High Yield Stewardship Report - Investment managers - Baillie Gifford
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High Yield
Stewardship
Report
Summary of our Stewardship
Activities 2020
Investment managers
Risk Factors The views expressed in this article are those of the Credit Team and should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect personal opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions. This communication was produced and approved in May 2021 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking. Potential for Profit and Loss All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns. Stock Examples Any stock examples and images used in this article are not intended to represent recommendations to buy or sell, neither is it implied that they will prove profitable in the future. It is not known whether they will feature in any future portfolio produced by us. Any individual examples will represent only a small part of the overall portfolio and are inserted purely to help illustrate our investment style. This article contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research and Baillie Gifford and its staff may have dealt in the investments concerned. All information is sourced from Baillie Gifford & Co and is current unless otherwise stated. The images used in this document are for illustrative purposes only. CM15704 High Yield Report 0621 Ref: 52817 IND AR 0837
Contents 01
Contents
Introduction Our Approach to Stewardship
Stewardship and our High
Yield Investment
Process
02 04 05
Investment Portfolio Engagement
Decisions Governance Highlights
and Sustainability
Scoring
08 12 13
Summary
19
02
Introduction 03 Introduction At Baillie Gifford, we know our clients want us to achieve strong investment returns and, understandably, they also care about the impact their capital deployment can have on society and the environment. Being stewards of our clients’ capital is an important role and therefore Baillie Gifford’s actions must reflect our shared values and beliefs. In a high yield bond context, integrating governance and sustainability (G&S) in the investment process in a clear and thoughtful way is the key to good stewardship. This is in addition to the broader responsibilities that come with managing significant sums of money. Companies that issue bonds in the high yield market are less creditworthy than their investment grade rated peers. When investing in this market, the risk of default and permanent loss of capital is material. We believe there is a strong alignment between good G&S practices and achieving, over the long run, the best possible investment returns. G&S considerations are, therefore, embedded in our research, company engagement and decision-making. This report focuses on how we fulfil our stewardship responsibilities for high yield portfolios, firstly by explaining our approach to stewardship and secondly by following up with examples of our stewardship activities over the course of 2020.
04 Our Approach to Stewardship
Our Approach
to Stewardship
Our approach to stewardship is based on a set of key beliefs. We believe that, as
high yield investors with an objective to focus on returns, it is important for us to
consider all the potential opportunities and risks associated with a company, before
and after investing.
It is not sufficient to consider stewardship matters only after an investment is made.
Alongside a company’s durable competitive position and an appropriate capital
structure, we see good governance and a sustainable approach as key components in
assessing an issuer’s fundamental resilience. Our approach aims to incorporate all
factors that are material and relevant to the return potential and risk profile of each
investment. We believe that companies with strong fundamentals will prove to be
more robust through economic, industry and market cycles.
We also believe that our stewardship approach, through strong G&S practices, will
benefit clients, companies, the economy and society as a whole over the long term.
G&S FACTORS ARE
G&S FACTORS ARE INTRINSINCALLY
A COMPONENT LONG TERM, LIKE OUR
OF RESILIENCE INVESTMENT HORISON
G&S ANALYSIS
ENHANCES RISK
CONTROL AND
IDENTIFIES
OPPORTUNITIES
Stewardship and our High Yield 05
Investment Process
Stewardship and
our High Yield
Investment Process
Bespoke Research and Analysis
We seek to invest in the bonds of resilient businesses whose idiosyncratic characteristics contribute
to the return potential of a high yield portfolio and add to the diversity of risks within it. We believe
that, over the long term, an issuer’s fundamental resilience will be reflected in the performance
of its bonds. To ensure our research is targeted appropriately, our first step is to narrow the field
of potential investments, focusing on identifying issuers whose fundamental characteristics score
highly when judged on these three factors. This is our resilience filter. We view resilience as a
combination of:
1 2 3
A durable Good governance and An appropriate
competitve position a sustainable approach capital structure
G&S topics are intertwined with these resilience factors and must be considered as part of the
investment process. Each investment in high yield bonds, new and existing, is analysed from a
G&S perspective. We do not use an exclusion list, instead we incorporate material issues into
our proprietary in-house research. To ensure consistency of that research, we take our cue from
the Sustainability Accounting Standards Board (SASB) Materiality Map. This is a thought map
that flags up, by sector, sustainability issues which could potentially have a financial impact on a
company’s operations.
We engage with companies when we require additional information to assess the risks and
opportunities. The emphasis we place on G&S factors varies depending on the company’s sector,
region, strength of financial position and debt maturity profile. So, while product quality and
safety may be a concern for some companies, weak leadership and governance could expose a
business to the risk of regulatory backlash and increased reputational damage in, for example, the
telecommunication services industry.
Evaluating risk is at the heart of what we do. A G&S risk factor needs to be treated like any other –
something for which investors should be well compensated. To invest in a company with elevated
G&S risk we require a strong resilience score from other investment criteria in order to give us
confidence that the company will continue to perform well. There may be times when a G&S risk
factor outweighs all others. Our approach is nuanced and flexible, reflecting the fact that there is no
straightforward response to such risks.
06 Stewardship and our High Yield
Investment Process
Governance and Sustainability Framework
Our process centres on being conscious of the most relevant or significant
G&S factors relating to a company, and includes this analysis in our
decision-making process.
Scoring levels Governance and Sustainability
scoring justifications
2 Materially positive characteristic(s)
1 Management willing to engage
Good disclosure available on material risk factors
0 A material issue is identified
Limited disclosure avaiable on material risk factors
Management refuse to engage
A holding can still be justified if:
Improvements are planned or in progress
Investors are appropriately rewarded for the risk
If a company has a high score on G&S factors, this may increase our
enthusiasm for an investment. Where we identify the likelihood of
improvement in governance or sustainability areas, we may take a more
positive decision than a static analysis or current score would suggest.
Conversely, new investments may be dismissed, and current positions sold,
if we have a fundamental concern on a G&S issue. When G&S factors weigh
against a potential investment, we will possibly hold a smaller position size
than we otherwise might, or may demand a higher risk premium for our
clients. These factors can also result in the decision not to invest. Scoring is
an iterative process, requiring ongoing monitoring and review. The examples
which follow demonstrate that scores can, and do, change over time.
07 Decision Making Our framework of analysis and decision-making allows us to take a long-term, forward-looking perspective on the quality of individual businesses. We believe this is a comprehensive way to add value through bond selection. In the high yield bond market, it is important to prioritise pessimism over optimism given that the asymmetry of returns does not work in bond investors’ favour. The capped upside return, together with a worst-case scenario of suffering a large capital loss, means risk considerations should be prioritised over returns. Over the life of a high yield bond, investors will be repaid in most instances, but may suffer a default on occasion. Having the confidence to invest in this market requires a clear set of objective criteria against which to evaluate potential investments and a time horizon long enough to allow fundamentals to assert themselves over fluctuating market sentiment. We have introduced the clear scoring matrix shown earlier to ensure that G&S factors are an important part of the decision-making process. To enhance our G&S analysis, we have two dedicated G&S specialists who are supported by a well-resourced team. These specialists monitor and conduct collaborative research on individual issuers, identifying specific G&S risk factors, and thus help form our overall investment view. Engagement Our approach to G&S as bond holders is based on engagement and dialogue. Given the contractual nature of our relationship with issuers, we understand that our ability to influence differs from other asset classes. However, issuers of debt do take on board our comments and recommendations. Where high yield investments are also held in Baillie Gifford equity portfolios, we have an additional opportunity to support, and/or take advantage of the stewardship activities of our colleagues. Milestones and Monitoring Enhanced G&S oversight encourages a deeper, broader discussion which supports the identification of early warning signals that may eventually translate into the issuer’s prospects. It is often useful to set specific G&S monitoring milestones for companies to ensure that they make progress over time towards achieving the expected performance improvements identified in our analysis.
08 Investment Decisions
Investment Decisions
Scoring levels Governance and Sustainability SASB Issue Categories
scoring justifications
Environment Greenhouse Gas (GHG)
2 Materially positive characteristic(s) Emissions; Air Quality;
Energy Management;
Water & Wastewater
Management; Waste
G&S Discussion & Hazardous Materials
Management
SNF SNF, the world’s largest producer of polyacrylamides,
Chemicals has a robust competitive position in its niche water- Social Capital Human Rights &
soluble polymers market, with strong market share Community Relations
and evidence of good bargaining power. SNF’s water- Human Capital Employee Health & Safety
soluble polymers are used in a wide range of water
Business Model Product Design & Lifecycle
treatment activities including drinking and wastewater & Innovation Management
management and in industries such as oil and gas, pulp/
paper, and agriculture. SNF is committed to delivering a Leadership & Management of the Legal
Governance & Regulatory Environment;
positive impact through its innovative chemical products, Critical Incident Risk
and continues to be a crucial player in helping to reduce Management
water usage and improve access to clean water.
Through its ESG reporting, SNF demonstrates an
Investment decision ADD
awareness of financially material G&S risks and, during
our engagement, displayed both willingness and ability We provided new capital to SNF as we view
to manage these risks. For example, disclosure on the credit quality to be higher than its peer
group, making the valuation opportunity
remuneration is weak and we believe that the lack of compelling. Our conviction was strengthened
independence on the board poses a potential threat to by SNF’s commitment to long-term value
the strength of SNF’s governance structure. However, creation through sustainable delivery.
the successful transition of the CEO and chairperson
role from the founder does provide reassurance that
the interests of the board (and founder) are aligned with
broader stakeholders and the board remains dedicated
to driving the business forward.
We will continue to monitor SNF’s board composition,
health and safety track record, and imperfect
disclosures. However, financially material risks for SNF
are significantly skewed towards sustainably delivering
the company’s impactful products. While it is important
to continue monitoring the board composition and
imperfect disclosures, these factors do not materially
threaten SNF’s ability to deliver products. For this
reason, following further analysis, we increased SNF’s
G&S score from 1 to 2 to reflect the materially positive
impact derived from its products.09
Scoring levels Governance and Sustainability SASB Issue Categories
scoring justifications
Environment GHG Emissions;
1 Management willing to engage, good disclosure Air Quality; Energy
available on material risk factors Management; Water &
Wastewater Management;
Waste & Hazardous
G&S Discussion Materials Management
Canpack Canpack is a Poland-based manufacturer of aluminium Social Capital Product Quality & Safety
Containers cans. This segment of the packaging industry is
expected to grow in developed markets as rising Human Capital
and Packaging
sustainability concerns, changing consumer preferences Business Model Product Design &
and lightweight/flexible properties cause aluminium to & Innovation Lifecycle Management
displace glass and plastic alternatives. Aluminium will Leadership &
play an important part in the circular economy given Governance
products can be recycled continuously in a cost-efficient
manner without loss of quality.
Our G&S score was hampered due to limited Investment decision BUY
transparency and best-practice governance. Canpack Canpack is well-positioned to deliver
is ultimately owned by its founder, who also sits on the sustainable expansion. However, its score
is held back by governance and some legal
supervisory board, which is thereby limited on being disputes, limiting our position size.
able to offer independent oversight. There is an ongoing
tax investigation by the Polish tax authorities and
outstanding litigation against former senior employees.
Positively, Canpack’s CEO leads the Sustainability
Committee which focuses on setting sustainability
strategy, reviewing ESG performance, and promoting
Canpack’s corporate responsibility pillars: Care,
Sustain and Recycle. Canpack demonstrates effective
management of key G&S risks, such as greenhouse gas
emissions and energy management, through disclosure
within its sustainability report.10 Investment Decisions
Scoring levels Governance and Sustainability SASB Issue Categories
scoring justifications
Environment Air Quality; Water &
1 Management willing to engage, good disclosure available on Wastewater Management
material risk factors
Social Capital
G&S Discussion Human Capital
Enviva Enviva is the world’s largest producer of wood Business Model Product Design & Lifecycle
Biofuels pellets, shipping its products from the US to Europe & Innovation Management; Supply
Chain Management
and Asia, where they are used to generate heat and
electricity. Our investment case was supported by Leadership & Management of the Legal
the belief that Enviva’s business can reduce reliance Governance & Regulatory Environment;
Critical Incident Risk
on fossil fuels and support the transition to a lower Management
carbon economy. However, further analysis indicated
that potential regulation relating to the sustainable
sourcing of biomass could negatively impact Enviva
and undermine the company’s ability to sustainably
Investment decision REDUCE
procure wood to support its long-term growth Our initial investment case did not fully
strategy. We have concerns about the impact on capture the financial materiality of these
climate risks. As a result, we reduced our
biodiversity from sourcing wood through primary non- holdings in Enviva.
certified forests; although we are confident that Enviva
is actively managing and minimising its impact.
We will continue to engage with Enviva to encourage
greater utilisation of sustainably sourced wood as well
as its use of efficient biomass technology. By doing so,
Enviva’s growth strategy should prove more resilient,
protecting the forests it relies on and reducing the risk
of financial impact from increased regulation.11
Scoring levels Governance and Sustainability SASB Issue Categories
scoring justifications
Environment GHG Emissions;
0 A material issue is identified Air Quality; Water &
Limited disclosure avaiable on material risk factors Wastewater Management;
Ecological Impacts
G&S Discussion Social Capital Human Rights &
Community Relations
Callon Callon Petroleum is a Houston-based oil and gas
Petroleum exploration and production company with a 70 per Human Capital Employee Health & Safety
Oil & Gas cent weighting to the production of oil. Given oil is Business Model Business Model Resilience
Exploration more carbon-intensive than gas production, Callon & Innovation
and Petroleum would be an extremely carbon-intensive
Leadership & Business Ethics;
Production holding. Gas flared was recklessly high at 16 per Governance Management of the Legal
cent of production in 2018 and this showed disregard & Regulatory Environment;
for the impacts on climate change. Our analysis Critical Incident Risk
Management
highlighted concerns from a social perspective
due to limited disclosure on safety metrics which
restricted our assessment of G&S risks. In addition,
we identified issues relating to the effectiveness of the Investment decision DISMISS
board and excessive management remuneration. We seek to lend to energy companies that
are prioritising sustainability and carbon
efficiency within their production processes
which was not evident with Callon Petroleum.12 Portfolio Governance
and Sustainability Scoring
Portfolio Governance
and Sustainability Scoring
HIGH ACCEPTABLE
G&S score
SVENSKA JAMES HARDIE
HANDELSBANKEN
G&S score
0
— Swedish
0 1% — Global building
materials company
1%
bank with
demonstrable G&S — Leader in innovative
score G&S
success in local score products improving
relationship banking 1 2 building durability and
6% functionality
— De-centralised 10%
business model is — Laggard in
unique and fosters
Acceptable High sustainability disclosure
Resilience Resilience
best-in-class risk may hinder ability to
4% 13% capture customer
management
sustainability trends
— Excellent
management G&S G&S
score score
culture and
commitment 1 Medium
Resilience 1
to long-term 38% 83% 44%
business success
How We Score Resilience MEDIUM
MARKS AND SPENCER
DURABLE COMPETITIVE
POSITION 0 1 2 — Long history as major
clothing and food
retailer in the UK
GOOD GOVERNANCE AND
SUSTAINABLE APPROACH 0 1 2
— Strong competitive
G&S Score position and improving
APPROPRIATE CAPITAL (Outer circle) online proposition
STRUCTURE 0 1 2 G&S Score
2 = Strong — Increased focus on
1 = Good supply chain mapping
RESILIENCE SCORE and management of
(INNER CIRCLE)
ACCEPTABLE MEDIUM HIGH
0 = Weak
environmental impact
As at 31 December 2020. Excludes cash, Totals may not sum due to rounding. Excludes cash. Totals may not sum due to rounding.
The chart above offers a view of the portfolio, first split by of our high resilience holdings have a G&S score of 1 (good).
our holdings’ resilience score in the centre, and then further Again, this makes sense, as our strategy aims to invest in
split by the G&S score around the outside. Three scores, underappreciated resilience. Many of these holdings may
2, 1 and 0 are highlighted around the chart. Our analysis achieve a higher G&S score over time, as we monitor the
indicates only a small number of our holdings have a G&S fundamentals. We rate only a small minority of our holdings
score of 2 – and they all currently have an overall score of as 0 (weak) for G&S. We invest in companies scoring 0 for
high resilience. Intuitively this makes sense, as one would G&S in the expectation of either material improvement, or
expect a strong focus on stewardship to result in industry because we expect these holdings to be a likely source of
leading market positions and financial health. The majority funds, if other investment factors are not met.Engagement Highlights 13
Engagement Highlights
The Credit Team is responsible for analysing and, where practicable, engaging with the boards
and management of companies we lend to, using a thorough and ongoing monitoring process,
supported by our G&S Team. We have had many interesting engagements with companies on
matters relating to governance, sustainability, and environmental impacts. These have helped to
inform our investment views and we look forward to building on this over the course of 2021
and beyond. Below is a selection of the conversations we have been having.
Sealed Air G&S Score 2
Sealed Air is a global manufacturer of packaging solutions that minimise food waste,
maximise food safety and protect goods shipped around the world. Food care accounts
SASB Issue Categories
for 60 per cent of sales, with product care making up the remaining 40 per cent. Sealed
Air operates in 48 countries, with distribution to 123 countries. During our research, we Environment GHG Emission
found it difficult to quantify the transition risk to non-plastic packaging as governments
Air Quality
in various geographies were beginning to clamp down on the use of plastic. We engaged
with the company to better understand how it was managing this transition and how Energy Management
it expected to see this risk evolve. Through our engagement, we came to understand Water & Wastewater
that Sealed Air works closely with associations, government bodies, and regulatory Management
organisations to enhance the sustainability of plastics and stay ahead of upcoming Waste & Hazardous
regulation. EU regulation is focused on circularity, thereby prioritising the recovery of Materials Management
materials and putting them back into the network and not adding to the current waste
problem. Sealed Air expects future plastic taxes to be based on weight of finished Social Capital Product Quality & Safety
solution, so it is focusing on delivering fully recoverable lightweight solutions. It has set Human Capital
a 2025 goal for 100 per cent of its products to be recyclable or recoverable.
Business Model Product Design &
& Innovation Lifecycle Management
We will monitor Sealed Air’s progress against these targets as we believe achieving
them will ensure minimal financial impact from increased regulation. Sealed Air faces Supply Chain
a potential tax burden if taxation is based on recycled content rather than weight, so we Management
will continue to monitor developments in the regulatory environment closely. Sealed Leadership &
Air’s recent investment in Plastic Energy, a leader in chemical recovery for end-of- Governance
life plastic waste, is a sign of its commitment to the circular economy. Management
demonstrated passion and commitment for continuing the development of sustainable
packaging solutions in line with all relevant environmental regulations, thereby further
increasing our conviction in this business.14 Engagement Highlights
Darling Ingredients G&S Score 1
Darling Ingredients is a meat rendering business with increasing exposure to biofuel
and renewable diesel. Rendering destroys pathogens that could be harmful to humans,
SASB Issue Categories
and it releases five-times less carbon into the atmosphere than other methods of
disposing of animal waste. While this is a company that has diversification and Environment GHG Emissions
sustainability at its core, we had some concerns regarding ESG disclosure, leading us
Energy Management
to engage with management. In our engagement, we emphasised the importance of
increased disclosure on G&S metrics and full disclosure on carbon emission, given Water & Wastewater
Management
the nature of the business. Additionally, we voiced concerns about the company’s high
health and safety incidents when compared to competitors. Social Capital Product Quality & Safety
Following our initial engagement, management invited us to give feedback on a new ESG Human Capital Employee Health & Safety
factsheet. Darling provided transparent scope 3 data that showed significant disclosure Business Model Supply Chain
improvements. However, we encouraged management to include clear reduction targets & Innovation Management
in future reporting. Management took on board our apprehension towards the lack of Materials Sourcing &
sustainability reporting regarding the company’s biofuel and renewable diesel business. Efficiency
We were also reassured to see health and safety training rolled out further and becoming a
focus for the management team. Demonstrating its commitment, the board has introduced Leadership &
Governance
health and safety as a metric within executive pay.
Both of our engagements with Darling helped us to understand which G&S risks it
is treating as a priority. We will monitor the company’s progress towards releasing
carbon reduction targets and also hope to see a continued reduction in health and safety
incidents. Additionally, we are monitoring how Darling implements its new Supplier
Code of Conduct and how it will engage with the supply chain around areas such as the
environment, as well as labour and human rights standards. While there is still progress
to be made, we do believe the company is on a positive trajectory in these areas and
that there is an opportunity for us to continue to work with management in support of
efforts to operate a sustainable business.15
Digi Communications G&S Score 0
Digi Communications is a leading broadband, pay-TV and mobile services provider
in Romania, and continues to invest significant capital in the country’s infrastructure,
SASB Issue Categories
driving socioeconomic empowerment and enabling people in economically
disadvantaged areas to connect and communicate. The company has an outstanding Environment Energy Management
competitive position in Romania and has strong growth potential as it expands in Europe.
Social Capital Customer Privacy
Digi Communications has a history of suspected bribery and corruption which Data Security
raised concerns for the strength of its governance structures. Its reputation was not
Human Capital
significantly impacted by the controversies, as evidenced by customers remaining
loyal to the business. Through our analysis, we did not believe its controversial Business Model Materials Sourcing
past was financially material, however, in line with our stewardship principles, we & Innovation & Efficiency
expect companies to act as responsible corporate citizens and adhere to the laws and
Leadership & Competitive Behaviour
regulations that govern them. Therefore, we engaged with Digi Communications Governance
to challenge management on internal policies, gaining reassurance that there are Systemic Risk
Management
appropriate structures in place to minimise the likelihood of significant controversies
arising in the future. With the help of third-party consultants, Digi Communications has
implemented and/or amended various policies on code of conduct, whistleblowing, and
conflict of interest, as well as anti-corruption, and anti-money laundering procedures. It
has pushed out firmwide education on these matters.
Following our engagements, we identified milestones that would help monitor Digi
Communications’ governance and ensure there is no regulatory backlash or reputational
damage from breaches of data privacy or internal governance programmes. We will
continue to test our belief that the impact of business ethics penalties proves immaterial
based on current market practices. We assigned the company a G&S score of zero,
leading to a below-average position size. However, we feel confident that it is on an
improving trajectory and we will monitor this closely.16 Engagement Highlights
© Francis Vachon / Alamy Stock Photo.
Netflix G&S Score 1
As long-term bondholders of Netflix, we have witnessed its growth from a modest online
DVD company to one of the world’s largest streaming services. We consider Netflix’s
SASB Issue Categories
continued move into international markets as a positive diversifier, thereby further
protecting its long-term growth. Environment Energy Management
Together with our equity colleagues, we engaged with Netflix to discuss its corporate Social Capital Customer Privacy
governance structures. Netflix has a unique corporate governance structure which Data Security
doesn’t conform to industry ‘best practices’. In recent years, Netflix has shunned
Human Capital Employee Engagement,
shareholders’ requests for changes to the company’s governance provisions and Diversity & Inclusion
shareholder rights. It has not been obliged to action any of the proposals and its
governance structure has remained constant. Business Model
& Innovation
Our engagement helped to give us confidence that the company’s governance is Leadership & Competitive Behaviour
pragmatic and supportive of its long-term strategy. We feel comfortable that Netflix’s Governance
board has the required skills and experience to continue to deliver its strategy in a
thoughtful and deliberately different manner. Consistent with our equity colleagues,
we believe Netflix has a differentiated business model and has demonstrated a strong
long-term focus which warrants our trust and support. We will continue to monitor its
governance practices and encourage timely evolution which is appropriate for the age,
stage and operating environment of the business.17
Travis Perkins G&S Score 1
Travis Perkins is the leading UK builders’ merchant for home improvements, and a key
product supplier to the building and construction market. The group’s main activities are
SASB Issue Categories
the distribution and sale of a wide range of general building materials, timber, plumbing
and heating products, as well as tool hire to professional builders, contractors, and the Environment Energy Management
general public. We consider Travis Perkins to be a resilient business and are encouraged
by its strategic vision ‘to deliver best-in-class service to trade customers’. Our G&S Social Capital Data Security
analysis identified that the company’s supply chain has limited visibility, and also noted Human Capital Labour Practices
an incident of forced labour in the UK. We engaged with management to understand the Employee Engagement
company’s approach to G&S and discuss the key risks to which we believe the business Diversity & Inclusion
is exposed. Over the course of the engagement, it became clear that sustainability is one
of Travis Perkins’ top five priorities in its strategic restructure. Sustainability has gained Business Model Product Design &
traction within the organisation over the past 12 months, with increased interest from & Innovation Lifecycle Management
customers, investors, employees, management, and the board. Leadership &
Governance
Travis Parkins articulated the challenges and responses to the integration of diversity and
inclusion, and enhancing supply chain mapping, emphasising that there is a long way to
go, but with the current buy-in from all stakeholders, it is making meaningful progress
on these issues. Travis Perkins operates in an industry that has not demonstrated a strong
commitment to sustainability and lacks diversity. Travis Perkins is ambitious in its goals
and is determined to not only be industry-leading but to also drive the industry towards
positive change. Management show commitment and demonstrate an understanding
of the significance of ESG risks, encouraging the rollout of initiatives such as net-zero
carbon targets and supply chain mapping.
Through our continued monitoring, we will have visibility of Travis Perkins’ expanding
supply chain mapping, thus allowing us to monitor its responsible sourcing strategy and
progress in contributing to the circular economy. The engagement helped to increase our
understanding of Travis Perkins’ sustainability strategy, and we subsequently increased
our conviction in the business.18
Summary 19 Summary Governance and sustainability issues have long influenced Baillie Gifford’s thinking on investments. As a firm, it is something that adds to our competitive edge and our reputation as responsible stewards of capital. Evaluating risk is at the heart of what the Credit Team does. Over many years, the team has integrated G&S risk and opportunity analysis into our investment cases. The team believes that weighting good governance and a sustainable approach equally with the durability of a company’s competitive position and the appropriateness of its capital structure helps to identify resilient businesses that should provide our clients with attractive returns through economic, industry and market cycles.
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by the Swiss Financial Market Supervisory Authority (FINMA) North America
to maintain this representative office of a foreign asset manager
of collective assets in Switzerland pursuant to the applicable Baillie Gifford International LLC is wholly owned by Baillie
transitional provisions of FinIA. Baillie Gifford Investment Gifford Overseas Limited; it was formed in Delaware in 2005
Management (Europe) Limited is a wholly owned subsidiary and is registered with the SEC. It is the legal entity through which
of Baillie Gifford Overseas Limited, which is wholly owned by Baillie Gifford Overseas Limited provides client service and
Baillie Gifford & Co. marketing functions in North America. Baillie Gifford Overseas
Limited is registered with the SEC in the United States of America.
Hong Kong The Manager is not resident in Canada, its head office and
principal place of business is in Edinburgh, Scotland. Baillie
Baillie Gifford Asia (Hong Kong) Limited
Gifford Overseas Limited is regulated in Canada as a portfolio
百利亞洲(香港)有限公司 is wholly owned by Baillie Gifford
manager and exempt market dealer with the Ontario Securities
Overseas Limited and holds a Type 1 licence from the Securities
Commission (‘OSC’). Its portfolio manager licence is currently
& Futures Commission of Hong Kong to market and distribute
passported into Alberta, Quebec, Saskatchewan, Manitoba and
Baillie Gifford’s range of UCITS funds to professional investors
Newfoundland & Labrador whereas the exempt market dealer
in Hong Kong. Baillie Gifford Asia (Hong Kong) Limited
licence is passported across all Canadian provinces and territories.
百利亞洲(香港)有限公司 can be contacted at Suites 2713-2715,
Baillie Gifford International LLC is regulated by the OSC as an
Two International Finance Centre, 8 Finance Street, Central,
exempt market and its licence is passported across all Canadian
Hong Kong. Telephone +852 3756 5700.
provinces and territories. Baillie Gifford Investment Management
(Europe) Limited (‘BGE’) relies on the International Investment
Fund Manager Exemption in the provinces of Ontario and Quebec.Oman Baillie Gifford Overseas Limited (“BGO”) neither has a registered business presence nor a representative office in Oman and does not undertake banking business or provide financial services in Oman. Consequently, BGO is not regulated by either the Central Bank of Oman or Oman’s Capital Market Authority. No authorization, licence or approval has been received from the Capital Market Authority of Oman or any other regulatory authority in Oman, to provide such advice or service within Oman. BGO does not solicit business in Oman and does not market, offer, sell or distribute any financial or investment products or services in Oman and no subscription to any securities, products or financial services may or will be consummated within Oman. The recipient of this document represents that it is a financial institution or a sophisticated investor (as described in Article 139 of the Executive Regulations of the Capital Market Law) and that its officers/employees have such experience in business and financial matters that they are capable of evaluating the merits and risks of investments. Qatar This strategy is only being offered to a limited number of investors who are willing and able to conduct an independent investigation of the risks involved. This does not constitute an offer to the public and is for the use only of the named addressee and should not be given or shown to any other person (other than employees, agents, or consultants in connection with the addressee’s consideration thereof). Baillie Gifford Overseas Limited has not been and will not be registered with Qatar Central Bank or under any laws of the State of Qatar. No transactions will be concluded in your jurisdiction and any inquiries regarding the strategy should be made to Baillie Gifford. Israel Baillie Gifford Overseas is not licensed under Israel’s Regulation of Investment Advising, Investment Marketing and Portfolio Management Law, 5755-1995 (the Advice Law) and does not carry insurance pursuant to the Advice Law. This document is only intended for those categories of Israeli residents who are qualified clients listed on the First Addendum to the Advice Law.
BAILLIE
GIFFORD.
ACTUAL
INVESTORS.
bailliegifford.com/actual-investors
Calton Square, 1 Greenside Row, Edinburgh EH1 3AN
Telephone +44 (0)131 275 2000 / www.bailliegifford.com
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