Stewardship Code 2020
Under Rule 2.2.3R of the FCA's Conduct of Business Sourcebook, Kennet Partners Limited, (“Kennet” or the "Firm") is required to include on this website a disclosure about the nature of its commitment to the UK Financial Reporting Council's Stewardship Code (the "Code") or, where it does not commit to the Code, its alternative investment strategy. The Code sets out a number of principles relating to engagement by asset managers or asset owners across all asset classes including, for example, listed equity, fixed income, private equity, infrastructure investment and in investments outside the UK.
The twelve principles of the Code for Asset owners and Asset Managers (in our case, Asset Managers) are as follows:
|Purpose and Governance:
|1. Purpose, strategy and culture Asset Managers’ investment beliefs, strategy, and culture to facilitate long term value, via stewardship, for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.
|2. Governance, resources and incentives Asset Managers’ governance, resources and incentives support stewardship.
|3. Conflicts of Interest Asset Managers should manage conflicts of interest to put the best interests of clients and beneficiaries first.
|4. Promoting well-functioning markets Asset Managers should identify and respond to market-wide and systemic risks to promote a well-functioning financial system.
|5. Review and assurance Asset Managers should review their policies, assure their processes and assess the effectiveness of their activities.
|6. Client and beneficiary needs Asset Managers should take account of client and beneficiary needs and communicate the activities and outcomes of their stewardship and investment to them.
|7. Stewardship, investment and ESG integration Asset Managers should systematically integrate stewardship and investment, including material environmental, social and governance issues, and climate change, to fulfil their responsibilities.
|8. Monitoring managers and service providers Asset Managers should monitor and hold to account third-party managers/proxy advisors/research or other service providers.
|9. Engagement Asset Managers should engage with issuers to maintain or enhance the value of assets.
|10. Collaboration Asset Managers, where necessary, should participate in collaborative engagement to influence issuers.
|11. Escalation Asset Managers, where necessary, should escalate stewardship activities to influence issuers.
|Exercising rights and responsibilities:
|12. Exercising rights and responsibilities Asset Managers should actively exercise their rights and responsibilities across all asset classes.
Whilst the Firm fully supports the general objectives that underlie the Code and observes high standards of corporate governance and due diligence in respect of its investments, upon consideration, it believes that the Principles are not currently applicable to its investment activities. The Firm will review this position annually and update this disclosure accordingly if the provisions of the Code become relevant.
The Shareholder Rights Directive II (“SRDII”)
The Directive took effect in June 2019 and falls under COBS 2.2B in the UK. It applies, broadly, to Portfolio Managers, UCITS Management Companies and Full Scope AIFMs. SRD requires Firms that invest in shares that trade on an UK/EU regulated market, in addition to ‘comparable’ markets outside the UK/EU, to develop and publicly disclose an engagement policy or publicly disclose a clear and reasoned explanation of why it has chosen not to comply with this requirement.
Given the similarity with the UK Stewardship Code, which is at present not deemed relevant to the type of activity undertaken by the Firm, it has been decided not to comply with SRD at the current time. However, this position is subject to annual review, in conjunction with the Stewardship Code, and any change to the current strategy of the Firm will be taken into account.
Sustainability Risk Disclosure
The EU Sustainable Finance Disclosure Regulation (“SFDR”) took effect on 10th March 2021. Currently, this regulation has not been onshored in the UK. However, certain UK Firms may fall within scope as a result of their activities or Group structure, or, may choose to opt-in to SFDR to demonstrate a commitment to green finance and sustainability. This requires them, under Art 3 of SFDR, to publish information on their websites about their sustainability risk policies.
At present, Kennet’s latest flagship fund, Kennet VI will be an Article 8 fund under SFDR and consider the adverse impacts of investment decisions on sustainability factors. We recognise the fundamental importance of transitioning to a low-carbon, more-sustainable resource-efficient economy, and will promote environmental or social characteristics within our products (where possible and acceptable); although Kennet is not making any sustainable investments. We will continually review the products and regulatory guidelines as we are mindful that Financial Services Industry has a part to play in “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate‐resilient development”.