Stewardship

Summary 

Q4 summary including votes cast on equity holdings*: 

• We voted at 109 meetings on 995 separate resolutions. 

• We only abstained on 13 resolutions (2.8%), demonstrating that we exercised our rights to vote the vast majority of the time. 

• We voted in favour of 775 resolutions (76%), we upheld our intention to be supportive of management to help them continue to run successful businesses, but also exert pressure on companies when it is needed. 

*Managed by, Brunel (Global Equities), Magellan (Listed Infrastructure) and Ninety One (Emerging Markets)

Commentary and case studies 

Aspen Technology, Inc.

Aspen Technology, Inc. is a software company in our Global Sustainable Equities (GSE) portfolio (market value c. £1m as at December 2023), that provides software solutions for the process industries including oil and gas, chemicals, engineering, and construction. The software solutions are aimed at helping companies optimize their operations, improve efficiency, reduce costs, and enhance their overall performance and sustainability. We voted against the resolution due to concerns related to the board's gender diversity and the independence of the nomination Committee; the board has 25% female representation which is below the minimum expectation of 30% and the nomination committee is only 50% independent. Aspen is not part of the formal engagement programme with Hermes EOS but a future engagement on the topic will include writing to Aspen to explain the voting rationale and engaging with the company post their annual governance meeting (AGM). 

Bio-Techne Corp

Bio-Techne Corp is a global developer, manufacturer and supplier of high-quality reagents, analytical instruments and precision diagnostics. WPF holds a total market value of £1.3m in our Paris Aligned Benchmark and GSE portfolio. The vote against the resolution was driven by the lack of disclosures on targets and reward for middle of the peer group performance which would lead to substantial reward for the CEO. There were also concerns on gender diversity; the board has 22% female representation is below our expected 30%. Following Bio-Techne AGM, engagement would include writing to the company to explain the reason for our vote and discussing the topic.  

Bio-Techne Corp failed to gain support for this resolution with only 35% of shareholders supporting this plan.  

2023 Overview... 

From January 2023 to December 2023, 76% of our votes were in favour of resolutions, 23% against and 1% abstained. Through our active engagement with our managers on their voting records, it demonstrates how the Fund is exercising stewardship to protect its investments while promoting sustainable business practices when it is needed.  

Summary 

Following the Q2 proxy season, quarter 3 was a quieter month for Annual General Meetings and voting. As a result, the majority of the votes cast in Q3 were in relation to company Board structure and renumeration. However, there were two notable examples of equality, diversity and inclusion (EDI) where the fund exercised its voting rights.   

The following summary includes votes cast on all active listed equity portfolios:

• We voted at 95 meetings on 1,156 separate resolutions. 

• We only abstained on 9 resolutions (0.6%), showing that we exercised our rights to vote the vast majority of the time. 

• We voted in favour of 996 resolutions (86%), we upheld our intention to be supportive of management to help them continue to run successful businesses, but also exert pressure on companies when it is needed. 

Commentary and case studies 

Compagnie Financière Richemont S.A., commonly known as Richemont, is a Switzerland-based luxury goods holding company. Richemont produces and sells jewellery, watches, clothing, and accessories through its various subsidiaries such as Cartier, Van Cleef & Arpels and Net-a-Porter. As at the end of Q3, we held £1.8m through our portfolio with Brunel. EOS Hermes (Brunel's engagement provider) had some concerns relating to Richmont's approach to gender diversity on the board and that the company pay is misaligned with EOS' renumeration principles. EOS voted against the re-election of Johann Rupert as Director and Board Chair and the approval of the variable remuneration of the executive Committee as it was misaligned to EOS' principles.  The outcome was that in spite of this, both these items were approved. 

Moreover, similar themes echoed in votes with Nike Inc, an American athletic footwear and apparel corporation in which we have almost £6m invested through our Brunel portfolio. In a vote to rectify the Executive Officers' compensation, EOS voted against as it would contribute to high variable pay ratios and excessive CEO pay. We are pleased that EOS were able to use the vote to support for the introduction of reports on the median gender and racial pay gap, and report on effectiveness of supply chain management on equity. Voting in favour of these reports is thought to promote better management of opportunities and risks.  The outcome was that both these shareholder proposals gained significant (although not majority) backing, and although not successful, this did prompt further explanations and a statement from the board.   

These instances underscore the dual commitment to holding companies accountable while also promoting fairness and responsible business practices. The emphasis on EDI considerations within voting decisions will align our investments not just for financial gain but also for societal impact and ethical progress. 

Summary

The following summary includes votes cast on equity holdings in Developed Markets (Brunel) Listed Infrastructure (Magellan) and Emerging Markets (Ninety One):

• We voted at 840 meetings on 13,176 separate resolutions. 

• We only abstained on 216 resolutions (1.6%), showing that we exercised our rights to vote the vast majority of the time. 

• We voted in favour of 9,827 resolutions (75%), we upheld our intention to be supportive of management to help them continue to run successful businesses, but also exert pressure on companies when it is needed.

Commentary and case studies

Most of Wiltshire's equities are held within global mandates managed by Brunel, with stewardship services provided by Federated Hermes (EOS) (and Legal and General Investment Management (LGIM) for passive equities) . The second quarter of the year is known as proxy season, this is when most company AGMs are held. Consequently, Board structure and Remuneration made up two thirds of resolutions where votes were cast against management.

EOS highlighted a particular example of concerns related to the approach to board diversity and excessive CEO pay at Netflix, Inc. Last year, some 73% of shareholders rejected the pay proposal at Netflix and we were disappointed that the company had not done more to address shareholder concerns this year. Against the backdrop of a Hollywood writers' strike, Netflix shareholders (including EOS) again withheld support for the sizable packages awarded to the content streamer's executives, voting against the resolution.

To pick up on another governance theme, we noted EOS have continued to apply pressure on North American companies with long-tenured auditors on the believe that independence, and potentially audit quality, are at risk when the same external audit provider has been maintained for too long. EOS's toughened stance this year for companies with external auditor relationships extending beyond a century led us to votes against the auditor and audit committee chair for a number of companies, including the pharmaceutical Johnson & Johnson, among others.

While this report is primarily focused on voting, EOS provided insight of engagement activity that can avoid the need to raise shareholder resolutions at a recent Responsible Investment Sub Group meeting (of pension fund officer clients of Brunel). For example, in 2022, EOS intensified their lobbying of Mercedes Benz, facilitating discussions between the company and an investor group planning to file a shareholder resolution in on setting sustainability targets in the supply chain, the company's support for the Paris Agreement and emissions reduction targets. This resulted in receiving written assurance from the company in that it would carry out a review of its associations' lobbying activities and publish this with its sustainability report annually as 'the Mercedes-Benz Group Climate Policy Report', from 2023.

Magellan manage a mandate of listed infrastructure, the number of stocks held is relatively small; this quarter there were 27 meetings and therefore this represents most voting activity for the year.

Magellan voted at the 2023 AGM for Vopak, a company which stores chemicals, oil and gas based in the Netherlands. Magellan have been engaging with the company on energy transition risks and alignment of executive pay to address these.  Magellan were pleased to see the inclusion of new long-term incentive payments for executives, aligned to specific GHG emission reduction targets and capital expenditure commitments to new energies development. These proposals were supported as they address a material ESG risk for Vopak.

As a member of LAPFF, Wiltshire Pension Fund receive voting alerts, including those for climate related lobbying and carbon emission target resolutions. One of these alerts was in respect of Enbridge, an energy company held by Magellan, regarding their disclosure of scope 3 emissions data. We shared the resolution recommendation with Magellan to inform their voting intentions. Magellan's own analysis of the company recommended voting against the proposal which differed from the LAPFF alert to support.  Magellan highlighted how Enbridge are above their peers on reporting emissions data, and that the proponent of the vote may have missed disclosures that have already been made. On this basis, Magellan voted against both shareholder resolutions.

Ninety One voted at 58 meetings. There were abstentions on 41 of 713 resolutions (6%).

During quarterly meetings last year, we learned of Ninety One's engagement with Vale, the Brumadinho tailings dam collapse in 2019 that killed 272 people causing significant environmental damage to surrounding communities, and the company's progress in Brumadinho and reparations.

LAPFF recommended voting against resolutions on the Approval of the Financial Statements and Re-election to the Board of directors. We forwarded the alert to Ninety One, learning of the decision to vote in favour, and noted the manager comments as follows:

Ninety One's policy flagged risks that the financials "may be adjusted significantly in future periods, as new facts and circumstances become known". This is regarding estimates of costs surrounding the decommissioning of tailings dams following the Brumadinho incident. Vale has endeavoured to be transparent by sharing comprehensive expense estimates and disclosing their process and actions. Additionally, they hold an unqualified audit opinion from an independent auditor. As a result, Ninety One saw no reason to oppose their financials. The proposed Board member for re-election had been instrumental in reframing the audit and risk function and been an important part of overall governance improvement at Vale.

Finally, we asked Ninety One for some background on the process and factors considered for deciding on voting action to elect a number of directors at Grupo Aeroportuario del Sureste SA de CV.Ninety One provided their view that they should not vote against directors of a well-run business based on tenure that renders them non-independent. Ninety One consider what the directors bring to the business. For example, Fernando Chico Pardo, a de facto company founder and a majority shareholder had been key to its success. Rasmus Christiansen was a former Copenhagen Airport executive and has been instrumental in transferring operational expertise to ASUR since its founding. Ninety One also take into account overboarding if a director holds too many other appointments.

Conclusions

This report aims to highlight the stewardship activity being undertaken on our behalf across the Fund's equities portfolios. Voting and engagement is a key way for the Fund to protect its investments and to achieve its investment aims. Through engagement with our managers on their voting records, we have some assurance of the policies and oversight in place to manage voting activity in the context of wider stewardship as responsible asset owners.

Summary

The following summary includes votes cast on equity holdings*:

• We voted at 40 meetings on 447 separate resolutions.
• We only abstained on 3 votes, showing that we exercised our rights to vote the vast majority of the time.
• We voted 45.0% in support of management and 47.5% against management (meetings where one or more resolutions were voted against).  This demonstrates that we upheld our intention to be supportive of management to help them continue to run successful businesses, but also exert pressure on companies when it is needed.

*Developed (Brunel), Listed Infrastructure (Magellan) and Emerging Markets (Ninety One)

Commentary and case studies

Most of Wiltshire's equities are held within global mandates managed by Brunel, with stewardship services provided by Federated Hermes (EOS).  The first quarter of the year was fairly quiet, with fewer meetings (generally, voting season occurs in the second quarter of the year).  A recurring theme, as reported in the 2022 review, was remuneration.  We observed seven resolutions in the above meetings relating to pay and remuneration (for example, Becton, Dickinson and Company and Apple Inc.) with "against" votes cast accordingly.

Magellan manage a mandate of listed infrastructure, the number of stocks held is relatively small; this quarter there were no meetings and therefore no voting activity.  During Q1, Magellan engaged with Severn Trent regarding their climate and sustainability metrics in executive remuneration and encouraged the company to consider evolving the metrics to be more output focused.  Magellan view Severn Trent as one of the leaders in the sector in terms of commitment to climate and the environment.  The engagement was positive given the acknowledgement from the Board of the benefits of output driven metrics.  Constructive dialogue around the challenges with selecting and measuring metrics, as well as ensuring outcomes aligned with performance was of particular note.

Ninety One voted at 26 meetings.  There was an abstention on a remuneration resolution which officers queried.  Further context was provided that the vote flag was due to lack of transparency/disclosure around remuneration (which is a common theme in emerging markets) rather than a fundamental issue.  Ninety One also abstained a vote with Netcare, a healthcare provider, which was also in relation to remuneration. Ninety One expressed concerns about two out of the four financial targets set for variable remuneration. They have engaged with the board regarding this matter and received assurance that changes will be implemented in the future. This will now be an engagement point for the team moving forward.