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27 Nov 2020

Being Responsible on Purpose

Our latest quarterly report on responsible investing highlights something that’s become vital for businesses to define – their purpose.

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As businesses face increased pressure from customers and regulators to behave responsibly, there’s a growing need for them to get to grips with what’s known as ‘corporate purpose’.

A corporate purpose states clearly what an organisation exists to achieve. Of course, any business wants to be profitable for its owners, but the crucial matter is how it goes about doing that. And the huge amount of government support for businesses throughout the coronavirus pandemic has only made this more important.

Coutts is committed to contributing to wider society and we’ve made our purpose clear. We’re focusing on three areas where we believe we can make a big difference – tackling climate change, supporting entrepreneurs to maximise their growth, and raising awareness of the importance of sound financial planning.
 

Many companies still struggle with purpose

But many companies are still struggling with purpose, according to our voting and engagement partner EOS at Federated Hermes (EOS).

EOS, which works with asset managers – including Coutts – on behalf of investors to encourage responsible behaviour in the corporate world, says the last few months have provided “a stress test of corporate purposes”.

Their sector lead for retail, Amy Wilson, says: “Many companies have disclosed only superficial or meaningless purpose statements, and few have consciously thrived because of their purpose.

“We expect companies to be guided by a purpose that serves not only shareholders, but also other stakeholders, society and the environment.”

“Businesses need to figure out and articulate exactly how they plan to benefit not just their shareholders, but the world around them too.”
Leslie Gent, Head of Responsible Investing, Coutts

Using our influence as shareholders to help

As shareholders, we at Coutts have been using our influence to help companies address the kind of environmental, social and governance topics that can underpin their purpose. We look at how they consider the interests of their customers, employees, communities and suppliers when making decisions.

For example, most of our shareholder voting activity over July, August and September concerned remuneration – ensuring fair pay across the board as many lose their jobs this year – and board structure, focusing on diversity. Both aim to ensure companies are treating their people well.

Overall, we voted at 36 company meetings, and opposed one or more resolutions at seven of them – showing how we’re committed to holding companies to our high standards even if it involves going against their management. The number is lower than the previous quarter because most companies hold their annual meetings in the spring, so that tends to be when most shareholder voting takes place.

We also had detailed discussions with 46 companies that feature in our portfolios and funds on 162 environmental, social and governance issues. The vast majority of those conversations were about their plans to tackle climate change, their behaviour towards their people, and how they’re serving society during the pandemic.
 

Strong purpose can mean long-term value

Leslie Gent, Head of Responsible Investing at Coutts, says, “We want to ensure that the companies in which we invest on behalf of our clients are well run, support society and act on environmental issues.

“Not only is this good for the world, it can have a positive impact on their long-term value, and their ability to help us deliver robust returns for clients.

“Corporate purpose has become a very important element of achieving all this. Businesses need to figure out and articulate exactly how they plan to benefit not just their shareholders, but the world around them too.”
 

See below for more detail on our voting and engagement record in the third quarter of the year. And read more about responsible investing at coutts on our dedicated page.
 

 

 

EOS CASE STUDY: BOOHOO

An example of how our voting and engagement partner EOS works with businesses on environmental, social and governance issues
 

EOS contacted online fashion retailer Boohoo following press allegations about its employment practices in Leicester. The company told EOS it had commissioned an independent review to take a good look at its obligations and duties of care regarding those working within its supply chain. It said the review’s recommendations would be incorporated into its future strategy.

EOS also raised broader concerns about the sustainability of the fast fashion business model generally, and urged the company to be more transparent on its environmental impact.

Lisa Lange, Theme Lead: Pollution, Waste and the Circular Economy at EOS, explains, “Innovative business models are needed that move away from a focus on the number of purchases as a growth model, to consider fashion as a service that fosters the reuse or recycling of garments.”
 

Find out more in EOS’s Public Engagement Report Q3 2020

 

 

OUR VOTING AND ENGAGEMENT IN NUMBERS, Q3 2020

When investing, past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment.

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