Committee is responsible for sustainability integrity and corporate governance and engagement, and performs two key tasks:
- overseeing the Funds' investments to ensure they reflect the Funds' sustainability objectives
- providing input on matters of priority for corporate engagement and governance, where environmental, social or ethical issues, or labour standards are relevant
The Ethics Committee is comprised of sustainability research and investment personnel from within AMP Capital, and client representatives.
