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LOIM formally commits to Japan’s Stewardship Code
At LOIM, we firmly believe in the importance of stewardship in protecting and enhancing the long-term value of the assets entrusted to us by our clients. As such, we recently formalised our adherence to the principles behind Japan’s Stewardship Code.
Stewardship codes guide institutional investors in being transparent about their engagement and voting framework, application, processes and outcomes. Originating in the UK after the global financial crisis, the codes have since proliferated across global markets. As of September 2023, 329 institutional investors had declared their adherence to the Japan Stewardship Code.
LOIM recognises the vital role of active engagement and voting in helping to drive progress toward sustainable business models. Stewardship is integrated into our investment process and allows us to maintain constructive dialogues with companies throughout the investment lifecycle.
The following sections outline and describe our adherence to the principles of Japan’s Stewardship Code.
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Principle 1
Institutional investors should have a clear policy on how they fulfill their stewardship responsibilities, and publicly disclose it
The LOIM stewardship framework comprises four key documents that are publicly disclosed and updated annually:
- The Stewardship Statement sets out our overall rationale for carrying out stewardship, and our stewardship objectives and implementation framework
- The Engagement Policy sets out our approach to engagement activity linked to our stewardship objectives
- The Proxy Voting Policy defines the scope and process for proxy voting activities
- The Corporate Governance Principles and Proxy Voting Guidelines define our corporate governance and sustainability expectations and how we are likely to vote when they are not met
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Principle 2
Institutional investors should have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities and publicly disclose it
LOIM is committed to the highest degree of business professionalism and integrity. We have an over-arching Group policy addressing conflicts of interest.
Given our independent structure, we believe that LOIM is free from some of the conflicts of interest faced by publicly held financial institutions. However, we acknowledge that conflicts of interest may sometimes occur when we discharge our stewardship responsibilities, especially when we vote and engage on behalf of our clients’ assets.
Our Engagement and Proxy Voting policies include a section dedicated to conflicts of interest, outlining LOIM’s practices in the stewardship arena. Chiefly, we are committed as a fiduciary to all our clients and always strive to act in their best interest. As such, we actively identify any potential, real or perceived conflict of interest, manage it and mitigate any risks. We do so to prevent them from influencing our voting decisions, engagement and accompanying investment processes.
We report on any such issues that may have occurred and how we managed them in our annual Stewardship Report. -
Principle 3
Institutional investors should monitor investee companies so that they can appropriately fulfill their stewardship responsibilities with an orientation towards the sustainable growth of the companies
The transition to a sustainable economy is a major source of risk and opportunity. We recognise the interconnected character of climate change with other environmental issues, such as land use, pollution, freshwater consumption and biodiversity. Aligning portfolios with companies that are making demonstrable progress in the right direction is central to our investment and risk management approaches and aims to address systemic risks and promote a well-functioning financial system.
To monitor investee companies, the Stewardship function relies on:- The tools and metrics developed by our sustainability research teams (i.e., forward-looking metrics on decarbonisation and nature, indicators on business, social and governance practices)
- External indicators derived from regulatory frameworks (i.e., Principal Adverse Impact indicators derived from the SFDR legislation) and controversy events
- Guidance on transition pathways and shifting profit pools
- AGM and proxy voting research
- Investment teams’ inputs
A specific chapter dedicated to addressing systemic risks is available in our annual Stewardship Report. -
Principle 4
Institutional investors should seek to arrive at an understanding in common with investee companies and work to solve problems through constructive engagement with investee companies
Engagement serves as a means to achieve real impact by establishing continuous and constructive dialogue with issuers throughout the investment lifecycle, as well as with policy makers and standard setters. The outcomes of our engagement process influence our investment and research views, ensuring a circular and integrated approach.
Engagement case studies illustrating our dialogues with companies, policy makers and standard setters are available in our annual Stewardship Report. -
Principle 5
Institutional investors should have a clear policy on voting and disclosure of voting activity. The policy on voting should not be comprised only of a mechanical checklist; it should be designed to contribute to the sustainable growth of investee companies
LOIM takes a long-term perspective when exercising ownership rights. Where applicable, LOIM regards voting rights as an important component of the assets we invest in on behalf of clients. LOIM will therefore vote at shareholder meetings as described in the Voting Policy and in accordance with our Corporate Governance Principles and Proxy Voting Guidelines, unless this conflicts with the firm’s stewardship objectives, its expectations regarding the long-term performance of the assets, or local requirements.
Disclosure of voting activities is available at the firm level through our annual Stewardship Report, which provides a dedicated proxy voting chapter that includes cases studies, and at the fund level through our online sustainability reporting. -
Principle 6
Institutional investors in principle should report periodically on how they fulfill their stewardship responsibilities, including their voting responsibilities, to their clients and beneficiaries
Governments, organisations and market participants are working to implement and standardise regulations, frameworks and disclosure requirements for financial market participants at the corporate, service and product levels. The aim is to prevent greenwashing and ensure comparability by creating more transparency.
Stewardship activities are disclosed and communicated to our clients through various communications including: our annual Stewardship Report, fund-level online sustainable reporting, Swiss Climate Score disclosures, a PRI assessment report, SFDR disclosures and ad hoc reporting upon clients’ requests.
Our client service model allows us to be close to our clients and to understand their needs in all areas, ranging from investment strategy to engagement and reporting. We maintain a regular dialogue with them to ensure we understand their expectations. -
Principle 7
To contribute positively to the sustainable growth of investee companies, institutional investors should develop skills and resources needed to appropriately engage with the companies and to make proper judgments in fulfilling their stewardship activities based on in-depth knowledge of the investee companies and their business environment and consideration of sustainability consistent with their investment management strategies
LOIM’s investment professionals, who are experienced in managing thematic sustainability strategies, work closely with our sustainability experts. This combination helps us identify key risks across sectors and supports the investment decisions in line with the transition to a more sustainable world. We then focus on the most important sustainability transitions to capture growth and invest in companies that benefit from offering solutions to sustainability challenges. We integrate ESG using forward-looking, quantitative and qualitative metrics and actively engage with companies on their sustainability exposures. While investment returns are the key objective, we also believe that investments should provide a positive contribution to society and the planet.
Within holistiQ Investment Partners (our dedicated sustainability platform, created in June 2023 with our sustainability consultancy partner, Systemiq), LOIM harbours professionals dedicated to sustainable investing, focusing on both research and on the integration of sustainability in investment processes. Our efforts in these areas are centered around two dedicated teams reporting directly to the Managing Partners of the Lombard Odier Group: the Sustainability Research team, led by Dr. Thomas Hohne-Sparborth, and the Stewardship team, led by Rebeca Coriat (both teams together encompass 50 full-time employees at 31 October 2023). -
Principle 8
Service providers for institutional investors should endeavour to contribute to the enhancement of the functions of the entire investment chain by appropriately providing services for institutional investors to fulfill their stewardship responsibilities
LOIM is not subject to this principle. However, we maintain a close dialogue with our proxy voting service, and ESG and sustainability data providers to improve the quality of data and services that are key to our Stewardship approach.
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Links to policy framework and further reporting
LOIM’s Japan Stewardship Code Adherence Statement: Japan Stewardship Code Adherence Statement.pdf (lombardodier.com)
Our adherence to the code is supported by the following policies, framework and reporting:
LOIM Stewardship: Our stewardship framework I Lombard Odier
LOIM Stewardship Statement: Stewardship Statement.FINAL.pdf (lombardodier.com)
LOIM Engagement Policy: Engagement policy.pdf (lombardodier.com)
LOIM Proxy Voting Policy: Voting Policy.pdf (lombardodier.com)
LOIM Proxy Voting Guidelines: Corporate Governance Principles and Proxy Voting Guideline.pdf (lombardodier.com)
LOIM Stewardship Report 2022: Stewardship Report-2022.pdf (lombardodier.com)
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