Sustainable Investment and Active Ownership Approach
I. UOBAM's Sustainable Investment Framework
In our commitment towards advancing and supporting the principles of PRI, we have put in place our sustainable investing policy as part of our sustainable investment framework, as set out in the table below.
We believe that Environmental, Social, and Governance (ESG) issues are financially material to a company’s performance and will translate to material financial impact on the investments that we make. As part of our fiduciary duty to our investors, we have put in place our sustainable investing framework and process which focuses on deep fundamental research, augmented by the use of technology and leveraging on our local expertise.
Our proprietary sustainable investment framework is a common framework that is utilised across the firm, and is implemented through the integration of ESG evaluation within our investment process. The process of ESG evaluation involves the assessment of material ESG factors of companies which is determined by UOBAM’s proprietary materiality map.
UOBAM’s proprietary materiality map is developed by referencing the Sustainability Accounting and Standards Board (SASB) materiality map. UOBAM’s proprietary materiality map also assigns specific E, S and G pillar weights to companies across 11 sectors that are classified using Global Industry Classification Standard (GICS). Below is an overview of how ESG is incorporated into our investment process.
The execution of ESG evaluation and integration into our investment process is supported by dedicated resources in our regional investment teams and covering all major asset classes that we invest in. Overall, we believe that ESG integration into our investment process contributes to performance and risk mitigation by enabling us to identify high-quality companies which are resilient, well-managed, able to grow sustainably and are likely to maintain their competitiveness in the long term.
To complement ESG incorporation into our investment process, we also have in place an Active Ownership Policy which has a coverage that aligns to the Sustainable Investment Policy. The Active Ownership Policy serves to facilitate dialogue, engagement, and proxy voting. We will leverage our regional footprint and the local expertise of our regional investment teams to execute meaningful dialogues and engagement which will drive strategic investment decisions for the sustainable investments we make.
To quantify and enable our investors to better understand how their investments are helping to address critical global issues such as climate change and human capital management, we have developed internal capabilities to carry out portfolio impact analysis to highlight how we reduce our environmental footprint, and to make a more tangible contribution to the UN Sustainable Development Goals (SDGs), UOBAM will also integrate impact measurement aligned with these global trends as part of portfolio analysis.
We also continuously monitor on a global and regional basis, the changing regulatory landscape that impacts sustainable investing. Whenever possible, we will participate in responding to regulatory consultations to provide our inputs and help guide and develop ESG policies and guidelines that support the advancement of the six Principles of the PRI. Our responses to such regulatory consultations will be aligned to our sustainable investing policy and will look to support the six Principles of the PRI. To ensure that this alignment is achieved, we have in place our sustainability governance structure that will provide oversight and accountability for our responses.
II. UOBAM Active Ownership Approach
Sustainability is a key pillar in UOB Asset Management’s (UOBAM) corporate strategy, and we view active ownership is a crucial aspect of our sustainability culture, as it can positively influence companies to engage in sustainable business practices, creating not only long-term value for these companies but also social and environmental benefits for the world.
We have a strong regard for fostering good stewardship and as an asset manager based in Singapore, we are a signatory to our local stewardship code (Singapore Stewardship Principles (SSP) for Responsible Investors). UOBAM is also a signatory of the UN supported Principles for Responsible Investment (PRI), and we are committed to follow their 6 Principles.
Active ownership at UOBAM consists of company engagement and proxy voting activities. These activities form a key component of our responsible investment approach and fulfils UOBAM’s fiduciary duty as an investment manager to act in the best long-term interests of our clients.
1. Company Engagement
UOBAM believes in the value of engagement and aim to enhance risk-adjusted returns of our investments and shareholders’ value in the long run. We identify a range of thematic and material ESG issues that can affect our investee companies in the long run and engage them to ensure that they are well prepared to mitigate these issues.
Throughout the engagement process, we gain valuable insights into our investee companies’ propensity deal with ESG issues and whether they will take the appropriate measures to manage these issues. Engagement acts as an important information source to aid our investment decision.
By engaging with companies, we can also encourage improvement in their ESG disclosure, identify the need to advocate positive change, communicate our concerns and improve its practices on ESG issues, where necessary.
We prioritise our engagement based on geography of companies and size of holdings, severity of identified material ESG issue, potential to generate long-term value following a successful engagement, and specific client request(s).
UOBAM engages with companies through a variety of channels and also considers collaborative engagement with other stakeholders in the event we believe that the efficacy and chance of success of the engagement can be enhanced.
Over the course of the engagement process, UOBAM would pursue a number of courses of action should the company constantly fails to meet the standards expected.
UOBAM will vote against management at the annual company meetings if we are not satisfied with managements’ response to the ESG issues raised and ability to mitigate the identified risks. UOBAM may also consider voting for shareholder resolutions initiated in response to the ESG issues.
Ultimately, if the company still continuously fails to meet the standards expected after the engagement timeline, UOBAM will decide to reduce our exposure to investment holdings size or divest our investment in the company.
2. Proxy Voting
UOBAM aims to vote on the vast majority of proposals raised at every company meeting in a timely manner. UOBAM has engaged the services of proxy voting agent, Institutional Shareholder Services Inc. (“ISS”) to provide us with proxy voting services and proxy voting research and recommendations.
While UOBAM has authorised ISS to vote on its behalf, UOBAM retains full discretion over all voting decisions and reserves the right to vote contrary to the recommendations of ISS. This can occur when UOBAM have a differing view that these vote recommendations are not in the best interest of its clients, after taking into account relevant information in its decision e.g. engagement outcome, internal research, etc.
There may be situations where UOBAM may choose not to vote or abstain from voting:
(a) where administrative or other procedures result in the costs of voting outweighing the benefits;
(b) the voting securities are part of a securities lending program and UOBAM is unable to vote securities that are out on loan;
(c) a meeting notice is delivered close to the meeting date and UOBAM has insufficient time to adequately assess the issues being tabled at the shareholders’ meeting and / or process the vote;
(d) UOBAM sells shares prior to a company's meeting date and decides not to vote those shares, on the basis that UOBAM shall not be restricted from trading in a security due to an upcoming shareholder meeting; and
(e) voting securities have been blocked from trading in order to be tendered for voting purposes and UOBAM believes that preserving the ability to trade the security is in the best interest of the beneficiaries;
(f) in event of a situation where regulatory obligations and rulings of the SIC imposed on UOB Group that also apply to UOBAM, may prohibit UOBAM from voting on securities due to its deemed affiliation for a corporate action.
III. UOBAM's Approach to Strategic Partnerships
We take an inside-out approach to sustainable investing and move beyond just focusing on internal processes such as ESG integration ; efforts include establishing strategic investment partnerships with global sustainability leaders such as Robeco and Fukoku Capital Management.
Through such external partnerships that we aim to further enhance our capabilities and develop the accessibility of sustainability investment opportunities in the Asia region for investors. This will be done through sustainability mandates, working in policy consultation, and responsible investment education and thought leadership.
Our Sustainability Partners
Robeco is a global leader in sustainable investing, and our partner in launching sustainable solutions and UOBAM’s Sustainability Academy.
Fukoku Capital Management
Fukoku Capital Management is one of the leading investment management firms in Japan, and our partner in managing sustainable mandates.