RESPONSIBLE INVESTING

At Polaris Capital, we view corporate responsibility and sustainability as good business practices; these practices are “part and parcel” for the long-term success of a company.

RESPONSIBLE INVESTING POLICY STATEMENT

Polaris is an investment adviser to clients worldwide. We are retained to manage client funds subject to investment management agreements that provide, among other requirements, investment guidelines including responsible investing policies.

Since inception, the Polaris investment research process has focused on investing in quality companies that generate strong sustainable cash flows. Polaris has found that companies with sound business practices, which benefit customers, shareholders, and other stakeholders, often meet the desired metrics; conversely, corporate shortcomings can pose a material risk to a company’s ability to achieve sustainable cash flows. Further, companies that safeguard their own future by adapting to challenges are, not coincidentally, often those with durable competitive advantages, value drivers and successful track records.

Recognizing that corporate responsibility impacts a company’s long-term success, Polaris integrates sustainability factors into the investment research process to vet potential investments and track current portfolio holdings. Identifying and anticipating material risks and opportunities is a factor in achieving long-term value creation for our clients. Responsible investing issues may have material impact on potential investment opportunities and Polaris recognizes the danger of overlooking these in its screening and valuation process.

To that end, Polaris screens and evaluates companies as part of the fundamental bottom-up research process with attention to the following issues:

• • Polaris seeks out companies with adept corporate leadership and effective governance practices, which aim to advance interests of all stakeholders and shareholders. Such companies are more likely to avoid or reduce cost increases due to legal and regulatory interventions such as fines, legal fees, and brand damage/customer attrition.
  • Polaris advocates for the improvement of companies’ environmental footprint and concurrent reporting transparency. Companies that manage their environmental impact may avoid regulatory fines, mitigation demands and/or litigation that could negatively impact company cash flows. Additionally, a focus on the environment can lead to creative new pathways for growth and/or business development.
  • Companies that violate labor practices, human rights or other civil/constitutional rights risk reputational damage, poor corporate image/identity, low connection with customers and stakeholders, and ultimately loss of revenues and cash flow. Ethical issues extend beyond the workplace, involving product safety, access or quality regulations that can impact a larger demographic. Polaris engages with company management on ethical business practices, when warranted.

If a company clears Polaris’ stringent investment criteria, cash flow targets and sustainability standards as part of the initial investment research analysis, it is considered for investment. Once a portfolio holding, the stock is subject to routine sustainability review as part of Polaris’ ongoing company investment analysis and engagement.

DIRECT ENGAGEMENT

Direct engagement is a hallmark of our investment process. Our investment team attends thousands of meetings annually, participating in face-to-face meetings with more than 75% the companies in the portfolios. Building rapport with company management, establishing a foundation of mutual respect and understanding, allows for effective communication and productive dialogue on potential conflicts and important issues that can impact financial performance. Our most impactful influence occurs before agenda items are prepared for shareholder votes (proxy). On frequent occasion, we review proposed compensation programs and other governance matters directly with company boards on behalf of our clients. As active, long-term investors, we encourage the companies in which we invest to adopt best-in-class sustainability practices that complement their business models.

Recent examples of our direct engagement include: LOOMIS NOMINATING COMMITTEE

PROXY VOTING

Proxy voting is an important method to exercise shareholder governance, engagement and investment stewardship. Polaris uses its proxy voting rights to support shareholder resolutions that align with respective policies or, when necessary, to influence change in operating practice standards of portfolio companies; details about our proxy voting record are available upon request.

View Polaris’ current PROXY POLICY here.

Want to learn more about Polaris’ responsible investing practices? Please contact CLIENT SERVICE to get a comprehensive overview of our policy and practices.