Leighton Financial Services

Leighton Financial Services provides world class investment solutions and retirement expertise to institutions, individuals and their advisers - to help our clients build better futures for themselves and generations to come.

As a private company we think generationally and invest for the long term. Helping clients to save for retirement and other long term investing objectives has been at the core of our business for over 50 years. "We are responsible for total client assets of £329.7 billion from over 2.4 million clients across Asia Pacific, Europe, the Middle East, and South America".

We offer our own investment solutions and access to those of others, and deliver services relating to investing; for individual investors and their advisers we provide guidance to help them invest in a simple and cost effective way. For institutions including pension funds, banks and insurance companies we offer tailored investment solutions and full-service asset management outsourcing. And for employers we provide workplace pension administration services on top, or independently of, investment management.

Our history

Established in 1969 and founded in 1946, Leighton Financial Services became independent of the UK organisation in 1980, and is today owned mainly by management and members of the original founding family. Building on active, bottom-up research, we create the competitive advantage that is able to deliver superior returns for our clients. Because markets are only semi-efficient, we act on intelligent insight.

How we run our business

Our portfolio managers are compensated on their long-term performance so that client and manager interests are aligned. The same is true for our management, whose shareholdings are for the duration of their careers with the company.

"To our clients we offer tried and tested funds as a matter of principle."

We are stewards of our clients’ money and have an important role to play in improving the governance of the companies in which we invest our clients’ money – helping companies become better companies. We train many of our fund managers through our rigorous Portfolio Manager Academy programme. New portfolio managers initially manage pilot funds to test their ideas with our own money first. It’s an approach that works: More than 120 awards across Europe and Asia in 2018 to recognise the consistent strong achievements of our investment teams.

Leighton Financial Services reputation rests on how we look after the investments our clients entrust us with - we are their stewards and we must exercise that responsibility with great care. Every investment decision we make has an impact both on our clients and on society at large, so we must consider not just short-term financial returns but the longer term financial and societal consequences of our actions. Indeed, they go hand in hand. This can’t be done from behind a computer screen alone. As asset managers, we have a unique opportunity to go into boardrooms and challenge corporate management teams to align their business practices and incentives today with creating genuine, long-term sustainable value. In the past year, this has included calling on oil and gas companies to reduce emissions, actively engaging with companies on their data privacy risks, as well as reviewing the sustainability of the palm oil industry, as we show in this Sustainable Investing Report. In the coming 12 months, our areas of engagement will include reducing carbon emissions, addressing human rights issues within supply chains, and promoting sustainable waste management practices and the circular economy. In order to get the companies we want in the future, we must invest with vigilance today. This is of vital importance in creating a sustainable economy for society as a whole but also for delivering robust, long-term financial returns for our clients and customers today.

The term ‘sustainable investing’ has come a long way in recent years.

The shortening lifecycle of companies - accelerated by technology-driven business models and customers’ increasing comfort in switching between competitors - makes finding organisations with genuine staying power a greater test than ever. Analysing what can’t be modelled on a spreadsheet is as important as what can. Environmental, social and governance considerations have long been integrated throughout our investment process, but over the past year we have made considerable progress in transitioning from the implicit to the explicit; demonstrating how ESG factors are interwoven into our mainstream investment research. Our analysts’ intimate knowledge of investee companies allows them to provide a nuanced approach, seeing through what cannot always be captured in publicly- available numbers, scores or ratings. However, ESG integration is not just about research. This year, we began including ESG and carbon data as part of our portfolio managers’ quarterly reviews, to continue to raise awareness amongst portfolio managers on these issues. In this way, portfolio managers are held fully accountable by their Chief Investment Officer as to how ESG considerations formed part of their investment decision making process.

In 2018 we engaged globally with 780 companies on ESG issues. Our analysts, portfolio managers and ESG specialists actively collaborated on this process, which included structuring our engagement programme to be more proactive and systematic in our approach to environmental and social issues. This complements our long-established engagement on corporate governance issues, including executive remuneration. We’re evolving our own approach to sustainable investing as new issues arise, additional tools or disclosures become available, and investors’ expectations evolve. For example, this year we have provided more transparency regarding our stewardship activities, including our approach to climate change. As you’ll read in this report, 2018 was a significant year in our sustainable investing journey, thanks in particular to the dedication of our ESG team. I hope you will find the report informative and thank you for your interest in finding out more about our approach to sustainable investing.

Perspective from Asia

Companies in Asia have historically lagged their European counterparts when it comes to environmental, social and governance considerations but practices are fast evolving in the region. The results of this year’s LFS Analyst survey reveal that the number of our analysts reporting a growing ESG focus by Chinese companies under their coverage has nearly doubled from last year. We expect this trend to continue as ESG disclosure becomes mandatory for Chinese listed companies from 2020. Whilst demand for sustainable investing has been driven by asset owners suchas pension funds across Europe, asset managers can play a key role in shaping the ESG agenda in Asia, acknowledging some of the key differences in the age and structure of the listed corporate sector in the region.

Key sustainability themes for stakeholders in the region also vary. Priority is given to health and safety, working conditions, and supply chain management. Until recently, environmental considerations were often secondary but environmental regulations, notably driven by air pollution concerns in China and India, have brought these to the fore. Understanding how international capital flows can help to accelerate this change, several governments have launched initiatives over the last few years to support the development of the green bond market. Whilst we have seen the overall number of listed companies contract in places like the US, Asia continues to benefit from the structural growth of the public listed market as even asset light companies look to the opportunity for an external valuation and to broaden their shareholder base. Relationships between family and state-owned companies and minority shareholders are opening up. This gives asset managers an opportunity to engage more systematically with investee companies to drive change in companies’ ESG practices and disclosure. However, when setting expectations, it may be tempting to evaluate the credentials of companies through a European lens.

Our investment and ESG teams based in Tokyo, Hong Kong, Singapore and across the region use their knowledge of local markets, regulators and areas of policy focus to complement their engagement with our investee companies. This reinforces the idea that a company focusing on its stakeholders in the broadest sense improves the chances of delivering attractive long-term returns.

To global standards

We participate in the debate over the development of appropriate standards for responsible investment through our membership in various forums including:

Asian Corporate Governance Association (ACGA)

Corporate Governance Forum

Global Real Estate Sustainability Benchmark (GRESB)

International Corporate Governance Network (ICGN)

The Investor Forums (in both Japan and the UK)

UK Sustainable Investment and Finance Association (UKSIF)

Dutch Association of Investors for Sustainable Development (VBDO)

In addition, we are signatories to the UK Stewardship Code and the Japanese Stewardship Code.