For professional investors/qualified investors only

Stewardship
Quarterly
Q4 2023

Stewardship Quarterly | Q4 2023

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Stewardship Quarterly | Q4 2023

Welcome
Our report outlines our global active
ownership (engagement and voting)activity during the quarter, including a
selection of engagement case studies.

Targeted Environmental, Social and Governance(ESG) engagement with issuers is an importantpart of our investment approach as active investors
and responsible stewards of our clients’ assets.
Consistent with client expectations, our primary driverfor engagement is to support long-term value creation
by mitigating risk, capitalising on opportunities linked to
ESG factors, and reducing any material negative impactthat our investment decisions could have on thesefactors. We believe that, by engaging in this way, we canplay a part in building a more sustainable and resilient
global economy by encouraging issuers to improvetheir ESG practices. This can also help drive positive
impacts for the environment and society that are in linewith the achievement of the United Nations Sustainable
Development Goals (SDGs).
Where appropriate, we seek to exercise voting rights
on our clients’ behalf at all shareholder meetings
associated with the holdings of the investment
mandates we manage.
This provides the opportunity to express ourpreferences acting for our clients on relevant aspectsof an issuer’s business and to promote good practice,or express our concerns identified through researchand engagement, including when escalation becomes
necessary.

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Stewardship Quarterly | Q4 2023

Proxy voting in review
829

6,138

meetings voted

14.4%

proposals votedof all proposals
where we voted
against management

41

markets voted in

Votes against management by topic:
Capitalisation
Director related
Remuneration
Shareholder
Other
Total

57
422
270
15
122
886

6.4%
47.6%
30.5%
1.7%
13.8%
100.00%Meetings voted by region
Support management on all items

Dissent from at least one item

Total meetings

North
America
106

149

255

Latin America
15

17

8

United Kingdom
97

24

121

37

112

All figures subject to rounding.

4

49
75

79

142

72

214

Europe ex UK
Emerging
Markets

Asia Pacificex Japan

30

Japan
17

25

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Stewardship Quarterly | Q4 2023

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Stewardship Quarterly | Q4 2023

Our engagement activity
highlights

375

Engagement activites

328

Companies engaged

111

Milestones achieved

31Countries covered

We measure and report on the success of engagement through the assignment of Milestones, which recognise improvements in issuers’ ESG policy, management systems or practices against the
Objectives that were set.

Companies engaged by country

94 North America
153 Europe

43 Asia (ex Japan)
24 Japan

14 Other

Total

Engagements by theme

Milestones achieved by theme

3.9%

1.8%

Business conduct

Business conduct

20.1%

Climate change

33.6%
Corporate
governance

2.9%

Public health

8.9%

33.3%

5.8%

5.4%

Environmental
stewardship
Human rights

24.7%

Labour standards

All figures subject to rounding.

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328

33.3%

Climate change

Corporate
governancePublic health

10.8%
Labourstandards

11.7%

Environmental
stewardship

3.6%

Human rights

Stewardship Quarterly | Q4 2023

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Stewardship Quarterly | Q4 2023

As active owners, engagementwith the issuers we invest in
on behalf of our clients is an
integral part of our approach toresearch and investment, andas stewards of client capital.

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Stewardship Quarterly | Q4 2023

Engagement case studies
Discover in-depth examples of our engagement withcompanies during Q4 2023.

Jet2 Plc
Strengthening SAF and offset strategy
Response to engagement:
Good
Themes:Climate change
Subthemes:
Energy transition; Net zero strategy

SDG Target(s):13.2 – Integrate climate change plans into policies and strategies.

plan, enhance its carbon offset procurement criteria and begin
disclosing to CDP. We had been sceptical of Jet2’s willingness
to move on these points, as the company had little sustainability
personnel, and we did not view many of our calls with the CFO
as especially productive. However, in Q4 we had a call withboth the CFO and the new Head of Sustainability that indicateda real step change in the company’s amenability to listen toinvestor asks on this topic. Jet2 confirmed that they would begin
disclosing to CDP Climate next year, and outlined to us a clear
short, medium and long term SAF strategy that was well thought
out and presented a compelling picture from our perspective.
Jet2 also listened to our concerns on the quality of carbon
offsets that it is procuring, and we had a series of productive
follow up email interactions with the Head of Sustainability on
this topic to clarify our asks.

BackgroundJet2 is a leisure airline and tour operator operating throughthe UK and Europe, therefore operating in what is well known
to be a hard to abate sector given that the aviation industry’s
decarbonisation levers are not currently financially competitive
and often are technically immature. We have historicallyconsidered Jet2 to be one of the weaker European airlines on
its climate strategy. While the company has historically had
good emissions intensity relative to the rest of the industry, it
was slow to move on sustainable aviation fuel (SAF), had weak
disclosures on its climate transition strategy and had a relatively
under-staffed sustainability function in our view.

ActionWe began engaging the company in 2022 to strengthen its
approach to climate risk management. We have since had eight
engagements with the company, requesting that it strengthens
its SAF strategy, disclose more detail on its climate transition

Verdict
We are encouraged by Jet2’s progress, and now
consider the company to be somewhere in the
middle of the European airline pack on the climatetransition. There are still significant areas for thecompany to improve on – and at the moment most of
the commitments we have heard from the company
have been verbal rather than formally provided inpublications or press releases. In particular, we
continue to encourage the company to diversify its
SAF supply base, enhance the detail of its climatetransition strategy, and enact a high quality carbon
offset procurement approach. We will continue toengage with Jet2 in 2024.

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9Stewardship Quarterly | Q4 2023

ArcelorMittal
Engaging with ArcelorMittal after the deadly fire triggered nationalisation of Kazakhstani assets
Response to engagement:
Good
Theme:
Human rights; Labour Standards
Subthemes:
Occupational health and safety

SDG Target(s):Engagement not aligned to any of the SDGs.

Background
ArcelorMittal is the second largest steel-producer globally, with
manufacturing facilities in 16 countries and customers in 155. 46 ofArcelorMittal’s (MT) employees were killed in a fire at its Kostenko
coal mine in Kazakhstan which was triggered by a methane-gas
explosion on October 28th, 2023. The explosion is the most
severe industrial accident in Kazakhstan’s independent history
and triggered the nationalization of all MT’s assets in the country,
consisting of 8 coal mines, 4 iron ore mines and 1 steel plant.

the remediation steps taken after the accident, including providing
immediate support for families, such as a payment equivalent to
a 10-year salary, payment for children’s education up to the age of
23 and repayment of all personal loans of the families impacted.
Regarding what went wrong, MT highlighted the ‘complex’ geologyof the region as well as the ‘risk-taking culture’ as exacerbating
risks. We challenged the company on this, as these are in noways risks that we believe should have been outside of MT’s
due diligence and safety reviews – as it stands, we view these
two explanations as inadequate at justifying what went wrong,particularly considering the scale of the accident and the endemic
safety issues in the region. We requested evidence of how MT will
ensure that its 33,000 employees- who are now being transferred
to a nationalized company - will not be exposed to even worse work
conditions. The company state they want to ensure a good legacy
for MT in the region, however this will be a challenge, with thePrime Minister of Kazakhstan stating on the day of the disaster that
MT is the “worst” investor in Kazakhstan’s independent history.

ActionMT reached out to us following the accident to explain theremediation actions taken, and to outline what went wrong alongwith the lessons learnt. We have previously spoken to the company
about its chequered safety record in Kazakhstan, as there havebeen consistent indications that the company is not handling
occupational safety effectively for example with 14 fatalities in
2022 and 4 fatalities before October 2023. MT quickly outlined
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Verdict
We are disappointed by the explanations provided by MT
on what went wrong, particularly considering the safety
record in the region which should have provided ample
warning of the need for significant improvement on safety
monitoring and procedures. MT state more information
will be provided after the ongoing third-party audit of thewhole company’s safety practices is published, due in
mid-2024. We will re-engage the company on safety after
its publication.

Stewardship Quarterly | Q4 2023

Sendas Distribuidora S.A.
Engaging for long-term board effectivenessResponse to engagement:
Good
Theme:
Corporate Governance
Subthemes:
Board effectiveness; Remuneration; Capital Allocation; Strategy andExecution
SDG Target(s):13.2 Integrate climate change plans into policies and strategies

5 times with the company in 2023, with 3 meetings withrepresentatives across the company, including investor
relations, sustainability teams, the CFO, and members of the
new board. The company has been executing on a strategy
of store expansion and conversions, leading to increased
debt-levels, but will soon start to focus on deleveraging – wehave sought enhancements in their remuneration structure
to reflect this, in particular the inclusion of performance
metrics associated with their deleveraging efforts, as well as
broader simplification of aspects of their short-term incentive
scheme. We also met with members of the sustainability
team to discuss their ESG strategy, in particular their humancapital management and decarbonisation efforts.

Background
Sendas Distribuidora (Assai) is one of the leading cashand-carry food distribution and retail businesses in Brazil.
The company were previously a wholly-owned subsidiary ofCompanhia Brasileira de Distribuição (GPA), however in March
2021 was spun-off and publicly listed on both the Brazilian
stock exchange, and the NYSE. The previous controllingshareholder of GPA, Casino Group, maintained a 41.3% stakein the company. Then in late 2022 and early 2023, Casino
Group announced a series of secondary offerings, reducing
their stake to 11.7%. This was accompanied by significant
change in the board structure, including the nomination of a
new independent Chairman.

ActionAs a result of these corporate actions, we engaged
with the company on a range of governance topics, inparticular their remuneration structure. We have engaged

Verdict
The company have been very responsive to our requests
for engagement following their AGM in April, and were
proactive in reaching out to us to set up a meeting todiscuss their remuneration structure with several of the
new board members. Following our initial conversations,an improved interim remuneration structure was put to ashareholder vote at an EGM in July, which we supported
in light of the conversations we had. Following a
letter we wrote to the CEO and Chairman in Q4, we
will look to assess whether our views are taken into
consideration by the new board and incorporated into
the remuneration structure ahead of the 2024 AGM.

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11Stewardship Quarterly | Q3 2023

Accessour insights
Learn more about the key ESG
trends and developments andthe insights that are driving ourstewardship agenda.

Discover a selection of our Q4 2023 publications:

ESG Viewpoint: Greater clarity anda focus on financial outcomes

ESG Viewpoint: Investingin a Just Transition

Quick view: What’s in store for responsible
investing from here? We explain whyenvironmental, social and governancefactors matter, highlight the importance ofmeeting defined client needs and discuss
our active ownership efforts in 2024.
Download the viewpoint

Quick view: It’s essential we consider
the social dimension as we transition
to a low carbon world. We explore
the investment implications of a Just
Transition.

Thematic Insight: Chopping and changes:
what are the implications of the EU’s
Deforestation Regulation?
Quick view: The EU’s Deforestation Regulation will
make us as investors think about company risks andopportunities and is under discussion with our equity
and fixed income teams.
Download the thematic insight

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Download the viewpoint

Stewardship Quarterly | Q3 2023

ESG Viewpoint: Sustainable
Development Goals: A framework
for investors
Quick view: In 2023, we have reachedthe halfway point – and a coordinatedeffort is needed to get the goals on trackahead of 2030.
Download the viewpoint

Thematic Insight: Managing
the Human Capital Transition
Quick view: Human capital, althoughoften overlooked by investors, is asignificant component of the forces
driving performance. Businesses investingin human capital are likely to derive acompetitive advantage.
Download the insightInterested in reading more?
Visit our website.

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Contact us
clientsupport@columbiathreadneedle.com
columbiathreadneedle.com

To find out more visit columbiathreadneedle.com
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