Sustainable income streams have always been fundamental to Foord’s long-term investment philosophy. Multiple-counsellor portfolio managers bring an acute awareness of environmental, social or governance (ESG) factors to the stock selection process.
Foord considers ESG factors in its formal macro view, economic and earnings forecasts, probability analysis and top-down asset allocation. Foord also uses ESG factors as a subjective measure to rank attractively priced companies or when evaluating management of investee entities.
In terms of its Sustainable Investment Policy, Foord undertakes to:
- Score investments in the Foord global funds on ESG risks
- Monitor ESG risk scores of investee entities
- Incrementally improve ESG risk scores of investee entities by engaging management on ESG issues
- Vote for resolutions that support positive ESG outcomes
- Avoid investment in securities with extreme ESG risk or to divest from such entities if possible
- Disclose its proxy voting record.
Corporate abuses are more probable in an environment of shareholder apathy. Shareholders must therefore actively participate in protecting the value of their investments against potentially harmful management decisions.
Foord’s fiduciary responsibility to its investors is to vote on corporate resolutions in a manner that preserves and enhances the investor’s investment interest. Guiding principles include:
- Do not abstain unless for strategic or tactical reasons. Foord takes its stewardship responsibilities very seriously. We apply our minds to every resolution put to shareholders.
- Vote against resolutions that dilute the interests of shareholders. Examples include placing shares under the blanket control of directors, authorising loans and financial assistance to directors, associate companies or subsidiaries and blanket authority to issue shares.
- Vote against share option remuneration models that offer inherent risk-reward asymmetry and dilute existing shareholders. We favour the alignment created between management and shareholders when management buys shares in the market for cash. Foord’s management remuneration philosophy therefore supports cash awards to good managers that achieve performance metrics that enhance long-term shareholder value.
- Scrutinise director appointments closely. We pay special attention to the election and re-election of directors. Appointees must be appropriately qualified and experienced for the company’s industry. Track records must show the highest ethical and governance standards. We apply strict criteria to the election of independent directors and chairpersons.
- The proper composition and size of boards and board subcommittees.
- Auditor rotations in line with corporate governance best practice.
Foord’s engagement policy document is available here.