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2022 was another extraordinarily challenging year for the world: war, energy and food crisis, high inflation, biodiversity loss, and continued extreme weather events caused by climate change. At Pictet Asset Management we remain deeply committed to embracing environmental, social and governance (ESG) factors in the way we do business.
2022 proxy voting in numbers
46%
abstained
voted against
meetings at which we did not vote
in favour of all resolutions
against / abstained or withheld
at least one resolution
3%
44%
53%
voted for
Director election
Compensation
Director related
Capitalisation
Routine/business
Company articles
Other
1%
10%
89%
0
0
companies engaged
ESG cases
+30%
increase from
2021
+66%
increase from
2021
21%
10%
8%
6%
3%
6%
33%
17%
13%
6%
5%
3%
Social
Corporate governance
Environmental
Director related
Compensation
Director election
E&S blended
Other
6%
18%
Source: Pictet Asset Management, ISS, December 2022
Participant in engagement with Glencore
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E
S
G
Climate
Water
1.
Low carbon transition
2.
Sustainable
forests
3.
Water
conservation
4.
Water
quality
5.
Healthier
food
7.
Long-term performance culture
8.
Talent development
and retention
Nutrition
Long-termism
THEMES
angles
Voting against the longest serving member of the board of this US consulting and engineering services company, who had served for 34 years. At the same time, we engaged with the company to increase the diversity of the board and better align it with its customer base. Ongoing engagement and proxy voting activity have led to continued change including a tenure limit added to company policy alongside further board renewal.
Tetra Tech Inc
Our collaborative corporate engagements
Pictet’s involvement
About the photographer
J.B. Russell is a Paris-based documentary photographer, filmmaker and educator. His work has received numerous accolades, including the Public Prize at France's Bayeux War Correspondents Competition, 1st place in the Magazine News Story category of the POYi competition, the American Photo competition and his work has been selected for the American Photography annual numerous times. He received the Saint Brieuc Photoreporter Grant and his work has been exhibited and frequently featured at Visa Pour L'Image in Perpignan, France, among many other festivals and venues.
'West Africa Climate Change and Biodiversity' series features the way of life, traditional livelihoods, and local culture which are profoundly intertwined with the region’s unique ecosystem and natural resources. West Africa is disproportionally subjected to the adverse consequences of climate change: drought, flooding, rising sea levels, and extreme weather. Seventy per cent of Africa’s mangrove forests are located along the Atlantic coast. Their rich biodiversity makes mangroves extremely efficient carbon sinks for regulating global warming and one of the most important ecosystems on the planet. Nevertheless, human activity and climate change are destroying mangroves, and the livelihoods that depend on them, at an alarming rate.
6.
Biodiversity
Responsible investment report highlights
hover to find out
940
shareholder resolutions
43,550
management resolutions
Source: Pictet Asset Management, ISS, December 2021
hover to find out
abstained
voted against
voted for
1%
9%
90%
50%
22%
14%
11%
2%
0%
0%
Directors-related
Compensation
Routine / business
Capitalisation
Reorganisation / merger
Anti-takeover-related
Other
4%
42%
54%
36%
15%
11%
6%
5%
3%
1%
1%
20%
Directors-related
Health / environment
Routine / business
Corporate governance
Compensation
Social proposal
Human rights
General economic issues
Other
abstained
voted against
voted for
2%
45%
53%
We believe that governance, both for companies and countries, will come back to the fore and play a much more important role in investors’ agendas as the extended era of cheap money comes to an end.
“
”
Eric Borremans
Head of ESG
The overarching purpose of our voting is to protect and promote the rights and long-term interests of our clients as shareholders. As such, we consider it our responsibility to hold companies and their executives accountable for their decisions.
2022 engagement in numbers
Drought caused by climate change has transformed the ecosystem into an inversed estuary, of which few exist in the world. The increased salinization of the ecosystem has degraded large swaths of West African mangrove forests with devastating consequences on fish stocks, wildlife and the livelihoods of local inhabitants. Marsassoum, Senegal. 05/12/2015.
Fishermen in traditional wooden pirogues arrive on the beaches of Kafountine in the Casamance region of Senegal. Thousands of tons of fish are smoked, salted and dried along the beaches and exported throughout the region, playing a crucial role in the local economy. However, not enough has been done to protect the region's natural resources. Illegal fishing by foreign trawlers and the degradation of the mangrove ecosystem, the breeding habitat for many fish species, have drastically reduced fish stocks and hurt local fishing communities. Kafountine, Senegal. 08/11/2014.
Fish drying in the open air on the beaches of Kafountine. Traditional maritime fishing in Casamance and the transformation of fish into smoked, salted and dried products has increased significantly in recent years and plays an important role in the economy of the region. However, the cutting of forests to feed the fish smoking ovens along with the consequences of climate change on the local ecosystem are threatening the traditional way of life and economic activities of the region. Kafountine, Senegal. 08.11.2014
The villagers of Diagho harvest palm nuts in the forest for the artisinale production of palm oil, palm wine and palm oil based soaps. Palm oil products from Casamance are well known and are an important part of the local economy. During the dry season, the men harvest the fruit and the sap of wild palm trees and the women transform the palm nuts into local products. Palm oil production in Casamance remains traditional and has resisted the transformation to industrial scale plantations to satisfy the growing demand from the international food and bio fuel industries that have resulted in large scale deforestation in SE Asia and Latin America. Diagho, Senegal. 10/11/2014.
Villagers from Kabiline working in the rice fields of the valley near their community. Rice farming is a centurie sold tradition for the people of Casamanceand northern Guinea Bissau. Rice is not only the staple of the local diet, but it is also an integral part of the local culture and way of life. Ricecultivation is essential to food security and the economy in Casamance. Riceproduction in recent years has been severely affected by the salinisation of soil and ground water due to drought and rising sea levels caused by climate change. Kabiline, Senegal. 09/11/2014.
Engagement tracking
1
Initial
engagement outreach conducted
Engagement dialogue established
2
Company
commits to address issues
3
Company develops a strategy to address issues
4
Company is at an advanced stage of implementing the strategy
5
Final stage
Successful completion, or disengage/no longer relevant, or failed engagement
Key engagement themes
To align engagement efforts throughout the Pictet Group and maximise impact, we identified four key ESG themes in which Pictet has long-standing expertise. This framework helped increase the number of companies we engaged with by 30%, and broadened our participation in collaborative initiatives.
Management resolutions
Report on GHG Emissions Reduction Targets (Management recommendation ‘Against’)
We voted FOR this resolution. We believe the requested report would allow shareholders to better evaluate how the company is managing emissions from Berkshire’s insurance group, and the report may help the company prepare for future climate regulations.
Berkshire Hathaway Inc.
Environmental Shareholder resolutions
We considered that a vote FOR this proposal was warranted because more information on the impact of the company's standard arbitration provision has on Apple's employees may bring information to light that could result in improved recruitment, development and retention and could help the company prepare for pending federal legislation on the matter.
Apple Inc
Social Shareholder
resolutions
the company already appears to provide adequate and sufficient disclosure
Apple Inc
Shareholder resolutions
Main reasons for rejecting certain resolutions:
the board is best placed to make the decision
the resolution is overly prescriptive
it is not clear that the request would produce meaningful additional information beyond what the company already discloses
For a meeting to be considered an engagement, there must be clear and measurable objectives. We do not consider all routine or monitoring interactions to be engagement even where those meetings take place with members of senior management or the Board of Directors.
“
”
Juan Salazar
Senior Engagement Specialist
Case studies
An engagement is a constructive dialogue whereby we engage companies on material ESG issues to satisfy ourselves that they fully understand and address areas of concern effectively over the short, medium and long term.
An engagement needs:
How do we define engagement?
Ensure the world’s 166 largest corporate greenhouse gas emitters take necessary action on climate change
Goal
Climate change
Topic
Leading engagement with LVMH
Pictet’s involvement
Encourage 72 companies with a high water footprint to value and act on water as a financial risk and drive change to better protect water systems
Goal
Water
Topic
Signatory to the Investor’s Expectations on Nutrition, Diets and Health;
Participant in dialogue with China Mengniu, Danone and Nestlé
Pictet’s involvement
Drive substantial change in 25 of the world’s top food companies’ commitments, practices and disclosure on nutrition
Goal
Nutrition
Topic
Participant in the dialogue with SalMar, Signatory to letters to four companies
Pictet’s involvement
Encourage the world’s eight largest salmon companies to develop a science-based approach to diversifying fish feed ingredient sources
Goal
Biodiversity, climate change
Topics
E, S and G corporate examples
Environmental
JBS S.A.
Environmental
JBS S.A.
Consumer staples
Fixed income
ESG issue: deforestation
Engagement objective(s)
Enhance approach to reversing and preventing deforestation from cattle sourcing.
Issue
Engagement action
Outcome(s)
Issue
Engagement action
Outcome(s)
As the world’s largest beef producer operating in Brazil, JBS is highly exposed to deforestation risks. The company has developed robust solutions to achieve traceability of its direct supply chain; however, there have been NGO reports linking JBS with deforestation within its indirect supply chain. The company committed to eliminate illegal deforestation in the Amazon from its entire cattle supply chain by 2025. However, the lack of sufficiently strong law enforcement mechanisms makes it incredibly challenging to ensure the entire supply base is free from illegal deforestation.
JBS’ actions in the past couple of years to manage deforestation risks in its supply chain have been substantial and address most of our engagement asks. Actions include investing in blockchain technology platforms and satellite imagery systems, rolling out programmes to build capacity for both direct and indirect suppliers, setting up a more robust sustainability governance structure, providing better transparency and disclosure, and actively lobbying for industry-wide solutions. Importantly, and as part of its 2040 Net Zero commitment, the company brought forward its zero illegal deforestation target for upstream suppliers in biomes other than the Amazon, including the Cerrado, to 2025 from 2030 previously. The effectiveness of JBS’ stronger approach in tackling deforestation has been hampered by the Bolsonaro presidency. However, positive developments such as the growing number of suppliers joining the company’s blockchain technology platforms, and actions to block suppliers involved in deforestation, are reason for optimism. We expect that, with Lula at the helm, JBS is now in a much better position to advance on its zero deforestation commitments. There are still significant challenges ahead as well as room for improvement in the company’s approach. As such, we will continue engagement on this issue – both on our own and via our engagement provider.
Our engagement service provider started engaging with the company on this issue back in 2019. Since then, it has had several interactions with the investor relations team and, more recently, with the newly appointed Corporate Sustainability Officer (CSO) for JBS Brazil. Discussions have addressed progress in deforestation commitments, policies and practices, whilst calling for stronger efforts to meet the challenge of eliminating deforestation within the indirect cattle supply chain. We took the opportunity of the CSO’s appointment to meet him directly and reiterate this message. We highlighted the need for mechanisms that would lead to more attractive financial incentives for small cattle farmers, and asked the company to consider requiring suppliers to re-forest areas previously deforested.
Social
Alibaba Group Holding
Information technology
Equity
ESG issue:
labour standards
Engagement objective(s):
Improve workforce-related transparency and disclosure, including but not limited to employee turnover. Set targets to increase proportion of women in managerial roles.
Governance
Fortum
Utilities
Equity
ESG issue: shareholders’ rights
Engagement objective(s):
The Finnish government, as a connected party with 51% ownership of Fortum shares, should waive its right to vote in an Extraordinary General Meeting (EGM) called to approve an emergency liquidity package.
Alibaba Group Holding
Social
Issue
Engagement action
Outcome(s)
There is room for improvement at Alibaba when it comes to workforce-related disclosures. Regarding gender diversity, representation of women at board (39%) and senior executive (50%) levels is positive. However, only 28% of managerial roles are held by women. We would like the company to enhance the disclosure of any programmes in place to promote workforce diversity and to set diversity targets, including for managerial positions. Setting targets can provide management with the necessary focus to increase the gender balance and clarify accountabilities.
We have yet to see positive outcomes from our engagement with the company on these issues, but this is not surprising given that the engagement only started in 2022. Our conversations, however, suggest we might see developments towards achieving our objectives in the near future. We are in regular communication with the company, which allows us to monitor their progress more closely. We plan to have another ESG-focused meeting later this year, as soon as the company’s new ESG report is published.
This year we engaged with Alibaba for the first time on human capital management issues. Our engagement asks to disclose metrics on training and development, turnover/retention, and health and safety were well received. All these metrics are tracked and monitored, and some disclosure provided in the company’s latest ESG report. There is an internal push by its ESG Steering Committee to provide additional disclosure, including on employee turnover – potentially split by business lines. We highlighted that Alibaba is in a good place to be the market leader in workforce-related disclosures and help shape industry standards. On gender diversity, the company told us that their objective is to continue to increase this proportion by focusing on rolling out dedicated initiatives across the firm. However, there is reluctance to set firm-wide targets at this point.
Issue
Engagement action
Outcome(s)
Fortum
Governance
Issue
Engagement action
Outcome(s)
In September 2022, with European power prices spiking as a result of the war in Ukraine, Fortum, Europe’s third largest producer of carbon dioxide-free electricity, negotiated a financing package with the Finnish government to provide emergency liquidity. We deemed the terms of this financing to be unnecessarily punitive, and potentially detrimental to minority shareholders. Importantly, we were concerned that the deal had been struck without consulting minority shareholders, and that the government would be voting in the EGM to approve the transaction.
While we appreciate the constructive discussions both with Fortum’s management team and the Finnish state, it shortly became evident that our engagement objective would not be met. Therefore, we voted against the relevant proposal at the EGM, reduced our governance score for the company, and moved to reduce our position in the company.
Initial contact with the Investor Relations team in September provided the rationale behind accepting the terms of the financing deal agreed with the Finnish state, but yielded little in terms of our corporate governance concerns. We moved quickly to our escalation policy, writing two letters to the Chairman of the board, copying the senior management team. A follow-up call with the CEO again addressed the rationale behind the deal but it became clear that Finnish law allowed for a connected party to vote in an EGM where share issuance was at stake and that the company’s hands were largely tied on that particular objective. We again moved to escalate, arranging a discussion directly with those responsible for the Fortum shareholding within the Finnish government.
Issue
Engagement action
Outcome(s)
Case studies
Sovereign engagement
Discussions with Nigeria’s representative to the IMF about the risk of state fragility significantly increasing given inflationary and fiscal pressures, upcoming elections, and challenges of basic service provision across the country.
Met with Uruguayan government officials as they prepared the launch of the country’s first ever sustainability-linked bonds (SLB). We asked them to introduce and enhance coupon adjustment mechanisms.
As members of a working group within the Emerging Markets Investment Alliance, we wrote a letter to the Colombian government to suggest improvements in ESG-labelled bond issuance in areas such as use of proceeds, project evaluation and selection, and transparency.
Talking about issues such as education or healthcare with governments is part of our fiduciary duty - and helps us form a holistic view of the countries we invest in.
“
”
Mary-Therese Barton
Head of Emerging Market Fixed Income
Read our Responsible Investment 2023 report
3,677
4,401
votable meetings
42,540
1,139
not supported
not supported
515
management resolutions
shareholder resolutions
Breakdown by sector
US & Canada
Breakdown by geography
We have seen an increase in the number of engagement objectives related to the environment mainly thanks to global efforts in the climate and biodiversity space. However the majority of engagements still focus on Governance, as it is foundational to the realisation of both the E and S.
Breakdown by sector
Breakdown by geography
Breakdown by ESG issue
* SBTi (Science-based targets initiative (SBTi) drives ambitious climate action in the private sector by enabling organizations to set science-based emissions reduction targets. Science-based targets are greenhouse gas reduction targets aligned with the quantity of global emissions that needs to be reduced in order to meet the goals of the Paris Agreement and limit global warming to 1.5˚ C.
Source: Pictet. The current baseline and expected future progress will differ by asset class and geography. SBTi validated
2022 voting activity
Biodiversity is unquestionably critical to the proper functioning of the global economy and, therefore, to the ability of investment portfolios to generate shared value over the long term.
Our commitment to biodiversity
“
Stephen Freedman
Sustainability and Research Manager, Thematic Equities
169
Environmental
150
Social
233
Governance
esg issues over years
2022
552
Environmental
Social
Governance
How we are addressing the biodiversity challenge
Investment solutions
Engagement
Partnerships
Partnerships
* The Finance for Biodiversity Foundation was set up in March 2021 and aims to support a call to action and collaboration between financial institutions via working groups, as a connecting body for contributing signatories and partner organizations. Four working groups are currently active: engagement with companies, impact assessment, public policy advocacy and target setting.
2021
333
2020
272
Finance for Biodiversity Pledge: as signatories, we have committed to protecting and restoring biodiversity through our investments
Finance to Revive Biodiversity Programme (FinBio): founding partner in a global research programme to help the financial industry develop strategies to protect natural capital and halt biodiversity loss
Finance for Biodiversity Foundation*: as members of the Foundation, we collaborate and share knowledge with investors and other stakeholders
Engagement
Specific guidelines to inform discussions with companies with high impact on biodiversity
Initiated engagement with 10 companies on biodiversity related topics such as waste mismanagement and nutrient pollution
Investment solutions
Biodiversity as part of the investment universe of our Global Environmental Opportunities strategy
Launch of ReGeneration strategy, which targets companies that are helping to reduce and create more sustainable consumption of natural resources
20%
We engage with companies across the globe, with a focus on Western Europe and North America given that it is where most of the companies we invest in are domiciled.
For Pictet, climate change represents both an urgent challenge and an opportunity to build a more sustainable economy. Our Climate Action Plan sets out our actions to limit global warming to 1.5°C as signatories of the Net Zero Asset Managers Initiative and the SBTi*. Our commitment is that by 2040, 100% of our assets under management will be in issuers that have themselves committed to net zero by 2050 (vs. 20% today). You can track our progress here.
Initiatives we joined
It is our fiduciary responsibility to play an active role in accelerating the transition of the global economy towards a net-zero emissions future in line with the climate science.
“
”
Renaud de Planta
Senior Managing Partner of Pictet Group
Task Force for Climate Related Financial Disclosures (TCFD)
Science Based Targets initiative
Net Zero Asset Managers initiative
2020
2021
2022
Proportion invested in assets with validated 1.5°C science-based targets (%AuM)
121
82
46
Europe
109
95
78
Asia & Pacific
88
75
80
Latin America & Caribbean
20
7
11
Africa & Middle East
14
11
12
Total
352
270
227
Our commitment to climate change
40%
60%
100%
2021 baseline
2025
2030
2040
Source: Sustainalytics , Pictet Asset Management, 31.12.2022
Pictet Group’s target for listed equity and fixed income
Simply appearing to be compliant with governance norms, or ticking boxes, is not enough to assure us that an organisation is well-managed. We believe shareholder resolutions are an important mechanism in signalling to the board the urgency for action.
“
”
James Upton
Senior Corporate Governance Specialist
15%
14%
13%
11%
10%
9%
8%
7%
5%
5%
2%
Industrials
Healthcare
Consumer discretionary
Utilities
Materials
Consumer staples
Financials
Information technology
Energy
Communication services
Real estate
1 Part of this publication may contain proprietary information from third-party data providers (Sustainalytics, ISS) that may not be reproduced, used, disseminated, modified nor published in any manner without their written consent. Nothing contained in this publication shall be construed as to make a representation or warranty, express or implied, regarding the advisability to invest in or include companies in investable universes and/or portfolios. The information is provided “as is" and, therefore Sustainalytics assumes no responsibility for errors or omissions. Sustainalytics cannot be held liable for damage arising from the use of this publication or information contained herein in any manner whatsoever.
Disclaimer
This marketing material is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation.
The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments or services. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice. Reference to a specific security is not a recommendation to buy or sell that security.
Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Pictet Asset Management has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIFID, nor does it constitute on the part of Pictet Asset Management an offer to buy or sell any investments, or to provide financial services, neither an investment recommendation.
Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future
performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.
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Issued in May 2023
© 2023 Pictet
Marketing material
”
Since biodiversity is linked to multiple environmental challenges, focusing on it opens the doors to a much broader perspective on environmental investing.
Opportunities
A clear
objective
Improvers
A time
horizon
Leaders
At least one investment team involved
Leaders
An ability to influence the company
2022 proxy voting in numbers
Our commitment to biodiversity
Our commitment to climate change
2022 engagement in numbers
2022 proxy voting in numbers
Our commitment to biodiversity
Our commitment to climate change
2022 engagement in numbers
2022 proxy voting in numbers
Our commitment to biodiversity
Our commitment to climate change
2022 engagement in numbers
2022 proxy voting in numbers
Our commitment to biodiversity
Our commitment to climate change
2022 engagement in numbers
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