Pictet Group
Pictet Wealth Management Responsible Investing Policy
For decades, sustainability has been central to our way of thinking. Since the Pictet Group (“the Group”) was founded in 1805, we have aimed to ensure the prosperity of our clients over the long term. In doing so, we have instinctively considered the interests of future generations.
1. Introduction
Pictet Wealth Management (“PWM” or “the Bank”) believes in responsible capitalism and takes an enlarged view of the economy and its interactions with civil society and the natural environment.
Consistent with our fiduciary duty to act in the best interests of our clients and our adherence to the UN Principles for Responsible Investment (UN PRI), we are committed to integrating material Environmental, Social and Governance (ESG) criteria in our investment processes and ownership practices with a view to enhance returns and/or mitigate risks over the medium to long term. We also aim to include ESG aspects in our risk management and reporting tools in order to maintain high standards of transparency and accountability.
This document describes how the Bank integrates Sustainability Risks as part of its investment decision making process as well as its investment advice where relevant, implements Responsible Investing strategies, and performs its Active Ownership responsibilities on behalf of its clients, in full acknowledgement of their rights as investors and for their benefit. This includes: the monitoring of investee companies, proxy voting and issuer engagement.
This Responsible Investing Policy applies to all PWM staff managing discretionary investment mandates, funds or Pictet Equity Certificates (“PECs”), providing investment advice to clients, and/or exercising active ownership responsibilities or duties. It is approved by Pictet Wealth Management’s Responsible Investing/ESG Steering Committee and reviewed annually.
2. ESG integration and responsible investing
-
2.1 Scope
This section applies to funds and PECs managed by PWM, discretionary investment management mandates and to investment advice where relevant.
-
2.2 Purpose
Our understanding of corporate issuers and fund managers is based on a multitude of factors, of which the regular meetings our Research teams attend with companies’ management, respectively fund managers, is paramount. These discussions coupled with on-going analysis and monitoring contribute to our understanding of the different dimensions of their strategies, plans and operations, and inform our investment analysis and decision-making
-
2.3 Our approach
We apply the core tenets of good company ownership within our fundamental research-driven investment processes. Our goal is to ensure that investee companies are well-run and meet credible reporting standards. To achieve this, through our research and meetings with company representatives, we strive to focus our attention on:
- The clarity and robustness of the company’s corporate strategy as defined by the board.
- The functioning and calibre of the company’s management team and its ability to implement strategy through effective leadership2
- The financial strength of a company, its capital structure, and the fair valuation of issued securities.
- Sustainability risks3 & opportunities, and adverse impacts of potential investments on society
and/or the environment4.
These core tenets can only be applied if there is regular ongoing interaction with either a company’s board members or company’s management. Interaction with companies takes the form of one-to-one discussions, shareholder/bondholder meetings, investor roadshows and/or conference calls. The objectives of these interactions are to assess an organisation, monitor that their strategy is being implemented in line with our expectations and ensure that issuers are on track to meet their goals and objectives.
In addition to ongoing dialogue with company representatives, the Bank relies on various sources of information to analyse and monitor companies. Sources of information utilised within our research process include financial press; analysts research from other financial institutions (including brokers); credit rating services, ESG research providers and media reports.
The Bank integrates sustainability risks as part of its investment decision-making process as well as its investment advice where relevant. Across research, investment activities, risk management and advisory services, we place emphasis on the inclusion of high-quality environmental, social and governance data when evaluating corporate issuers. To this extent we have developed a proprietary ESG Scorecard that provides a focused view of both ESG risks and opportunities. Our ESG Scorecard is based on a curated setof the most material data points, across four pillars: Corporate Governance, Products & Services, Operational Risks, and Controversies.
Similarly, for fund manager selection we systematically address ESG issues with our investment partners and encourage improvements of current practices, if necessary. We have developed a comprehensive ESG questionnaire that includes both firm-and fund-level questions. The completed questionnaires are assessed on four pillars: Management Firm commitment to ESG, Investment Process, Active Ownership, Monitoring and Reporting. Based on this assessment, each fund is then assigned an ESG score ranging from 1 (ESG Laggard) to 5 (ESG Leader).
| Investment solutions | Investment process | Exclusion5 | Engagement6 | Voting7 | SFDR Classification8 |
| ESG Integrated | The strategy considers Sustainability Risks | Yes, but limited | Yes | Yes | Art. 6 (including Sustainabilityrisks) |
| ESG Focus | The strategy considers Sustainability Risks and promotes environmental and/or social characteristics, subject to good governance practices of investee companies | Yes | Yes | Yes | Art.8 |
| Positive Impact | The strategy considersSustainability Risks andtargets social and/or environmental objectives,subject to good governance practices of investee companies | Yes | Yes | Yes | Art.9 |
3. Active ownership
3.1 Proxy voting
-
3.1.1 Scope
Whenever both local regulations and client contractual documentation allow us, we intend to vote on behalf of our Discretionary and Advisory clients on the companies we cover where disclosure of share holder’sidentity is not requested or when such disclosure has been duly authorized by the clients.
It does not include indirect investments through third-party funds, where we expect those managers to exercise their votes according to their own policy and report accordingly.
-
3.1.2 Purpose
The overarching purpose of our voting is to protect and promote the rights and long-term interests of our clients as shareholders. We consider it to be our responsibility to support and/or challenge companies’ management to ensure that the issuers that our clients invest in are well-run, adhere to their strategy and deliver shareholder value. We aim to support a strong culture of corporate governance, effective management of environmental and social issues and comprehensive reporting according to credible standards.
-
3.1.3 Voting guidelines
Our proxy voting guidelines are based on generally accepted standards in environmental & social matters,and corporate governance including but not limited to board & executive remuneration, risk management,and shareholder rights (see Appendix D for more detail). Given that the long-term interests of shareholders are the paramount objective, we do not always support the management of companies and may vote against them. We also reserve the right to deviate from our voting guidelines to consider company-specific circumstances.
Our proxy voting guidelines are reviewed every year and adapted as appropriate to reflect the specificities of certain regions and/or ownership structures.
-
3.1.4 Research & decision making
To assist us in performing our proxy voting responsibilities, the Bank uses the services of third-party specialists to provide research and to facilitate the execution of voting decisions at all relevant company meetings worldwide.
Third party specialists are tasked with collecting meeting notices for all holdings and researching every resolution according to Voting Guidelines defined by the Bank. Based on these information, and other relevant publicly available information or relevant information collected form engagement. Pictet ESG specialists draft a vote recommendation and discuss it internally with relevant teams within Pictet Wealth Management.
The Bank retains full discretion over all voting decisions and always reserves the right to deviate from third party voting recommendations on a case-by-case basis in order to act in the best interests of our clients. Such divergences may be initiated by relevant teams within Pictet Wealth Management and must be supported by written rationale.
In instances when consensus cannot be reached, the decision is escalated to the Chief Investment Officer.
-
3.1.5 Shareholder Resolutions
Shareholder resolutions at Annual General Meetings ‘AGMs’/Extraordinary General Meetings ‘EGMs’ are evaluated in accordance with our Voting Guidelines.
The Bank does not usually assume the role of an activist investor and does not initiate shareholder resolutions or shareholder groups. However, the Bank may consider supporting the submission of shareholder resolutions initiated by third parties or joining shareholder groups.
3.2 Corporate Engagement
-
3.2.1 Scope
The scope of corporate engagement is corporate issuers holdings from the Pictet Wealth Management Investment Universe, approved and actively covered by our analysts, and fulfilling several criteria including potential influence (measured by current holdings), severity of the issue identified, issue linked to priority themes (climate, water, nutrition, long-termism), etc.
-
3.2.2 Purpose
We consider it our fiduciary duty to engage selected corporate issuers to positively influence a company’s ESG performance and to protect or enhance the value of our clients’ investments. We press management to adopt appropriate policies, practices, and disclosure in line with established best practices. We focus on companies where structural weaknesses in the governance and/or management of environmental and social issues have been identified.
-
3.2.3 Approach
Depending on the ESG issue identified with a given company, we might engage corporate issuers through a combination of targeted in-house-led discussions, and via collaborative institutional investor initiatives:
- Tier 1 – Direct Engagement
The first tier is our Direct Engagement with corporate issuers. These companies are identified by relevant teams within Pictet Wealth Management.
Direct engagement entails regular and ongoing company dialogue and can take the form of, or be a combination of, the following communication channels: face-to-face meetings, video conferences, telephone calls and written communication.
- Tier 2 – Collaborative Engagement
Taking part in collaborative engagement with other investors forms the second tier of our approach. The Bank recognises that there are occasions when it is more effective to act collectively rather thanind ividually, particularly if our investment is relatively small given the enterprise value of the company.
- Tier 1 – Direct Engagement
4. Conflicts of interest
The Bank is sensitive to any activities, interests or relationships that might interfere with, or even appear to interfere with, its ability to act fairly and in the best interests of its clients. The Bank puts long-term interests ahead of short-term gains. The Bank is committed to identifying and mitigating or avoiding potential conflicts of interest in its business activities whenever the potential for damage to clients arises, or the appearance thereof. The Bank implements appropriate measures such as segregation of functions, internal directives, training, monitoring, management reporting, counterparty selection or outsourcing, adapted product design, client disclosures and/or contractual arrangements, client compensation or declining to act for a client. Every employee who believes that they, or the Group, are faced with a potential conflict of interest, is encouraged to proactively disclose and address it, or decline the corresponding business.
Within the context of exercising our Responsible Investment activities, for example, we may face firmwide conflicts of interest when voting against management of a company who is a client, or whose pension scheme or senior management are clients of Pictet Wealth Management. Likewise, personal conflicts of interest may arise.
Every employee is responsible for identifying and escalating potential conflicts of interest so that they may be appropriately managed and resolved. All of our staff are required to undertake regular training to ensure they are aware of their obligations and ad-here to this policy.
5. Market abuse
The Group has implemented several guidelines, procedures, and code of ethics to ensure that employees act in respect of what the Bank can expect in terms of honesty, loyalty, and integrity. The aim is to protect its image, reputation and potential damages resulting from transactions carried out by employee for their own account that are considered unethical or in violation of law or regulations:
- to prevent conflicts of interest that may arise between the Group, its employees, and its clients (such as front running, parallel running and after running);
- to prevent employees from using their position or grade to gain pecuniary advantages based on information for example that may be likely to influence market prices, exchange rates or interest rates;
- to protect the Group's staff against financial risks resulting from transactions for employees' accounts that may be disproportionate with respect to their assets and/or income, or the execution or monitoring of which may require a disproportionate amount of time out of their working hours;
- to ensure the transparency and smooth running of securities markets and to guarantee the equal treatment of all investors.
In this context, the Bank takes an active role in ensuring transparent, free, competitive, and efficient markets, and equal treatment of investors. The Bank’s goal is transparency, good faith and honesty in all our dealings. The Bank does not tolerate any attempt to manipulate or tamper with the markets or the prices of financial instruments.
Every employee must ascertain whether information received is public and, if not, whether it could affect the value of an investment (material non-public information or ‘inside information’). The employee will report receipt of confidential, price-sensitive information for inclusion on a watchlist, to ensure such information is restricted to a limited circle of insiders, under strict confidentiality safeguards. The Bank aims to ensure that all securities transactions have an economic basis and are executed at the prevailing market price.
In addition, employees’ operations are monitored by a dedicated unit within the Human Resources department to ensure compliance with the mentioned guidelines, procedures, and code of ethics.
6. Remuneration
The remuneration policy integrates sustainability risks by way of the policies and procedures which Pictet employees are bound to respect. Compliance with internal (Policies & Procedures) P&Ps form a part of an employee’s annual review, which may include ESG limitations and taking into account sustainability risks based on the type of products or services selected by clients served by that employee. In addition, Pictet employees are held to the Group’s general engagement on sustainability and responsible investing, as relevant to their function.
7. Transparency
Pictet Wealth Management publicly discloses how we implement this Policy on an annual basis through the Reporting and Assessment of the UN PRI and UN PRB and through our Active Ownership Report.
