Henderson Opportunities Trust | ESG

Responsible Investment is the term used to cover the Manager’s work on ESG issues in the Company’s investee companies. It is very wide ranging and all investment decisions are made with consideration of the ESG context. It is an important part of the investment process, and is incorporated at both the Board and Fund Managers’ level and in conjunction with the Janus Henderson Responsible Investment & Governance (“RI&G”) team, as a specialist resource on ESG issues.

In some ESG areas the issues are easily measurable and considerable progress can be seen.

The governance of many businesses has improved. Board composition has become more diverse and gender equality is gradually being tackled by the business community. Remuneration packages are (broadly) being set with careful consideration in dialogue with shareholders, and many of the investee companies within this portfolio have good levels of management ownership so shareholders and management teams are well aligned.

There are, however, some ESG issues that are more subjective and as a result progress is difficult to monitor. The environmental area is particularly challenging. We prefer dialogue with, rather than the exclusion of, companies or sectors that do not score as highly in environmental screening so as to try and understand the issues. For example, the portfolio continues to hold companies with exposure to fossil fuels. It is our view that in the current stage of the energy transition there is a need for fossil fuels, particularly lower carbon emission fuels such as natural gas.

One of the ways an awareness of these issues colours all investment decisions is in the search for companies that are helping to provide answers. When viewed in this context, ESG issues are both a challenge and also an investment opportunity. For example, many of the early-stage companies held within the portfolio are addressing the need for de-carbonisation through a variety of technologies including solid state batteries, renewable energy and fuel cells. There are also companies held within the portfolio where their end products could have a material societal benefit if they become fully commercialised. For example, companies developing less invasive surgical tools, or low-cost gene sequencing that would allow more personalised medicine. Janus Henderson seeks to protect and enhance value for the Company’s shareholders through active management, integration of ESG factors into investment decision making, company engagement and voting.

Voting and the Stewardship Code

The Board believes that voting at general meetings is an important aspect of corporate stewardship and a means of signalling shareholder views on board policy, practices and performance. The Board has chosen to delegate responsibility to the Manager for voting the rights attached to the shares held in the Company’s portfolio, and the Manager actively votes at shareholder meetings and engages with companies as part of the voting process. Voting decisions are guided by the best interests of the investee companies’ shareholders and made in consultation with the Fund Managers, who have an in-depth understanding of the respective company’s operations. On occasion, the Manager might make a voting decision following consultation with the Chairman of the Board. Voting decisions are taken in keeping with the provisions of the Manager’s ESG Investment Policy (see www.janushenderson.com) which set out the Manager’s approach to corporate governance and compliance with the Stewardship Code (see www.frc.org.uk). The Manager is also a signatory to the Principles for Responsible Investment (see www.unpri.org) and an active member of a wide range of organisations and initiatives that work to promote ESG integration and responsible investment.

Additional information:

Information on the Company’s approach to ESG can be found in the latest annual report: www.hendersonopportunities.com.