Our approach to responsible investment and stewardship

We take a long-term view of our investments, and our aim is to grow the real value of our assets so that we can maintain and grow our charitable work long into the future. We invest across a range of asset classes and across the globe in order to do this. Our portfolio is the resource that makes our charitable work possible, rather than the means through which we seek to pursue our mission.

Our board of governors delegates the day-to-day management of our portfolio to our investment team, led by our managing partners, with oversight from our investment committee which reports to and advises the board. Our investment team manages approximately half of our assets internally and the remainder is invested with external managers.

We are focused on the long-term financial prospects of each company, fund and asset we invest in. They must demonstrate a sound and sustainable business model. As part of that, their management teams must show that they consider the risks and opportunities relevant to their business.

We expect our investment partners to maintain strong relationships with customers, suppliers, employees, governments, regulators, providers of capital and society as a whole. This includes a positive corporate culture, ensuring compliance with laws and regulations, the health and safety of employees, considering impact on communities and the environment and having an appropriate governance structure. We refer to this as social licence to operate.

As well as being a reflection on its values, a positive approach to these considerations is indicative of whether a company represents a strong investment prospect. If a company does not maintain its social licence to operate, we believe there are questions over its long-term sustainability and therefore its long-term return potential. Companies that consider their licence to operate carefully and are concerned with avoiding harmful externalities should generate stronger financial returns over time.

We consider licence to operate at each stage of our investment process, from initial due diligence to ongoing monitoring and continuous engagement. We may seek outside support to provide information, but we form our own opinions and do not outsource decision-making to consultants or advisers.

We do not directly invest in tobacco. Other than that, we apply our framework to individual assets and do not exclude any other economic sectors outright. However, as a result of our process, we have sold positions or rejected investment opportunities that in our view did not meet the standards of corporate responsibility we require.

We identify and analyse licence-to-operate risks when assessing any potential new investment. We are particularly interested in the culture of the companies and asset managers in which we invest. Our due diligence processes are tailored for each investment, but include an assessment by Wellcome’s risk team, which is separate to the investments team. We engage external specialist advisers and service providers to support our due diligence if required.

Many of our relationships and shareholdings span well over a decade. We try to get to know our investment partners and management teams as well as we can. Running a reasonably concentrated portfolio with very low turnover enables us to spend significant time on building a deep understanding of all our assets. As with due diligence, our monitoring processes are tailored to each investment. We expect our managers to maintain appropriate procedures and report to us regularly on their investment activities, including licence-to-operate issues, and any material litigation, compliance, fraud, bribery or regulatory issues. We make the same assessment in relation to our directly owned property assets and asset-backed operating businesses. We undertake an annual review of our most significant assets from a licence to operate perspective, including all our directly held public equities.

We aim to uphold equally high monitoring standards for our private assets. Where we have majority or significant direct ownership, we exercise control or influence through the board. Where we hold smaller passive stakes or indirect stakes through partners, we rely on our partners to look after our interests. Monitoring the partners themselves is therefore an important part of our process.

We are active owners of our directly held equities. We use our voting rights, including where shares are held in our name by external managers. Each voting decision is driven by our in-house stock analysts with oversight by our head of public markets.

Wellcome is a founding member of the Investor Forum and we work with fellow members on collective engagements where appropriate. We are also a member of the Institutional Investors Group on Climate Change.

We also seek to engage directly with the management teams of our public companies on licence-to-operate questions where we feel there are important areas for improvement.

Similarly, we engage with our external managers on licence-to-operate issues such as diversity and inclusion and climate change. We aim to share best practices across our partners and management teams.

We establish a governance and operating model for each of our directly owned property investments and asset backed operating businesses and ensure licence to operate matters are integrated into each. Based on this, we expect management teams to create an appropriate culture and embed suitable risk management policies and processes in the business, with continuous oversight at the board level.