Active stewardship, integrated throughout investment analysis, share voting and company engagement, is critical for the good governance of companies and as a means for active managers to deliver superior investment returns. Our process promotes investment and engagement with companies that allocate capital responsibly, putting environmental, social and governance (ESG) considerations and sustainability at the centre of their operations. We believe these companies should deliver greater returns at lower levels of risk over the long term.
Although we are not currently a signatory of the Financial Reporting Council’s Stewardship’s Code, we are working to implement all of its principles and become a signatory in the near future. This document sets out our investment strategy in the interim.
Investment analysis and ongoing monitoring is carried out internally to identify companies that have:
- Sustainable growth achieved by selling mission critical services or products that are recurring or predictable in nature.
- Strong profitability and limited capital intensity leading to high return on capital through the economic cycle
- Excellent management whose incentives are aligned with long-term shareholders, preferably through ownership of large stakes in the business themselves
Each company is monitored by a dedicated analyst, supported by the wider team. The ultimate investment decision is agreed by the Investment Committee following a thorough analysis and consideration of the investment opportunity; where possible we meet with the management team before we invest. Complementing our own research with data and insight from Vigeo Eiris, we also analyse the behaviour of companies and how they look to mitigate their impact on the planet, their stakeholders and wider society. We seek to invest in companies with corporate structures that encourage accountability and transparency.
Engagement is an important aspect of our investment process, both prior to and during our ownership. We engage with companies in several ways, including direct contact both in person and via phone or video calls, and correspondence with senior management, board directors and investor relations teams. These interactions cover aspects ranging from long term corporate strategy and financial performance to social and environment issues where we deem these material risks or opportunities to our investment case.
In addition to these interactions, voting rights also give us the opportunity to participate in the stewardship of the companies in which we invest. Our voting policy aims to encourage best-practice and positive change, while placing our clients’ capital in the best position to make attractive economic returns at a lower level of risk in the future. We rely on a proxy voting provider to implement votes on our clients’ behalf; we will vote against management or override the voting recommendations of our proxy voting provider if we believe it is in our clients best interests, and will record the justification for doing so.
While our investment process leads us to avoid investment in companies exposed to major controversies or industries where we have material concerns, where issues arise we will consider whether we can play a constructive role by challenging the company and its response. This process will typically be led by the lead analyst and involve written exchanges with company management, the chair or other independent directors if we deem it more effective. Where our individual efforts fail to produce the desired response from company management teams, we will consider collective engagement with other shareholders as a means of escalating our concerns where appropriate. Ultimately, if we are concerned that the company is not addressing our concerns and we regard it as a material investment risk we will sell our holding.
As we view engagement and ESG issues as fully integrated within the investment process, we do not operate a separate engagement or stewardship team. Stewardship considerations are central to our investment approach and the responsibility of the entire investment team.
JH&P is an independently owned partnership and is not bound to any other corporate group. We do not purchase shares or other investments for our own account, limiting the potential for conflicts of interest to arise. The primary cause of any potential conflict of interest in relation to our engagement is likely to be where the director of an investee company is also a client. In this situation we ensure that our engagement or voting decisions are made in the interest of the broader client base.