Strategic Equity Capital | ESG

Gresham House is the investment manager of Strategic Equity Capital plc and therefore the ESG information on this page and policies here reflect those of the investment manager.

Gresham House has a clear commitment to sustainable investment as an integral part of its business strategy. Sustainable investment considerations are applied across the investment process for all assets and involve the integration of ESG factors as well as the application of active stewardship responsibilities, including engagement and voting. 

Our Sustainable Investment Framework is based on ten core ESG themes and is used as the basis for the ESG assessment during the due diligence stages before an investment decision is made, as well as being used as a way to structure engagement activity carried out throughout the holding period.

The asset class specific ESG Decision Tools builds on these themes by supporting the investment teams in identifying potential, material ESG risks that need to be managed and mitigated, and to help shape the due diligence process for individual companies prior to investment. The Tools also provides a way of summarising material ESG issues, which can then be tracked and monitored over time, and include actions that can be taken to mitigate those risks throughout the holding period.

At Gresham House, our approach to sustainable investment is embedded across our business and involves ESG analysis, active stewardship, and outcome measurement.

Our commitment is demonstrated through the integration of sustainable investment practices across our strategies, through our proactivity in seeking to make a positive social, economic, or environmental impact alongside delivering strong financial returns and by being a responsible and ethical employer.

Our approach to sustainable investment across each asset division is based on five core components:

01 Sustainability governance structure

02 Sustainable investment commitments

03 Sustainable investment policies

04 Sustainable Investment Framework (SIF)

05 Asset class specific ESG Decision Tools

We are also members of a range of industry bodies which inform and support our sustainable investment approach, and work with some service providers who develop and implement certain aspects of our sustainable investment activities.

These aspects are all managed within our sustainability governance structure which includes our Board, Group Management Committee, and Sustainability Executive Committee. 

Our Public Equity teams target superior long-term returns, by applying an active private equity approach, engaging with companies, and applying rigorous due diligence and developing a deep understanding of each investment.

The ‘G’ (Governance) of ESG is the most important factor in our investment processes for public equity. Board composition, governance, control, company culture, alignment of interests, shareholder ownership structure, remuneration policy etc. are important elements that will feed into the fund manager’s analysis and the company valuation.

The E and S (Environmental and Social) are assessed as risk factors during due diligence to eliminate companies that face environmental and social risks that cannot be mitigated through engagement and governance changes.

We integrate ESG considerations into the lifecycle of each investment as follows:

01 Initial appraisal

Identify material ESG matters requiring further investigation during the due diligence stage. If certain risks are unlikely to be sufficiently managed or mitigated, then we may choose not to proceed at this stage.

02 Due diligence

The ESG Decision Tool and meetings with management are used to assess material ESG risks that need to be mitigated and ESG opportunities that could drive value. Specialised consultants may be used to provide additional information.

03 Investment appraisal

A summary of the ESG analysis is included in final Investment Committee submissions. Appropriate risk mitigation approaches will be referenced and assurance that the business is open to making improvements is sought.

04 Holding period

During this stage, our periodic engagement with the management teams of our investments includes discussion of ESG performance and progress aimed at identifying key concerns and to give us a clearer view of ESG management within our portfolio.

Public Equity: We engage regularly with boards, focusing on strategic, financial, and operational matters, including ESG factors, and consistently use our voting rights.

As an active investor, the Manager is committed to acting as a long-term steward of the assets invested in on behalf of clients. The Management team use active ownership responsibilities, including engagement and voting, to protect and create value. The Investment Manager’s Engagement and Voting Policy sets out the approach and explains how integrated these activities are to business practices and investment processes. Both activities are viewed as a key part of the investment approach and not considered stand-alone objectives.

Engagement

The Company’s investment philosophy means that it aims to act, by default, as an actively engaged shareholder. The Management Team’s assessment of management, Board and governance forms a critical part of the investment case, which necessitates that Management work with companies on matters such as strategy, M&A and remuneration, both from the outset of our holding period and on an on-going basis. The Management Team encourages an open and honest dialogue with the companies which we believe is an essential part of being an effective steward of our clients’ assets.

The Management Team will meet face-to-face with the management team of an investee company at least twice a year, and up to quarterly for this strategy . These meetings form the basis for the ongoing monitoring of a company strategy, financial performance and ESG considerations.

Defining engagement objectives

Dependent upon factors such as materiality and level of control, the Management Team may identify and agree strategic milestones that they expect a company to deliver on over the holding period. Strategic milestones will typically be bespoke to the organisation and important to the development of the business, aiming to keep the directors focused and ensure continued progress.

Objectives may change over time depending on several factors, including business priorities, market forces and stakeholder considerations. Example of engagement objectives include:

• Improvements to reporting, including ESG factors
• Board composition
• Improvements to governance arrangements
• Product or geographic expansion or variance, including due to ESG related market forces
• Staff retention and reduction of absence rates
• Implementing compliance programmes with forthcoming ESG legislation.

The identified objectives provide a form the basis of discussions with companies during regular engagements.

Voting

Voting is an important part of the investment strategy. The Management Team devotes the necessary research, management time and resources to ensuring we make good voting decisions.

Voting decisions are based on views of which course of action will be in the best interests of the Company’s investors. Votes are informed by various sources including: research, engagement with the company, discussions with other stakeholders and advisers, internal discussions and consultations, and other relevant information.

Voting decisions

The Investment Manager does not have a set policy defining how voting decisions should be made on specific items, but it has defined the following requirements:

1. Authority to allot shares – it is our policy to vote against anything over 33%.

2. Disapplication of pre-emption rights – it is our policy to vote against anything over 10%.

3. Authorise Company to purchase own shares – it is our policy to vote against anything over 10%.

4. Political donations – it is our policy to vote against all political donations.

Proxy voting providers

The Management Team does not use any proxy voting advisory services, but uses proxy voting services to deliver voting decisions to the companies invested in.

Voting against management

If the Manager plans to vote against the company decision, it will engage with the company in advance, explain why its plans to vote against the decision and look for ways to avoid that if possible. If a satisfactory outcome is not reached through this active dialogue with the company, the Manager will typically tell the company in advance of its intention to abstain or vote against management and clarify the reasons grounding such intention.