AEW Proxy Voting Guidelines

AEW Acts as a Steward of Client Capital

AEW uses proxy votes as an important mechanism to hold management teams and boards accountable for the way they run a company, its historic performance and its future direction. Through proxy voting AEW can influence governance structures, company priorities, senior team compensation and strategic goals, both financial and non-financial. AEW seeks to protect its sharehold­ing and promote director accountability by considering all votes and voting on each proposal after prudent, careful consideration rather than using a generic or out-sourced approach. Voting is required at annual (AGM) and extraordinary (EGM) meetings, when management seeks shareholder approval. AEW acts prudently, solely in the best interest of its clients, and for the exclusive purpose of maximizing value to its clients. For the accounts over which AEW maintains proxy voting authority, AEW will vote proxies in accordance with these proxy voting guidelines. These guidelines are not exhaustive and do not include all potential voting issues.

Company Engagement

Prior to the vote but once a proposal has been published for its AGM/EGM, AEW and the relevant company may engage in dialogue surrounding a specific vote. This often involves clarification on the background of the vote and potential consequences of the vote. It also gives both sides the opportunity to discuss, in detail, potential issues raised by the vote. Such dialog is valuable for both sides and forms a part of the engagement process. Further to these discussions there are many other ways AEW engages companies, details of which are set out in our Engagement Policy.

Our Engagement Approach

The Board

A company board sets the tone for a company and has vital oversight of directors and company performance, as well as the formation of the AGM/EGM proposals. Board members are therefore vital to protecting shareholder interests. AEW believes the selection and screening process for identifying suitably qualified candidates for a company’s board of directors requires the examination of many factors, including the balance of skills and talents, breadth of experience, as well as the diversity of candidates and existing board members. Diver­sity of skills, abilities and points of view can foster the development of a more creative, effective and dynamic board. AEW expects active involvement and attendance of directors at board meetings. AEW will consider voting against a board member or director if “overboarding” is considered to be a risk, with that individual unable to dedicate sufficient time to the company.

Board Composition

AEW seeks to ensure that the board of directors of a company is sufficiently aligned with security holders’ interests and provides proper oversight of the company’s management. In many cases, this may be best accomplished by having a majority of independent board members. Although we will examine board member elections on a case-by-case basis, we will generally vote for the election of directors which would result in a board comprised of a majority of independent directors. In addition, key board committees should generally be comprised of at least a majority of independent board members. A board member will generally not be considered independent if they have been on the board longer than 10 years. AEW may consider voting against the election of the chair of the nomination committee if there is insufficient board refreshment or independent board members. For all other votes regarding boards of directors, we will vote on a case-by-case basis.

Election of Boards

The annual election of directors provides increased accountability and requires directors to focus on the inter­ests of shareholders. When companies have staggered boards, shareholders are deprived of the right to voice annual opinions on the quality of oversight exercised by their representatives. In general, AEW will vote against staggered boards.

Separation of CEO and Chairman

An independent board chair is better able to oversee executives and set a pro-share­holder agenda without the conflicts that a CEO, executive insider, or close company affiliate may face. As such, separating the roles of CEO and chair may lead to a more proactive and effective board of directors. We believe that the presence of an independent chair can foster the creation of a thoughtful and dynamic board not dominated by the views of senior management. We believe separating these two key roles elimi­nates the conflict of interest that inevitably occurs when a CEO or other executive is responsible for over­sight. In general, AEW will vote against the election of a board chair that is either the CEO or an “insider” to the extent they are not sufficiently separated from management.

Election of Directors

To promote a basic level of director accountability, we believe companies should require that directors must receive a majority of votes cast to be elected. Unlike a plurality vote standard, a majority voting standard al­lows shareholders to collectively vote to reject a director they believe will not pursue and protect their best interests.

External Shareholder Proposals

We may consider recommending support for well-crafted pro­posals in cases where the proponent has clearly demonstrated that adoption of the requested proposal will protect shareholder interests or enhance shareholder value.

Director Compensation and Clawback Provisions

AEW carefully reviews executive compensation, as we believe that this is an important area in which the board’s priorities and effectiveness are revealed. Executives should be compensated with appropriate base salaries and incentivized with additional long-term awards in cash or preferably stock, vesting over a minimum of 3 years when their performance and that of the company warrant such rewards. We believe that compensation should be closely aligned with company per­formance, with reference to compensation paid by the company’s peers, and compensation programs should be designed to promote sustainable shareholder returns while discouraging excessive risk-taking. Votes to set minimum senior director ownership, for example as a % of salary will generally be supported. We believe that clawbacks should be trig­gered, at a minimum, in the event of a restatement of financial results or similar revision of performance indica­tors upon which bonuses were based. CEO compensation will preferably have some link to total and relative shareholder return and AEW will generally approve a compensation link to ESG performance improvement as a marker of enhancement of long-term value. In markets where shareholder approval of executive compensation is not required by law, AEW will gen­erally support shareholder resolutions requesting a company adopt an advisory vote on executive compensa­tion.

Merger Acquisitions, Reincorporation and Other Transactions

Companies may ask their shareholders to vote on a variety of different types of transactions, including mergers, acquisitions, re-incorporations and reorganizations involving business combinations, liquidations and the sale of all or substantially all of a company’s assets. Voting on such proposals involves considerations unique to each transaction. Therefore, our vote on proposals to effect these types of transactions will be determined on a case-by-case basis.

Anti-Takeover Measures and Shareholder Voting Rights

Certain proxy proposals seek to hinder the ability of an outside party to take control or buy a certain percentage of the stock of a company without the approval of management or the board. Such proposals include the adoption of a shareholder rights plan, requiring supermajority voting on particular issues, adoption of fair price provisions, issuance of blank-check preferred stock, or the creation of a separate class of stock with unequal voting rights. However, some of the proposals may benefit shareholders in certain circumstances. Because of the variety of such proposals and their varied effects on security holders, our vote on anti-takeover measures will be determined on a case-by-case basis.

Capital Structure

Shareholders of companies may be presented with proposals seeking to change the company’s capital structure by authorizing additional stock, repurchasing stock or approving a stock split. As with mergers and acquisitions, there are a variety of transactions that may be presented to shareholders. Accordingly, we will vote on a case-by-case basis involving changes to a company’s capital structure. AEW would typically not approve none pre-emptive capital raise allowances above 20% of share capital.

Conflicts of Interest

Occasions may arise where a person or organization involved in the proxy voting process may have a potential conflict of interest. A potential conflict of interest may exist, for example, if AEW has a business relationship with either the company soliciting the proxy or a third party that has a material interest in the outcome of a proxy vote or that is actively lobbying for a particular outcome of a proxy vote. Any individual with knowledge of a potential conflict of interest relating to a particular proposal should disclose the potential conflict to AEW’s Chief Compliance Officer. The Chief Compliance Officer will review the potential conflict of interest to determine if a conflict of interest in fact exists. Where a conflict is determined to exist, appropriate steps will be taken to ensure that the action taken is made on the merits and in the best interest of the shareholders without regard to any other consideration.

In the event of a conflict of interest involving any proxy vote, AEW will generally vote in accordance with recommendations provided by Glass Lewis or another independent party proxy service provider.

Environmental and Social Matters

We believe a board should monitor management’s performance in mitigating environmental and social risks related to operations in order to eliminate or minimize the risks to a company and its shareholders. Failure to take action on important environmental or social issues may carry the risk of inciting negative publicity and potentially costly litigation. AEW will generally support appropriate, well-crafted proposals requesting that companies report their greenhouse gas (“GHG”) emissions. AEW will generally support and encourage value-focused emission reduction proposals, for example, “Carbon Neutral” Goals. AEW will generally support disclosure on energy consumption and measures to increase renewable energy consumption.

Social risks may include non-inclusive employment policies, inadequate human rights policies, or issues that adversely affect the company’s stakeholders. Taxes on GHG emissions and legal or reputational issues arising from poor governance on social issues may well have consequences for shareholder value. Voting is on a case-by-case basis in this area but in general, AEW will vote in favor of votes that enhance social and environmental improvements as we feel such measures are in the best interest of the shareholders and the long-term sustainable value of the company.

Environmental, Social and Governance Disclosure

AEW will generally recommend in favor of shareholder resolutions requesting that companies provide enhanced disclosure on environmental-related issues.

Reporting on Diversity, Equity, and Inclusion

AEW believes that human capital management is an area of material importance to all companies. Main­taining a diverse and engaged workforce can help mitigate risks related to low worker productivity, employee turnover, and lawsuits based on discrimination or harassment. AEW will generally vote against the election of the chair of the nomination committee if there are less than 30% women on the board. AEW believes the board and management should be allowed dis­cretion in designing and implementing employment policies. Where shareholders identify a lapse in directors fulfilling their duty, shareholders can hold them accountable in director elections. AEW may recommend supporting reasonable proposals seeking enhancements to, or the establishment of, an equal em­ployment opportunity policy if there is evidence of discriminatory treatment of employees. AEW expects equality of pay for performance and no discrimination on gender and ethnicity.

Political and Charitable Contributions

Political engagement, covering lobbying and donations to political causes and candidates will be looked at case-by-case, though we would generally vote against any contribution to an individual candidate. Appropriate charitable and community giving will generally be looked at favorably.

Human Rights

If directors have not adequately overseen the overall business strategy of the company to ensure that basic human rights standards are met or if a company is subject to regulatory or legal action with a government or entity due to human rights violations, we will consider voting against directors taking into account the severity of the violations and the outcome of the claims.

Routine Matters

Proxy statements generally involve the approval of routine business matters and procedural matters relating to shareholders meetings. Generally, these routine matters do not materially affect shareholder interests adversely and are best left to the board of directors and senior management of the company. Thus, we will generally vote for board-approved proposals regarding such matters.

Proxy Voting Abstentions

AEW seeks to have a positive impact through Proxy voting and therefore prioritizes proxy voting however there may be instances where AEW may abstain from voting. These instances will typically occur when there are “Share Blocking” restrictions in place in a given country.

Client Specific Guidelines

If a client has specific proxy voting guidelines, AEW will, at the written request of the client, vote in accordance with the client’s guidelines; provided that such guidelines are not inconsistent with AEW’s obligations under ERISA or other applicable laws.

AEW Proxy Voting in 2022 for Discretionary Accounts

Votes in 2022:
Proposals voted in favor: 1,399
Proposals voted against: 128
Proposals voted abstain: 1

Proxy Oversight

It is the responsibility of the investment teams in the relevant geographical region to cast AEW’s proxy votes, on behalf of its clients. These teams are best positioned to make the decision based on the in-depth knowledge they have of the companies involved. These teams are also assisted in making their decisions by having external third-party research on each vote made available to them. This research is currently provided by GlassLewis. Any external recommendation is considered but the ultimate responsibility for the vote is with the relevant investment team, they are accountable for the votes cast.

At least each quarter or more often, as appropriate, proxy votes are reviewed. Votes against management-supported proposals must be documented and an explanation for such votes will be reviewed by this group. This process ensures consistency and oversight.