Who we are
NFU Mutual is an institutional shareholder in respect of the Group’s insurance funds and an agent in respect of funds managed via NFU Mutual Investment Services Ltd and NFU Mutual Unit Managers Limited.
This statement addresses NFU Mutual’s approach to stewardship as set out by the European Shareholder Rights Directive II (SRD II) which The Financial Conduct Authority (FCA) recommends adopting in the UK. It amends the original SRD, which came into effect in 2007, with the objective of promoting better corporate governance, effective stewardship and long-term investment decision making in companies which have their registered office in an EU Member State and whose securities are traded on the EU’s regulated markets.
The Directive aims to achieve this by enhancing transparency of engagement policies and investment strategies across the institutional investment community.
Investment performance is an essential driver of NFU Mutual institutional and member outcomes and investment activities are governed accordingly within NFU Mutual's Committee and Governance framework. Strategies are aligned to the individual requirements and constraints of each investment fund.
Optimal asset class allocations for multi asset funds, including high-level equity allocations, are the responsibility of a dedicated allocation team. Strategic Asset Allocation Models are used to inform the optimal combination of asset classes and the proportion of these asset classes over the medium term to deliver the best diversified combination of returns, considered within the confines of each fund’s mandate and risk appetite which are set to be consistent with the profile and duration of liabilities.
Lower level equity investment strategy such as sector allocations, shareholder engagement and delivering returns are the responsibility of a combination of dedicated internal and external fund managers acting within their mandated limits.
The Prudent Person Principle is applied to all equity investments, requiring diversification/risk concentration and asset-liability matching considerations to be an integral part of the decision-making process at both strategic and stock selection levels.
Our Stewardship Belief
As active owners and long term investors NFU Mutual has a duty to be good stewards of the assets we manage. NFU Mutual is dedicated to strong stewardship which plays a vital role in responsible investment practices. NFU Mutual recognise the importance of shareholder engagement and the contribution that Environmental, Social and Governance (ESG) considerations can make to sustainable investment outcomes.
Shareholder engagement in our investment strategy
Engagement is undertaken by the Investment Management Team and is seen as vital to understanding a company’s strengths and weaknesses. We believe engagement is useful in assessing the performance and suitability of investee management teams and is key in influencing these teams. An emphasis is placed on engagement efforts with UK based companies where we tend to hold more significant positions.
The Investment Management Team of NFU Mutual is responsible for continuously monitoring companies and holdings to ensure that they remain appropriate and suitable for investment. Meetings are regularly held with companies to discuss specific results or events as well as more informal dialogue incorporating site visits and other research initiatives. These meetings cover a range of topics from corporate strategy, risk management, corporate governance, board composition and remuneration issues. Ultimately this dialogue aims to cover aspects relevant to the decision on whether or not to invest in the company in question.
Where we use external providers, we will regularly review their engagement policies to ensure that these align with our expectations. Where appropriate feedback will be provided as part of the wider ongoing monitoring process of these funds*.
The NFU Mutual Investment Management Team regularly meet with company management, engages with company updates as well as regular discussions with analysts to ensure they are able to monitor the strategy of an investee company. Investment analysis conducted includes non-financial and financial performance, ESG policy, risk, capital construction and strategies.
(b) Financial and non-financial performance and risk
Our Fund Managers use a mixture of internal and external research when considering an investee company and frequently meet with management teams or their representatives to ensure that their interests are aligned with our own and that we are comfortable the company has a strongly embedded culture.
Non-financial factors are becoming an increasingly important area of analysis and are monitored through company reports and statements, stockbroker research, independent analysis, press comments and direct contact with the company.
(c) Capital structure
The Capital structure of an investee company is considered by the Investment Management Team on initial investment and subsequently monitored for any changes on a short and long term basis.
(d) Social and environmental impact and corporate governance
NFU Mutual is taking an integrated approach to incorporate ESG considerations directly in to our investment process and considerations. This allows our fund managers to consider ESG alongside more traditional measures. As long term investors looking to build quality portfolios our fund managers consider ESG factors throughout the investment process.
Conduct and Communication with stakeholders of Investee Companies
Engagement is undertaken by the Investment Management Team and is seen as vital to understanding a company’s strengths and weaknesses. We also believe engagement is useful in assessing the performance and suitability of management teams and is key in influencing these teams.
Exercises voting rights and other rights attached to shares
The Investment Management Team currently votes on all eligible stock at every meeting, apart from those in the few remaining markets that still operate share blocking policies or require Power of Attorney. To facilitate the voting on our equity holdings we use proxy advice services provided by Institutional Shareholder Services (ISS). This allows us to take advantage of the extensive research carried out by ISS and our default instruction gives ISS consent to vote on our behalf in line with their expert recommendation.
For the majority of shareholder resolutions, we vote in line with ISS recommendations, however we retain the option to enter our own votes. ISS research is closely analysed and regular meetings are held with a senior investment manager present to discuss upcoming votes and wider ESG themes.
A summary of our voting record is available to download [PDF: 1MB]. This includes all votes we consider to be significant. Votes which we consider to be most significant include those where we vote against management and those where we vote against the voting policy of our proxy advisers. An explanation of the most significant votes can be found within the report under voting policy rationale and the meeting notes.
Cooperation with other shareholders
ISS often engage with investee companies on behalf of the shareholders they represent. We recognise that there is value in collaborative engagement and regularly work with and act alongside other similarly aligned market participants.
Conflicts of Interest
Potential conflicts of interest can arise in fund management operations. It is a requirement that all reasonable steps are taken to identify conflicts of interest that may arise either between clients and/or between clients and the Fund Manager.
Company voting policy states that in order to avoid any potential conflict of interest, we will abstain from a shareholder vote in relation to direct investment in another of the investee group’s affiliated companies and in circumstances in which the interests of clients diverge.
In all cases where a potential conflict of interest arises with an external client the position will be referred to the appropriate governing body within NFU Mutual and every effort will be made to resolve such issues in the client’s favour.
*Voting and Engagement Resources
- Baillie Gifford
- Capital Group (CIMC)
- Lazard Asset Management
- Legal & General Investment Management
- Ninety One
- T. Rowe Price
- Aberdeen Standard Investments
- Columbia Threadneedle