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 Ltd.
This statement addresses NFU Mutual’s approach to stewardship as set out under Article 3g of the European Shareholder Rights Directive II (SRD II) which The Financial Conduct Authority (FCA) recommends adopting in the UK.
Shareholder Rights Directive (SRD II) is part of EU-wide measures intended to promote effective stewardship and long-term investment decision making. The Directive aims to achieve this by enhancing transparency of engagement policies and investment strategies across the institutional investment community.
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.
Cooperates with other shareholders
ISS often engage with investee companies on behalf of the shareholders they represent. We recognise that is 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.