F LY E R|MONTH 2022

ESG integration philosophy
At Wellington Management, we see environmental, social,and governance (ESG) considerations as one set of factors
among many that should be weighed appropriately toinform investment decision making.

Professional and accredited investor use only. Not for further distribution.

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ESG integration philosophy

The firm’s leadership team believes that material
ESG issues are strategic business concerns that canaffect the value of assets we invest in on behalf ofour clients. We view the analysis and integration ofESG considerations as both return enhancing andrisk mitigating. Our objective is to provide investment
teams with the information and resources they needto integrate ESG as appropriate into their individual
investment philosophy and process (P&P).
OUR APPROACH
ESG research at Wellington is centralized and available to all
portfolio managers and investment teams. In this way, ESG
analysis is a shared responsibility.
Wellington’s ESG Research Team is a global team of sector
specialists who focus on developing and sharing ESG research andinsights. ESG Analysts conduct bottom-up analysis of material

Our north star is the belief that material
ESG issues can affect the long-term valueof assets we invest in; therefore, it is in ourclients’ best interest for us to analyze them.

Each investment team incorporates this research into its decision
making to the extent it considers appropriate and in a way that isconsistent with its investment P&P. For example, some investment
teams may focus on companies they believe have best-in-classpractices that will help the business compound value over time.
Other investment teams may focus on companies that, in theirview, have improving practices that have not been incorporated
into the security’s assessment. We believe this type of tailoredassessment allows ESG integration to become more intrinsic toconsiderations in their respective coverage areas. They work

the investment process.

closely with Global Industry Analysts and Credit Analysts to gather

For many teams, ESG research is an input or lens to help assess

intelligence on ESG and help investment teams integrate these
considerations into their P&P as appropriate.
We do not have a chief investment officer directing investmentdecisions. Instead, each of our portfolio managers and investment
teams develops their own investment P&P. We believe this aligns
our investment teams with the outcomes they pursue for clientsand strengthens our investment dialogue, as teams with different

the value of investments. The “weight” or prominence of this
input differs, in large part, on the ESG topic, asset type, andteam P&P. ESG considerations can manifest in the investment
thesis or portfolio weighting for a particular security, as wellas in proxy voting and company engagement efforts. In somecases, teams consider ESG as the primary lens for evaluating
investment opportunities.

investment philosophies can share and debate ideas.

W H AT W E M E A N B Y E S G

In our view, ESG is a broad term that refers to one or
multiple environmental, social and/or governanceconsiderations. For example:

ESG

Understanding whether a manufacturer’s
supply chain faces physical climate risk
Understanding a service provider’s employee
engagement levels
Understanding a company’s capital allocationand compensation approach

While certain areas, such as climate risk, have becomeareas of research focus recently, most of these concepts
are not new and have long been considered by many
teams as part of their investment process.

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Professional and accredited investor use only. Not for further distribution.

We believe having regularconversations with management
and boards enables us to assess
a company’s corporate culture,adaptability, and responsiveness,and ensure that incentives arealigned with long-term targets.
YO L A N D A C O U R T I N E S , C FA
Equity Portfolio Manager

ENGAGEMENTOver time, we believe our company ESG engagements will

Investors and analysts engage with boards and management

enable us to influence corporate behavior in ways that have theteams on many topics, including ESG topics that they consider

potential to unlock value or better manage risks, for instance, by

as material and relevant to a company’s long-term success.

encouraging companies to align executive compensation withEngagements on ESG issues, which are focused purely on

reduction targets to better prepare them for future. We arefinancial materiality, cover manifold topics, including climaterelated risks, environmental regulation, employee training anddevelopment, executive compensation, or senior-level succession
planning, for example. Engagements with investee companies caninvolve members of our investment teams as well as members of
our ESG Research, Climate Research, Global Industry Research,
and/or Credit teams who are interested or invested in a particularsecurity. These engagements can also be coordinated at the firmlevel, with a specific or shared objective in mind.
When engaging on financially material climate-related issues, weadhere to a foundational principle recognizing that companies
may be at very different stages, depending on their region,location, and other factors. We typically start these engagementsby assessing company representatives’ understanding of climate
physical and transition risks. Many companies do not yet disclosedetailed climate-relevant information, so we may begin byencouraging them to measure and disclose their greenhousegas emissions and the physical locations of property, plant, andbusiness outcomes or helping them set science-based emissionsincreasingly tracking and measuring these engagements acrossthe firm to monitor and share outcomes, assess effectiveness, andidentify potential areas for potential escalation.

P R OX Y VOT I N GProxy voting is a powerful tool that can provide leverage incompany management discussions and opportunities that help
us maximize investment returns for our clients.
Many clients ask us to vote proxies on their behalf, and we takethat responsibility seriously. Our custom proxy voting guidelines
are based on Wellington’s fiduciary obligation to act in the best
financial interest of its clients as shareholders. These guidelines areresearch-driven, refreshed annually, and approved by the Investment
Stewardship Committee. While these guidelines are designed tobe applied globally, we consider jurisdictional differences to makemore informed decisions. Our guidelines are not rigid rules nor do
we enforce a “house view” or seek top-down consensus.

equipment to the extent we believe doing so would enable our

Manual voting represents a fraction of our total vote volume each

investment teams to better assess value and risk.

year; the majority of voting is done by a third-party proxy agent
in accordance with our custom proxy voting guidelines. When3

Wellington Management

In my view, the key to successful
engagements is the ability totap a global set of equity, credit,and ESG analysts who help us
analyze a company’s risks andopportunities holistically.
K AT S U H I R O I W A I , C FA
Equity Portfolio Manager

manually voting on a shareholder proposal related to social or

E S G - R E L AT E D I N I T I AT I V E S

environmental issues, we generally vote in favor if we determine

Wellington is a signatory to several industry initiatives

that the company’s adoption of the proposal would promote longterm shareholder value. In making this determination, we consider
numerous factors, including but not limited to the anticipatedbenefits of the proposal to the company and whether:• the proposal addresses the general interests of the company’s
shareholders and not just the interests of those putting forward
the shareholder proposal• the company is currently addressing the issue motivating
the proposal or has engaged with those putting forward theshareholder proposal• the company can implement the proposal effectively• the proposal’s adoption would impose material costs on thecompany or could result in unintended consequences
In addition, because proxy voting provides only limited means(i.e., voting “for” or “against”) to express our views on a particularissue, we may support shareholder proposals in cases where we
do not support every recommended action or where the proposal
is accompanied by a supporting statement that we do not support

focused on ESG. We believe participation helps us gain
knowledge, stay current on key issues, and help shapediscourse for our industry.
We will participate in ESG-related initiatives only to the extent that
we believe that doing so is consistent with our fiduciary duties toour clients. To maximize the research impact of our participation,
we are discerning in our evaluation of the wide range of initiatives
we are asked or encouraged to join. We consider the credibility ofan organizing body and its participants, materiality of the group’s
focus to investee companies, and the expertise available toinfluence outcomes and content.
Importantly, as a participant in these industry initiatives, we do
not form groups, act in concert, or make any collective-investment
decisions with other investor participants; nor do we ask,
encourage, or allow other participants to represent our views or
speak on our behalf. These initiatives do not issue any individual
or collective recommendations, arrangements, agreements, orunderstandings with respect to any company or its securities,
including voting or investment decisions.

(so long as we are directionally aligned with the issue motivating

A full list of our external ESG-related partnerships is available inthe proposal). In these cases, we aim to engage directly with theour annual Sustainability Report, available on our web site.

company to clarify the nuanced view that our vote represents.

4About Wellington Management

USD 1T+

Assets under management

1,063

Investment professionals

2,565

Number of clients

61

Client locations (by country)

All figures are for the Wellington Management Group of companies as of 31 March 2023.

I M P O R TA N T I N F O R M AT I O N
Wellington Management Company llp (WMC) is an independently owned investment adviser registered with the US Securities and Exchange Commission(SEC). WMC is also registered with the US Commodity Futures Trading Commission (CFTC) as a commodity trading advisor (CTA) and serves as a CTA tocertain clients including commodity pools operated by registered commodity pool operators. WMC provides commodity trading advice to all other clientsin reliance on exemptions from CTA registration. WMC, along with its affiliates (collectively, Wellington Management), provides investment managementand investment advisory services to institutions around the world. Wellington Management Group llp (WMG), a Massachusetts limited liability partnership, serves as the ultimate parent holding company of the Wellington Management global organization. All of the partners are full-time professional
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not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. n This material
is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities. Investors shouldalways obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or toinvest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice.
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©2023 Wellington Management Company llp. All rights reserved. | As of May 2023 | 89547_ESG-philosophy_v6