abrdn.com
Resilience from
GLYHUVLɫFDWLRQ
Annual report and accounts 2022
At abrdn, we are
reshaping our business
to serve a wider range
of clients to plan, save
and invest for the future.
By diversifying our business,
we are positioning ourselves
for growth in a changing
investment landscape.
This annual report and accounts 2022 for abrdn plc, and the strategic report and
financial highlights 2022 are published on our website at www.abrdn.com/annualreport
Access to the website is available outside the UK, where comparable information may
be different.
Certain measures such as adjusted operating profit, adjusted profit before tax,
adjusted capital generation and cost/income ratio, are not defined under
International Financial Reporting Standards (IFRS) and are therefore termed
alternative performance measures (APMs).
APMs should be read together with the Group’s consolidated income statement,
consolidated statement of financial position and consolidated statement of cash flows,
which are presented in the Group financial statements section of this report. The
revenue APM included within adjusted operating profit has been renamed from fee
based revenue to net operating revenue. Further details on APMs are included in
Supplementary information.
See Supplementary information for details on assets under management and
administration (AUMA), net flows and the investment performance calculation. The
calculation of investment performance has been revised to use a closing AUM weighting
basis. 2021 comparatives have been restated. Net flows in the Highlights page excludes
liquidity flows as they are volatile and lower margin. It also excludes Lloyds Banking
Group
(
LBG
)
tranche withdrawals relatin
g
to the settlement of arbitration with LBG.
APM
Adjusted operating
profit
IFRS (loss)/profit before
tax
Full year dividend per
share
£263m
(£615m) 14.6p
2021: £323m
2021: £1,115m
2021: 14.6p
Investment performance
(% of AUM above benchmark
over three years)
Net flows
(Excl. liquidity and LBG)
MSCI ESG Rating
65% £10.3bn
outflow
AAA
2021: 78%
2021: £3.2bn outflow
2021: AA
Contents
1. Strategic report
Our business at a glance 2
Chairman’s statement 4
Chief Executive Officer’s review 7
Our business model and strategy 10
Performance overview 14
Our vectors 16
Sustainability 28
Key performance indicators 48
Chief Financial Officer’s overview 50
Risk management 64
Governance
2. Board of Directors 70
3. Corporate governance statement 74
3.1 Audit Committee report 86
3.2 Risk and Capital Committee report 95
3.3 Nomination and Governance
Committee report 99
3.4 Directors’ remuneration report 103
4. Directors’ report 131
5. Statement of Directors’ responsibilities 137
Financial information
6. Independent auditor’s report 140
7. Group financial statements 156
8. Company financial statements 265
9. Supplementary information 279
Other information
10. Glossary 292
11. Shareholder information 296
12. Forward-looking statements 297
13. Contact us IBC
This symbol indicates further information
is available within this document or on our
corporate website.
Download this report from:
www.abrdn.com/annualreport
APM
1abrdn.comAnnual report 2022
STRATEGIC REPORT
At a glance
Resilience
from diversification
Note: Adjusted operating profit in 2022 is £263m, including a loss of £9m from Corporate/strategic which is excluded from the diagram above.
Our clients’ worlds are changing, and so are we
Global investments
UK savings and wealth
p
latforms
Investments
Adviser
Personal
–
Insurance companies
–
Sovereign wealth funds
–
Independent wealth
managers
–
Pension funds
–
Platforms
–
Banks
–
Family offices
–
Financial advisers
–
Discretionary fund
managers
–
Individuals
As industry trends and client behaviours have evolved, so have we.
We have focused on diversifying the earnings profile of our business –
moving away from a reliance on the market-driven revenues of a traditional
asset manager and, through the earnings potential of our Adviser and
Personal vectors, positioning ourselves to leverage opportunities in areas
that are being driven by attractive structural factors.
Investments
Adjusted operating profit
£114m
Adviser Personal
Adjusted
operating profit
£86m
Adjusted
operating profit
£72m
2 abrdn.com Annual report 2022
Our strategy is
to deliver client-led growth
Our four strategic priorities are
Asia Sustainability Alternatives
UK savings
and wealth
Our three businesses are
AUM
£376bn
Cost/income
ratio
89%
AUA
£69bn
Cost/income
ratio
54%
AUMA
£67bn
Cost/income
ratio
64%
Our purpose is
to enable our clients to
be better investors
Investments
Our capabilities in our
Investments business are built
on the strength of our insight
– generated from wide-
ranging research, worldwide
investment expertise and
local market knowledge.
Adviser
Our Adviser business provides
financial planning solutions and
technology for UK financial
advisers, enabling them to
create value for their
businesses and their clients.
Personal
Powered by the UK’s second
largest direct-to-consumer
investment platform, our
Personal business enables
individuals in the UK to plan,
save and invest in the way
that works for them.
3abrdn.comAnnual report 2022
STRATEGIC REPORT
Chairman’s statement
Progressing
against our
strategic
priorities
This period has
provided a stress test
to economies,
financial markets and
indeed to our own
business; the learnings
are invaluable.
Sir Douglas Flint Chair
2022 turned out to be a year like no other in recent
memory, with a series of unexpected events across the
globe.
Most significantly, the Russian invasion of Ukraine
brought scenes of chaos, destruction and human
suffering on a scale not seen in Europe since the Second
World War. Already fragile geopolitical tensions
intensified, in particular between the United States and
China. Energy costs rocketed, impacting all sectors of
the economy and requiring fiscal intervention to
prevent business collapse and unacceptable hardship
for people experiencing exceptionally high bills. Food
supplies also faced disruption contributing to the high
levels of cost inflation.
As inflation re-emerged from its dormancy, Central
Banks increased policy interest rates across most of the
major Western economies to temper inflationary
expectations. Critical economic cross-border
dependencies became apparent, precipitating an
exhaustive global examination of supply chain
resilience. China’s unwinding of its zero-COVID policy at
the end of 2022, while long encouraged in the West,
may in the near term add to global supply chain
uncertainties as its economy, health systems and
population adjust to living with the virus.
4 abrdn.com Annual report 2022
And here in the UK we saw unprecedented political
instability, with three Prime Ministers and four
Chancellors within a four-month period to the end of
October. We have entered 2023 facing strikes across
much of the public sector, threatening both economic
growth and higher inflation.
We adjusted our business model
to meet our clients’ needs
It was against this backdrop that we adjusted our
business model and investment priorities to meet client
and customer needs and to make our own business
more sustainable and resilient for the future.
As we stand back to reflect, we observe this period has
provided a stress test to economies, financial markets
and indeed to our own business; the learnings are
invaluable.
Embedding resilience as our
three-vector model takes
additional shape
Perhaps the most important lessons for us are the need
for resilience in our business model and, as an investor,
the enduring importance of fundamental analysis to
deliver long-term value through our investment
processes.
The unexpected and dramatic events noted above had
understandable adverse impacts both on market levels
at various points in the year and on flows as an
unprecedented level of withdrawals was made from
equity funds across the industry. We were not immune
from these impacts. What was encouraging was that
the impacts were largely seen across public markets in
the Investments vector with real assets and our other
two vectors in Personal and Adviser proving much more
resilient – reinforcing the decisions made to direct more
of our capital towards these businesses.
We made further progress against our priorities in 2022.
The development of the three-vector model introduced
in 2021 took additional shape during the year, most
markedly through completion of the acquisition of
interactive investor (ii). On top of this, the refocusing of
the Investments vector to improve productivity and play
to competitive advantage moved from the planning
phase to execution with much more to come in 2023.
Some examples include fund rationalisation, where we
are on track to consolidate or close some 80 funds this
year, having consolidated or closed 58 in 2022.
Additionally, we are focusing our real assets business on
areas such as the living sector (including residential and
student), where we are one of Europe’s largest
residential fund managers, and on industrial and
logistics real estate where our subsidiary Tritax has
grown assets under management by over 40% post our
acquisition. Activity to support repositioning has also
included moving to distribution partnership models in
Taiwan and Australia.
This report elaborates on the progress made in the
Investments vector on pages 16-19.
Financial performance reflects
expanded Personal and Adviser
contributions
Adjusted operating profit at £263m was 19% lower than
that achieved in the prior year (2021: £323m); the
decline was concentrated in the Investments vector
primarily for the reasons highlighted previously and
reflects the further work required to refocus the
Investments business. ii contributed £67m in its first
seven months of our ownership, ahead of our business
case modelling on acquisition, benefiting from the rise in
interest rates on uninvested cash balances. Together
our Personal and Adviser businesses contributed 60% of
adjusted operating profit in the year, a contribution that
is expected to grow taking into account the full year
contribution from ii from now on. Our IFRS pre-tax loss
amounted to £615m (2021: profit £1,115m) which
included the impact of impairments of intangible assets
mainly in the Investments business and lower share
prices for our significant listed investments.
Stephen and Stephanie provide greater insights into
performance across our vectors in their reports.
Continuing strong capital
management discipline
Capital management discipline was strong during the
year and remains a core philosophy of the company.
We augmented capital resources outside of operating
activity through further disposals of non-core stakes
realising £0.8bn; we completed share buybacks
amounting to £0.3bn and we invested c£1.5bn in the
acquisition of ii. We declared an interim dividend of 7.3p
per share which was paid on 27 September 2022 and
the Board is recommending a final dividend also of 7.3p
per share to be paid on 16 May 2023, subject to
shareholder approval at the AGM in May. Our
regulatory capital position remains strong. Stephanie
covers all of this in more detail in her report.
Board matters
As foreshadowed in my statement last year Catherine
Bradley, Mike O’Brien and Pam Kaur joined the Board
during the course of 2022. They have made significant
contributions to our discussions and we are delighted
with how well they have integrated into the rhythm of
our Board meetings which happily are now primarily in
person again.
Cecilia Reyes advised us in September that she would
not seek a second term when her first term concluded
at the end of that month. Cecilia brought great insight
and experience to the Board, Risk and Capital, and
Remuneration Committees. We wish her well in her
future endeavours.
5abrdn.comAnnual report 2022
STRATEGIC REPORT
Chairman’s statement continued
Additionally, Brian McBride has advised that he will not
seek re-election at our Annual General Meeting on 10
May 2023 and will stand down from that date as a Non-
Executive Director and as a member of the
Remuneration Committee. On behalf of the Board and
all my colleagues, I would like to thank Brian for his
significant contribution to abrdn. He served on the
Board, several subsidiary boards and the Remuneration
Committee. We will all miss Brian’s insights and
guidance. His direct experience of private market
investments and consumer-facing businesses has
brought significant value to our Board and Committee
discussions. We wish him all the best as he pursues his
many other interests.
Finally, I am sure shareholders will wish to join with the
Board and our colleagues in congratulating our former
CEO, Sir Keith Skeoch on his well-deserved knighthood
in the recent New Year Honours.
Looking forward to a more
sustainable world
Notwithstanding the severity and combined impact of
the events noted in my opening paragraphs, they
cannot compare to the existential threat that continues
to grow relatively unabated from failure to make
progress on constraining global warming to the agreed
target of 1.5°C.
COP27 held last year in Sharm el-Sheikh largely failed to
expand commitments made a year earlier, in our native
Scotland, to phase out fossil fuels. The one major step
forward was the agreement of a deal that has been
sought for over 30 years to launch a fund for ‘loss and
damage’ to support nations most exposed to the
consequences of climate change, but details and
financial funding remain to be agreed.
Already we can observe much greater incidence of
extreme weather events which are having devastating
effects on the impacted economies and are
contributing to the risk of a steady but dramatically
expanded flow of migrants towards more hospitable
climates. Notwithstanding the imperative of reaching
the agreed target, 2022 saw the resurgence of
investment in hydrocarbon capacity to build resilience
of supply-absent inflows from Russia. We also saw
growing pushback by many US states dependent on oil
and gas activity against financial firms restricting future
investment to this sector. These actions make
navigating our commitments to contribute to the net
zero targets more challenging, but we remain resolute.
Against the many current challenges lie the
opportunities – addressing climate change both in
mitigation and solution requires trillions of dollars of
investment annually for the next three decades at least;
reconfiguring supply chains, building security of supply
for energy and food, replacing inefficient infrastructure
for transportation and energy supply and distribution,
funding the science base and applied research needed
to create the solutions not available today, rebuilding
Ukraine – all of these add further billions of dollars of
investment demand in the coming years. The
investment industry is better equipped than ever to
steward capital into productive assets that meet
society’s expectations of it.
Policymakers are at last seeking to remove obstacles
that constrain investment flows from long-term savings
pools into infrastructure and early-stage science-based
investments, both of which require patient capital.
Industry leaders are prioritising capital investment over
share buybacks, particularly in Europe and employment
prospects are strong, particularly for younger workers
as many older workers who were close to retirement
brought that forward during the COVID-19 pandemic.
In addition, many of the mega trends that have caused
concern are forecast to improve in 2023: markets are
discounting moderation in inflation and interest rate
outlooks by the end of the current year; gas prices in
Europe have fallen back to levels pre the invasion of
Ukraine; wage levels are rising in most countries
although below inflation; China’s removal of most
COVID-19 restrictions and the re-opening of its
economy should in due course be positive for global
growth and the alleviation of inflation; and all these
factors should boost business and consumer
confidence unlocking investment funds.
Well-positioned for 2023
As in prior years we enter the new year supported by a
strong capital position, a committed leadership team
and colleagues throughout the organisation energised
by the many opportunities to make our business more
relevant and valuable to our clients and customers as
we support their ambition to become better investors.
Sir Douglas Flint
Chair
6 abrdn.com Annual report 2022
Chief Executive Officer’s review
A stronger
abrdn is
emerging
Stephen Bird outlines the progress made
during 2022, and how our strategy is
positioning our business for growth
Key highlights
– Completed the acquisition of ii in May 2022.
– Delivered £0.8bn of value through divestments.
– Returned £0.6bn of capital to shareholders
through buybacks and dividends.
– Strong progress on fund rationalisation in
Investments, where overall costs were down 2%.
– Retained position as leading adviser platform.
The global economy changed
dramatically during 2022
2022 was one of the hardest investing years in living
memory. Almost all asset classes dropped in value as
the cost of money soared to quell the rising tide of
inflation. Although market conditions have had an
impact on overall group performance, abrdn’s more
diversified model has proved resilient.
The world in which we and our clients are operating
today is radically different from the environment of the
past decade. The changing macro environment is
resulting in the acceleration of key investment trends,
notably the rise of Asia, a move to more sustainable
offerings and, at an asset class level, the growth of
alternatives and increasing client interest in fixed
income.
We are also actively assessing the impact of these new
market dynamics on pension funds and insurers, to
ensure that we provide solutions to meet their complex
needs. Each of these trends very much plays to our
existing strengths, and we are well positioned to help
our clients navigate this new investing world.
Building a stronger business model
Against this challenging backdrop, the company
continued to progress as it completed the second year
of its three-year strategy. We have transformed and
built upon our asset management heritage and abrdn is
now positioned for growth across its three businesses:
Investments, Adviser and Personal.
The shape of the group is now settled following the 2022
acquisition of ii. This significantly expands our reach into
the higher growth UK savings and wealth platform
market, which is forecast to grow at a realistic rate of
11% by 2027. Leveraging the subscription-based model
of ii, and the wider structural trends in the savings and
wealth market, we benefit from income streams less
exposed to market volatility. Looking ahead, we are set
to exploit the synergies our new model offers.
2022 performance shows our
growing resilience
The group’s adjusted operating profit of £263m is 19%
lower than in 2021. In line with the sector, the
Investments vector faced headwinds in the market.
Despite the progress made on its transformation
journey, adjusted operating profit fell by £139m,
principally due to a decline in revenue. Our focus on
simplifying and streamlining the Investments business
reduced its overall costs by 2%, although we know we
have more to do to drive this down further.
The adjusted operating profit for Adviser and Personal
combined increased by £76m including a £67m
contribution from seven months of ii. With the
Investments vector impacted by market conditions,
these businesses contributed 76% of adjusted operating
7abrdn.comAnnual report 2022
STRATEGIC REPORT
Chief Executive Officer’s review continued
profit in H2 2022, clearly demonstrating the benefits of
the new abrdn model.
Overall, we are reporting an IFRS loss before tax of
£615m reflecting the reduction of £187m in the value of
the listed stakes held on our balance sheet, and
impairments of £369m largely due to a fall in market
levels, 2022 performance and lower projected
revenues. However, with the strong discipline applied to
our capital management, I’m pleased to report that our
dividend for 2022 remains unchanged at 14.6p per
share. Stephanie talks more about our performance in
the Chief Financial Officer’s overview.
Scaling-up our UK savings and
wealth businesses
The acquisition of ii in 2022 delivered a substantial
scaling-up of our presence in the UK savings and wealth
market. This direct-to-consumer capability now sits
alongside our established Adviser business, which I’m
pleased to report remains the number one adviser
platform in the UK by AUA, with 50% of the UK’s advice
businesses using our platforms. Customer satisfaction
as at end 2022 was 95%. The recent delivery of
technology enhancements to our platforms will further
support advisers to unlock capacity and grow their
client bases.
In the seven months since joining abrdn, ii delivered
£114m in net operating revenue and £67m in adjusted
operating profit, at a cost/income ratio of 41%. Based
on the seven months profits, the £1.49bn purchase price
represents a multiple of 16 times annualised post-tax
adjusted earnings.
Reductions in gross and net flows in Personal Wealth this
year include the impact of market uncertainty which
has resulted in lower and more muted activity by
individual investors. Looking ahead, we see substantial
opportunities to evolve the newly combined Personal
vector to deliver an end-to-end customer proposition,
that stretches from simple online transactions to more
complex financial advice.
At a societal level, individuals are having to take more
responsibility for building and managing their own
savings, investments and retirements, while at the same
time becoming increasingly accustomed to using
direct-to-consumer platforms and digital tools for
financial transactions. The democratisation of financial
services, supported by technology, is driving structural
change in the investment market and we are now well
positioned to serve this growing opportunity.
Refocusing Investments
After previously competing across a very broad
waterfront, the Investments business is becoming much
more focused on the areas in which we have both
strength and scale.
We have a long heritage in public markets, including
through our capabilities in Asia and emerging markets
and our strong fixed income franchise. Although 2022
has been a challenging year, particularly for equities, we
are well placed to benefit from evolving conditions in
China and in the bond markets. Our already strong
position in alternatives is growing. Here we manage
around £87bn in assets in areas such as real estate,
infrastructure, logistics and private credit. A highlight has
been the performance of Tritax which saw c25%
growth in average AUM last year.
By focusing on these areas of strength, all underpinned
by our sustainability credentials, we believe we are in a
better position to deliver products that are more closely
aligned with current and future client demand.
In the Insurance sector, the changing approach to asset
strategies represents a headwind for the margin of this
business activity. We expect continued changes from
certain active equity and fixed income strategies to
passive quantitative strategies which, together with
related pricing changes, is expected to lead to further
margin contraction for our Insurance business in future
periods. Stephanie discusses this in more detail on page
51.
Disciplined management and
deployment of capital
Our strong capital position provides resilience in
uncertain times and enables targeted investment to
accelerate the growth of the group. As at 31 December
2022, our surplus regulatory capital was £0.7bn.
In 2022, we generated £1.1bn of capital through organic
cash generation and efficient stake sales, investing
£1.4bn in the acquisition of ii, and returning £0.6bn to
shareholders in buybacks and dividends. Over the near
term, as we continue to build capital through a focus on
profitability and ongoing monetisation of listed stakes,
we continue to expect to invest in inorganic
opportunities where we see capabilities we need that
offer compelling value. We are committed to returning
a significant proportion of proceeds from further stake
sales through share buybacks, and reconfirm our stated
dividend policy of 14.6p per annum until at least 1.5x
covered by adjusted capital generation from when it
can grow. We will continue to take a disciplined
approach to capital allocation as we drive sustainable
growth, relevance and scale for our business, in a way
that also generates value for our shareholders.
Progress on climate
We have a critical role to play as stewards of our clients’
capital, and the relationships we have with investee
companies enable us to drive positive change through
engagement.
We are targeting a 50% reduction in the carbon
intensity of our portfolios by 2030 versus a 2019
baseline. We are on track with a 27% reduction across
in-scope public market portfolios as at 31 December
2022 and a 31% reduction for in-scope real estate as at
31 December 2021. Assets in scope for our target
represent 30% of our total AUM. This is driven by data
availability, maturity of methodologies and control over
8 abrdn.com Annual report 2022
decision making (more on page 38). We recognise that
methodologies may continue to evolve over time and
we will review our approach as appropriate. We have
also been developing our net zero solutions, including an
Active Climate Transition proposition in equities and
fixed income. In compliance with level one of the EU’s
Sustainable Finance Disclosures Regulation (SFDR), we
have also been converting our range of SICAV funds to
comply with SFDR Article 8 and 9 – reflecting the
importance of ESG considerations in the investment
opportunities we seek. In 2022 we converted 27 of our
funds to Article 8 and 9. In Asia, one of our key growth
markets, we launched our MyFolio Sustainable Index
range of funds during 2022, and our Sustainability
Institute is helping us hone our expertise to deliver for
our clients.
We know that leading by example starts with our own
operations. We have a corporate target to be net zero
in our operations by 2040, and an ambitious interim
target to achieve a 50% reduction in operational
emissions by 2025, against our 2018 baseline. Colleague
engagement remains critical to delivering on this.
While a significant amount of work remains to be done, I
am proud of the progress we have made to date. We
will continue to drive towards our commitments with a
focus on transparency – through reporting and data
disclosure – and by engaging with our clients, investee
companies and wider stakeholders, with the aim of
achieving a cleaner, greener future together.
Building a culture that supports
colleagues and delivers for clients
Our culture and how it feels to work here are
fundamental to our success. We want every one of our
colleagues on board – believing in our purpose and
focusing on our strategy and their role in delivering
for clients.
Throughout 2022 our leaders worked with colleagues
across the globe to create a new set of commitments
and values that resonate with their collective beliefs,
identifying these as Client First, Ambitious, Empowered
and Transparent. We’re creating a culture that gives
talent the chance to thrive, and that empowers
colleagues to take ownership of client outcomes. A
culture of constant improvement is critical for success.
We ran our most recent all-colleague survey in January
2023 where it was pleasing to see a positive response
from colleagues around areas like our people leaders
and our strategy. Amid highly challenging market
conditions and ongoing change within the business,
employee engagement held steady, and we will
continue our focus on driving progress in this area. For
more information see pages 41 and 42.
It’s critical that diverse perspectives have an active
voice in decision-making processes. I’m pleased that
we’ve reduced our gender pay gap for the fifth year in a
row, and that we have more women on our Board, in
senior leadership and in investment decision-making
roles. But there is still much more to do. Our industry and
our wider talent pipeline need to be more
representative of the diverse society we live in, and
we’re focused on facing up to this.
In a very challenging year for the sector, in which we
have continued to go through significant change as a
business, the commitment and professionalism shown
by everyone across abrdn has been truly inspiring.
Those qualities are what give me so much confidence
about what lies ahead. On behalf of the senior
leadership and my fellow Board members, I’d like to
place on record our sincere thanks.
Focusing on the future
Although the external market environment remains
challenging, we have the right strategy, and we have
the team and the capital resources to execute it well.
Diversification of revenue streams is putting the group
on a sustainable growth trajectory.
In the Investments vector, there is further to go. This was
always the longest-cycle transformation given the
structural challenges and the nature of change in active
asset management. We have taken the hard decisions
and built the foundations for future growth. We’re
simplifying our product range and reducing cost and
complexity so that we are focused on delivering higher
margin products with the right performance. This work
should deliver net cost savings of around £75m in the
Investments vector in 2023.
Stephen Bird
Chief Executive Officer
9abrdn.comAnnual report 2022
STRATEGIC REPORT
Our business model
10 abrdn.com Annual report 2022
Read more about how we have engaged with our
stakeholders on pages 44 and 45.
11abrdn.comAnnual report 2022
STRATEGIC REPORT
Our strategy
Diversified client-led
strategy for growth
As we diversify our business, our focus on four strategic priorities enables
us to meet the changing needs of clients across a range of markets. They
are also fundamental to the continued transformation and resilience of
our business.
1. Asia
Asia remains a key market for our Investments business
and we are well positioned to drive growth. In 2022 we
celebrated the 30th year of our Investments business in
Asia Pacific and we use this expertise to support clients
in navigating this complex but vibrant market. Asia also
holds strong opportunities as we aim to be a leader of
sustainable investment solutions. This is supported by
our strong Asia-specific research and insight
capabilities.
2. Sustainability
Many of our clients seek more from their investments
than simply financial returns. We have created a
specific suite of sustainability-focused solutions to meet
client needs. We also believe that the consideration of
ESG factors is essential to more constructive
engagement and better-informed investment decisions
to help our clients achieve their financial goals. Insight
through tools such as climate scenario analysis helps
our clients to better identify investment risks and
opportunities.
2022 progress
–
Refreshed the leadership of our Client Group in Asia
Pacific, with new heads of Wholesale, Institutional,
Marketing and Client Servicing.
–
Focused our regional footprint by exiting Taiwan and
Australia and introducing distribution partnership
models.
–
Improved the performance of our flagship funds –
including our Asia-ex Japan Equity funds, which have
outperformed their benchmarks over three years;
and our China A Sustainable Equity fund, which is top
quartile over one, three and five years for funds in its
sector.
–
Launched our MyFolio Sustainable Index range in
support of clients’ ESG goals.
–
Converted 27 funds within our SICAV range to meet
the requirements for Article 8 and 9 funds under the
Sustainable Finance Disclosure Regulation (SFDR).
–
Emerging Markets Sustainable Development
Corporate Bond fund passed through the $100m
mark in its first year.
–
Initiated a two-year engagement programme with
the highest-financed emitters in our equity holdings,
identifying clear milestones.
12 abrdn.com12 abrdn.com Annual report 2022
3. Alternatives
The growing trends for urbanisation, digitalisation and
decarbonisation create significant investment
opportunities in real assets. Our Alternatives business
includes our capabilities in real assets, which comprises
real estate, infrastructure and commodities. Our
Alternatives business also offers clients access to major
areas of European private credit, as well as compelling
opportunities in the hedge fund sector.
4. UK savings and wealth
As financial responsibility continues to move more
towards individuals, we have successfully repositioned
our business towards an increasingly attractive and
growing UK savings and wealth market, as well as
focusing on creating more capacity for advisers to
serve more clients and reduce the savings and advice
gap. We are now operating across the full client
spectrum to help individuals in the UK plan, save and
invest for the future.
2022 progress
–
Within real assets, our logistics and industrials AUM
has risen since the acquisition of Tritax to £16.9bn.
–
Launched Inflation-Linked Infrastructure Debt fund in
November 2022.
–
Continued to grow our real estate footprint by
partnering with the John Lewis Partnership to build
1,000 residential rental homes in the UK.
–
Became largest external investor in regulated digital
s
ecurities exchange Archax and joined the governing
council of distributed ledger technology firm Hedera.
–
Acquisition of ii transformed our position in the UK
savings and wealth market, delivered a significant
acceleration of group revenue diversification and
brought over 400,000 new customers to the abrdn
group.
–
ii launched Investor Essentials, a part of its
subscription service designed to appeal to investors
with less to invest and those at the beginning of their
investment lifecycles.
–
Remained the only platform business ‘A’ rated for
financial strength by leading independent
consultancy firm AKG – with financial strength a key
consideration for advisers when selecting their
primary platform.
Asia and emerging markets
Our strategy
is aligned to four
key market
trends
Democratisation
of savings and
investments
Climate change
and energy
transition
Urbanisation and infrastructure
development
1.
2.
3.
4.
13abrdn.com 13abrdn.comAnnual report 2022
STRATEGIC REPORT
Performance overview
1. The revenue measure included within adjusted operating profit has been renamed from fee based revenue to net operating revenue.
Performance impacted in
a difficult macroeconomic
environment
Our full year results largely reflect the challenging global economic environment and
market turbulence that impacted across the industry. These impacts were largely seen in
our Investments vector. The reduction in profitability in the Investments vector is
disappointing, with detailed plans of work to improve the operating margin now
underway. Performance in our Adviser and Personal vectors were more resilient to the
market conditions.
Financial performance summary
Net operating revenue
1
reduced by 4% to £1,456m
(2021: £1,515m) mainly
reflecting adverse market
movements which particularly
impacted high revenue
yielding equities.
IFRS loss before tax
of £615m (2021: profit £1,115m)
was impacted by impairments
of goodwill and intangibles in the
Investments vector of £369m,
restructuring and corporate
transaction expenses of £214m
and losses of £187m from the
change in fair value of significant
listed investments.
Adjusted operating profit
reduced by 19% to £263m
(2021: £323m) due to the
impact of adverse markets on
revenue. The 2022 result
includes seven months profit
contribution from ii of £67m.
Net outflows
(excl. liquidity and LBG
tranche withdrawals)
of £10.3bn (2021: £3.2bn),
representing (2%) of opening
AUMA, largely reflected lower
gross inflows which included the
impact of the uncertain market
environment.
Cost/income ratio
worsened to 82% (2021: 79%) as
a result of the lower revenue.
We acknowledge that costs in
the Investments vector remain
too high. Read about our actions
to reduce costs on page 51.
£1,456m
(£615m)
£263m
(£10.3bn)
82%
14 abrdn.com Annual report 2022
Our capital resources provide strength to allow investment in the business, support the
dividend policy and enable capital returns. Now that the shape of the Group is largely
settled following the acquisition of ii, we expect inorganic actions on a more modest scale.
Capital performance summary
Surplus regulatory
capital
remains strong at £0.7bn
(2021: £1.8bn), with a reduction
reflecting the ii acquisition.
Value of listed stakes
of £1.3bn (2021: £2.3bn)
excluded from the regulatory
capital position. Reduction
includes impact of further stake
sales which generated net
proceeds of £0.8bn
(2021: £0.9bn).
Shareholder return
programme
of £300m completed in
December 2022. We are
committed to returning a
significant proportion of
proceeds as further stake sales
are realised.
Cash and liquid
resources
remained robust at £1.7bn
(2021: £3.1bn) following the
£1.5bn ii acquisition. These
resources are high quality and
mainly invested in cash, money
market instruments and short-
term debt securities.
Full year dividend per
share
was maintained at 14.6p
(2021: 14.6p). Our dividend
policy remains unchanged.
Read more about our financial and capital performance
in the Chief Financial Officer’s overview section of
this report.
£1.3bn
£1.7bn
£300m
£0.7bn
14.6p
15abrdn.comAnnual report 2022
STRATEGIC REPORT
Our vectors – Investments
1. Refers to total assets invested in Africa & Middle East, Asia Pacific and Latin America.
2. Includes Insurance assets.
3. The calculation of investment performance has been revised to use a closing AUM weighting basis. 2021 comparatives have been restated. See
page 55 for more information.
Refocusing our
Investments
business
Our investments solutions are built on the
strength of our insight – generated from
wide-ranging research, worldwide
investment expertise and local market
knowledge. Our teams collaborate across
regions, asset classes and specialisms,
connecting diverse perspectives, working
with clients to identify investment
opportunities that suit their needs.
“We have refocused our
offering to areas where
we provide a
differentiated proposition
to our clients.”
Chris Demetriou
CEO, UK, EMEA and Americas,
Investments
“We aspire to be the go-
to place for global
investors seeking
exposure to sustainable
solutions across Asia,
particularly in China. We
are also focused on
supporting clients across
Asia as they seek to
access global investment
opportunities.”
René Buehlmann
CEO, Asia Pacific, Investments
Highlights Investment
performance
Read more about investment
performance on page 55.
£88bn
Leading active
Asia and emerging
markets
manager
1
£145bn
AUM from
insurance clients
£120bn
AUM from our
fixed income
capabilities
2
1 year
41%
(2021: 66%)
3
3 years
65%
(2021: 78%)
3
5 years
58%
(2021: 77%)
3
16 abrdn.com Annual report 2022
1. Public markets and Alternatives AUM includes Insurance assets.
2. AUM is based on client domicile and revenue is allocated based on legal entity revenue recognition. Revenue is shown for the Investments business
only, see Note 2(c) of the Group financial statements for a breakdown of total group revenue by geographical location.
Our investment capabilities
We have simplified and focused our investment
capabilities on areas where we have both the skill and
the scale to capitalise on the key themes shaping the
market, through either public markets or alternative
asset classes.
Our broad global reach and expertise
2
Public markets
AUM
1
£289bn
Alternatives
AUM
1
£87bn
UK
AUM
£256bn
Revenue
£655m
Americas
AUM
£46bn
Revenue
£137m
EMEA
AUM
£58bn
Revenue
£114m
APAC
AUM
£16bn
Revenue
£164m
17abrdn.comAnnual report 2022
STRATEGIC REPORT
Our vectors – Investments continued
Our capabilities
Public markets
Fixed income
We are one of the UK’s leading global fixed income
managers with £120bn of AUM across credit,
government bond and money market funds in
developed and emerging markets.
The outlook for fixed income is very positive following
the 2022 reset of bond prices and years of operating in
a low-yield environment. abrdn’s deep and proven
credit expertise positions the business well to support
clients as flows into fixed income accelerate against a
backdrop of economic recession and the resulting
pressure on corporate earnings.
Equities
Our equities franchise is organised into two segments.
Our Asia and emerging markets capabilities, reinforced
by robust investment performance in China A and Asia
Pacific strategies, position abrdn well in this segment as
China reopens.
Our Global Developed Markets team generates
investment ideas aligned to three distinct outcomes:
Sustainability, Income and Small Cap. Leveraging a
globally-situated research capability, the team is
becoming more focused on these specific areas of
specialism, where we are able to offer both strength
and scale.
Multi-asset
Our multi-asset team designs solutions to meet the
needs of three client segments.
Through our historic expertise in insurance, we help to
provide clients with solutions to their complex needs,
most notably our strategic partner Phoenix Group.
Our breadth and depth of experience supporting
pensions results in a broad range of solutions, including
our UK Defined Benefit Master Trust, launched in 2022.
There are significant growth opportunities in the UK and
Asian savings and wealth markets. In the UK we
currently manage £16bn of AUM in packaged solutions,
including MyFolio and Diversified Income and Growth,
which, combined with the customer access afforded by
our Adviser and Personal vectors, position us well in this
space. We have also established our WealthTech Hub, a
cross-team group focused on commercialising our
market-leading UK investment technology solutions in
Asia.
Alternatives
Real assets
We are a leader in UK and European real estate with
notable specialisms in residential and logistics. This is
evidenced by our recent partnership with John Lewis
and our management of Tritax Big Box, the UK’s largest
listed investor in quality logistics warehouses and owner
of the UK’s largest logistics-focused land platform.
In 2022, we commenced fundraising for abrdn Core
Infrastructure III, targeting a fund size of €1bn, and by
31 December 2022 the fund had raised over €400m.
The fund aims to invest in opportunities across the
utilities, energy, transportation and digital segments.
Private credit
We offer clients access to the major areas of European
private credit, including commercial real estate debt,
infrastructure debt, corporate private debt and fund
financing among other areas.
Private equity
Our private equity and venture capital team operates
as a bespoke business unit, providing capabilities in
pooled and segregated vehicles to clients seeking
diversified exposure to primary, secondary, venture and
co-investment opportunities.
Hedge funds and ETFs
We use our global knowledge and access to hedge
fund managers to identify and bring together the most
compelling opportunities the sector can offer. We offer
global hedge fund and diversification strategies across
the liquidity spectrum. Using a disciplined and proven
research-driven investment process, we create
portfolios to target a range of investor outcomes and
risk-reward requirements.
For the third straight year, abrdn’s range of commodity
ETFs generated positive inflows, finishing the year with
£6bn of AUM.
Our progress in 2022
Achieving strategic clarity
In 2022, we made further progress on the refocusing of
the Investments vector, away from a broad waterfront
approach towards our goal of a simpler business that is
concentrated on those areas where we have strength
and scale. To achieve this, we have adopted a strategy
designed to focus on our core competencies, across the
two distinct public markets and alternatives groups.
Our Public markets business generated revenues of
£746m in 2022. We have three clear strategic objectives
with respect to the Public markets business:
– Narrow our focus to our core investments
competencies.
– Improve investment performance to underpin a
return to growth, reinforced by our recent
appointment of Peter Branner as Chief Investment
Officer, joining in Q2 2023.
18 abrdn.com Annual report 202218
– Increase operational efficiency through rationalising
funds, improving systems and closing non-core
capabilities and markets.
Demonstrating our continued commitment and
confidence in the closed-end fund space, in December
2022 we announced that we were set to acquire and
reorganise four funds from Macquarie Group
subsidiary, Delaware Investments. This would see
approximately $750m merge into three existing abrdn
closed-end funds, with minimal additional operating
cost and estimated revenues of approximately $10m.
Our Alternatives business generated revenues of
£324m in 2022. Benefiting from market trends such as
growth in urbanisation and infrastructure development,
this business has strong track records across the
significant majority of its AUM and has delivered resilient
flows and revenue growth. Our strategic focus for this
business is to accelerate asset raising.
Simplifying our business
In 2022 we undertook a review of our fund and product
suite to ensure we continue to offer what our clients
want. Having reviewed c550 funds, we concluded that
only 20%, covering AUM of around £7bn, were sub-
scale, inefficient or no longer aligned with our core
strengths. We have taken steps to merge funds where
viable to reduce duplication and simplify our offering.
Globally we merged or closed 58 funds in 2022,
primarily within equities, fixed income and multi-asset. In
2023, we intend to merge or close a further 80 funds. As
funds are merged, we minimise decline in revenue
associated with these funds while improving our
cost/income ratio and continuing to deliver client
outcomes.
As part of our commitment to exiting non-core
businesses that no longer align to our overall strategy,
we have taken steps to simplify our footprint in Asia
Pacific. In July 2022, we announced the closure of our
office in Taiwan, appointing Manulife Investment
Management (Taiwan) as abrdn's Master Agent. We
have also announced the closure of our Australia office
and our intention to establish a strategic partnership
with SG Hiscock. These partnerships help us to
reconfigure global operations around our growth
strategy and focus on our core markets.
Consolidating our middle office services onto a single
arrangement is an important step towards increasing
capacity and delivery of client service. We completed
this consolidation in October 2022, which included
migrating onto a single provider for performance and
client reporting.
Further simplification steps are planned for 2023. A
significant process execution event occurred during
2022 which resulted in a loss and has been thoroughly
investigated. See Note 34 of the Group financial
statements for further details.
Evolving our client proposition
During the year we accelerated fund development and
launches in areas of growth, with net flows into products
launched in 2022 exceeding £800m. We launched six
new products in 2022, the same number as we did in
2021, including:
– Commercial Real Estate Debt fund II, with net flows of
£205m.
– Eclipse HFRI 500 fund, with net flows of £115m.
– Global Risk Mitigation (GRM) fund, with net flows of
£178m.
We are continuing to develop new funds to support
clients’ sustainability goals including the MyFolio
Sustainable Index range launched in 2022. In
compliance with level one of the EU’s Sustainable
Finance Disclosures Regulation (SFDR), we have also
been converting our range of SICAV funds to comply
with SFDR Article 8 and 9, which reflects the importance
of ESG considerations in the investment opportunities
we seek. In 2022 we converted 27 of our funds to Article
8 and 9.
The sustainable index strategies which we manage and
developed in partnership with our client Phoenix are
used for over 90% of the assets within Standard Life’s
new default workplace pension solution, raising over
£10bn in assets in the year.
Read more about our strategic focus on sustainability on
pages 28 to 39.
We are strengthening our position in the development
of the digital assets ecosystem, establishing
partnerships to help our clients benefit from the digital
assets value chain. In becoming the largest external
investor in Archax, the UK’s first regulated exchange and
trading platform designed to bring digital assets to
capital markets, we are building important capabilities
and knowledge. We are also the first asset manager to
join the governing council of Hedera, which is at the
forefront of enabling the migration of traditional
investments onto distributed ledger technology.
Our strategic focus
for 2023
– Complete the repositioning of our Public markets
business to focus on core strengths.
– Improve investment performance, with clear
structure and leadership.
– Accelerate growth in Alternatives franchise
through dedicated and accountable leadership
and resources.
– Continued focus on growth in Asia – on enabling
our clients in Asia through our global offerings,
and on growth of clients globally who invest into
our capabilities managed in Asia.
– Delivery of net cost savings of c£75m are
targeted in 2023 – read more on page 51.
19abrdn.comAnnual report 2022
STRATEGIC REPORT
19
Our vectors – Adviser
Growing from a market-
leading position
Our Adviser business provides financial planning solutions and technology for UK financial
advisers enabling them to create value for their businesses and their clients. We offer a
combination of tools and services personalised to their needs, including access to the full
suite of investment solutions that abrdn offers as well as a wide range of open
architecture investment options.
“We want to enable
advisers to grow their
businesses in line with
their ambitions, by
helping them to unlock
capacity to serve more
clients. We are building
solutions that we believe
make us the obvious
choice for adviser
businesses to partner
with because we aim to
make it as easy as
possible for them to
focus on what’s most
important, their clients.”
Noel Butwell
CEO, Adviser
50%
of UK advice
businesses use our
platforms
430,000
customers
2,600
Adviser firms
AKG A
rating
for financial strength,
the only platform
business with this
rating
No. 1 for
AUA
13% market share
97%
client retention rate
for our primary
partners
Platinum rated
by AdviserAsset
and
Gold rated
by Defaqto
Best platform
provider over
£40bn,
Schroders UK
Platform Awards
2022 – the ninth year
running
20 abrdn.com Annual report 2022
1. Source: Fundscape Q3/Q4 2022 releases.
A compelling market opportunity
We are well-placed to drive growth in an
attractive market for UK adviser platforms.
Performance overview
Performance and profit delivered in 2022
reflect our resilience in a challenging
environment.
AUA
£69bn
Adjusted operating profit
£86m
’22
’21
’20
£86m
£74m
£48m
’22
’21
’20
£69bn
£76bn
£67bn
abrdn
Adviser AUA
£69bn
Adviser platform
market AUA¹
£542bn
'Optimistic' Adviser
platform market
growth by 2027
1
+16%
'Realistic' Adviser
platform market
growth by 2027
1
+11%
21abrdn.comAnnual report 2022
STRATEGIC REPORT
Our vectors – Adviser continued
A compelling market opportunity
The need for individuals to take on more personal
financial responsibility continues to drive the demand
for quality financial advice. The current
macroeconomic environment has created uncertainty
and, for customers, the need for advice in such
environments increases in order to navigate volatility.
However, as the demand for advice continues to far
outpace supply, the savings and advice gap in the UK
could run well beyond 20 million people. Advisers also
remain capacity- constrained, the key constraint for
which is fragmented technology for servicing clients
through the whole cycle of onboarding, reporting and
review.
Our technology solves that pain point for advisers. We
put abrdn’s strength to work for advisers, enabling them
to look after their clients’ data securely, while providing
insight to make better decisions in areas ranging from
regulation to taxation. We deliver client-led outcomes
by building technology and investment solutions around
advisers’ and their clients’ needs, delivering a
personalised service to suit every type of business and
client.
Our adviser platform is ranked number 1 in the UK with a
leading share of AUA on our platform at £69bn. We
partner with over 2,600 UK adviser firms with around
430,000 customers in total. This market for financial
advice is compelling and we can see strong growth
patterns. Over the last 10 years, the assets in the adviser
platform market have grown at a 19% CAGR and the
realistic forecasts from Fundscape for the period
through to 2027 indicate growth at an 11% CAGR in
spite of the current market conditions.
Growing from a market-leading
position
Our leading position by AUA in the market places us
right at the centre of this opportunity. Our focus is on
expanding our service to our existing clients by creating
capacity for them to further grow their business and to
attract new clients of their own.
We are building solutions that we believe make us the
best partner for advisory businesses. Our service
proposition makes it as easy as possible for them to
focus on their clients, reducing the administrative work
and enabling them to focus on delivering high quality
advice. We offer fast, self-serve solutions, along with live
support that enables advisers to simplify the way they
operate, increase capacity and therefore allow more
time to focus on meeting their clients’ needs.
We have focused our proposition on the top five things
that advisory businesses tell us they value when they
are selecting their primary platform. They want:
– good online functionality
– financial strength and stability
– lower overall cost
– efficient administration
– a full range of wrappers.
Today we have a strong position in this space, with tools
and technology underpinning our operating model. Our
Adviser Experience Programme is driving us further
forward, with huge strides being made in these key
areas. Despite some challenges around timescales, the
recent delivery of technology enhancements to our
platforms will further support advisers to unlock
capacity and grow their client bases:
– Our online functionality continually evolves, from the
basics of the look and feel moving to modern
processes, to the rewiring of journeys to remove
unnecessary steps or make them more intuitive.
– As we grow the functionality we further improve the
value for money.
– We have invested in our service technology, with
clients able to benefit from new contact centre tools,
rich management information and tracking, and we
are pushing this further with fully online processes
and transaction tracking.
– We have added the Junior ISA, with more to come
including the Junior SIPP and access to third-party
products.
– We are the only platform A-rated for financial
strength by AKG, an independent organisation
offering assessments, information and support to the
financial services industry.
– We are targeting world-class customer satisfaction
scores, building on our end of 2022 Net Promoter
Score of 57 and Customer Satisfaction Score of 95%.
According to research from Investment Trends,
advisers want to increase client numbers by an average
of 16%. Their challenge is to unlock capacity constraints
in their businesses. This is the opportunity for us as our
technology is cutting edge and solves that pain point for
advisers. The more advisers who use our technology,
the more customers we can serve.
Our progress in 2022
Putting our strength to work for
advisers and their clients
Our Adviser Experience Programme has informed our
investment decisions and we have enhanced our
offering in 2022, which has included the launch of our
Junior ISA and continued work to simplify our processes.
We have invested in delivering a new contact centre
and customer portal, and we committed to delivering in
early 2023 a new adviser interface with increased
personalisation.
1
22 abrdn.com Annual report 2022
We have partnered with industry leaders such as
Salesforce and Amazon to drive cutting edge
technology into client engagement. This technology
measures and improves service in real time. It is
therefore critical to improving the experience for
advisers and their clients and freeing up advisers’
capacity to take on new business. We answer more
than 1,000 phone calls a day, with an average speed to
answer of nine seconds on our Wrap platform, so
efficiency is critical to client service.
We launched the Junior ISA in response to increasing
demand from advisers for more family wealth planning
solutions that can be managed alongside their existing
client investments. The Junior ISA is the first step we are
taking to create a family office environment on the
platform and we will be developing a Junior SIPP as part
of our overall solution.
We continued to support advisers with understanding
and meeting their regulatory requirements. The
Financial Conduct Authority’s new Consumer Duty rules,
for example, represent a significant piece of regulation
for raising standards of consumer care across the
financial services industry. We created practical
guidance and materials to help advisers ensure that
they were ready to take the immediate steps required
in 2022, as well as to understand the longer-term
impacts.
Performance and efficiency
in a challenging environment
We are building on our Adviser Experience Programme
to drive growth in gross and net flows, through a focus
on three key pillars:
– Expanding wrappers per customer amongst our
existing base.
– Increasing the number of primary firms we partner
with (46% of AUA at the end of 2022 was from our
primary partners).
– Growing our adviser base through advocacy
and experience.
Flows have been impacted industry-wide in 2022 by
economic pressures including rising inflation and higher
interest rates. Despite this, the core drivers of medium-
term flows remain and our Adviser business saw
another year of net inflows at £1.6bn (2021: £3.9bn).
Despite challenging market conditions and lower assets
under administration, the Adviser vector’s strong and
higher-margin business model has also delivered
another year of revenue and profit growth. Net
operating revenue increased by 4% benefiting from
rising interest rates and a broadly stable platform
charge. Coupled with continued cost management, this
has delivered an adjusted operating profit of £86m, up
16% compared to 2021.
Our long-term strategic relationship with FNZ to handle
custody and administration of our platform leverages
the scale of FNZ to secure an advantageous low-cost
model.
Measuring our progress
Industry recognition can make an important difference
when advisers choose who to partner with. As well as
our ‘A’ rating by AKG for financial strength, which is one
of the stated top reasons for advisers selecting their
primary platform, we are ‘platinum’ rated by
AdviserAsset and ‘gold’ rated by Defaqto. We also won
the Schroders award for the best large platform for the
ninth year running, which importantly is voted on by
advisers throughout the UK.
We have continued to see an increase in the number of
adviser firms using us as their primary partner. In 2022
there was a 1 percentage-point increase in primary
users of abrdn Wrap, up to 11% from 10% in 2021. When
advisers use our solutions as their primary platform, we
see new business increase. Our research tells us that
more than 70% of new business from an adviser firm
goes on the primary platform, as our processes and
capabilities become more embedded in their own
business. As a result, client retention also improves.
Our strategic focus for
2023
– Continuing to focus on delivering new platform
functionality through phase 2 of our Adviser
Experience Programme, to maintain our market-
leading position and deliver increased capacity
for our clients.
– Launch of our new fully online abrdn SIPP and
Junior SIPP products, creating new revenue
streams with no additional cost to clients.
– Establishing new growth opportunities
associated with model portfolios for advisers
across the UK, more firmly integrated into our
platform solutions.
– Increase in the number of products held by
existing customers through the launch of a new
SIPP, Junior SIPP and increased consolidation
within existing wrappers.
– Extending our primary partnership penetration
by leveraging our total offering to all sizes of IFAs
in the UK.
– Preparing our clients for the successful and safe
launch of the Consumer Duty later in 2023.
2
3
23abrdn.comAnnual report 2022
STRATEGIC REPORT
Our vectors – Personal
A leading direct-to-
consumer business
Powered by the UK’s second largest direct-to-consumer investment platform, our
Personal vector enables individuals in the UK to plan, save and invest in the way that works
for them. The acquisition of interactive investor (ii) has transformed abrdn, positioning us
for growth as one of the UK’s leading personal wealth businesses in a market with strong
long-term structural dynamics.
“The continuous evolution
of our proposition will help
us to deliver better
customer outcomes. With
ii joining the abrdn family,
we are positioning the
vector to serve customers
at all life stages,
harnessing abrdn’s
broader capabilities to
develop and grow what is
already one of the UK’s
leading direct-to-
consumer wealth
platforms.”
Richard Wilson
CEO, Personal
AUMA
£67bn
Adjusted operating profit
£72m
interactive
investor
Personal
Wealth
402,000
Total customers
27,000
Clients
1
29,000
New customers
added in 2022
£440m
Financial planning
gross flows to
abrdn Wrap
£435
Revenue per
customer
Top 10
UK financial
planning platform
for gross flows
(Finscape, 2022)
£134,000
Industry-leading
AUA per
customer
17.3k
Daily average
retail trading
volumes
’22
’21
’20
Personal Wealth
ii
(
7 months
)
£8m
(£5m)
Total £72m£5m £67m
’22
’21
’20
£13bn Total £67bn
£14bn
£54bn
£13bn
24 abrdn.com Annual report 2022
1. Includes double count of clients of both the discretionary and financial planning businesses.
2. Adjusted operating profit for FY 2021 has been presented to exclude losses relating to Share Limited (‘Share’) to provide a more meaningful
comparison to the go-forward position. The FY 2021 adjusted operating profit of £45m excludes losses relating to Share of £9m while part of this
business was wound down. Including losses from Share, the FY 2021 adjusted operating profit was £36m. The FY 2022 impact was £nil. See Section
9.1.4 of Supplementary information for further details.
3. Net operating revenue includes trading transactions, subscription fees and treasury income. See Section 9.1.4 of Supplementary information.
4. Cash dividends which are retained on the ii platform are included in net flows for the ii business. See the Glossary for further details.
Focus on ii
We completed our acquisition of ii, the UK’s second
largest investment platform for private investors and
the number one subscription-based provider, in May
2022. The acquisition has transformed our position in
the UK savings and wealth market. ii’s platform enables
retail investors to access a broad range of investment
and savings products and its simple subscription-based
pricing model helps to set ii apart. ii brings additional
growth opportunities and diversification to abrdn’s
revenue streams and its subscription-based model and
efficient operating model provide a high degree of
financial resilience.
As well as helping us to build a leading position in the UK
direct investing market, ii complements and adds
strength to our existing offering for individual investors
where our financial planning capabilities support clients
with larger, more complex financial needs.
Challenging market conditions in 2022 have impacted
short-term investor confidence and customer
acquisition has decreased from the highs seen in 2021
as a result. However, ii’s leading proposition and
platform have led to ii continuing to increase its market
share of AUA compared to prior year (Source: Compeer
Q3 2022 report) and deliver strong growth in both
revenue and operating profit.
Financial performance
Results for ii are included within abrdn’s full year 2022
results only for the seven-month period to 31 December
2022 following the completion of the acquisition.
For comparative purposes, ii’s results for the 12 months
to 31 December 2021 and 2022 are set out below:
FY 2022
12 months
£m
FY 2021
12 months
£m
excl Share
2
Change
Net operating revenue
3
£176m £128m 38%
Adjusted operating
expenses
(£82m) (£83m) (1%)
Adjusted operating profit £94m £45m 109%
Cost/income ratio 47% 65% (18ppts)
Key operational metrics:
FY 2022
12 months
FY 2021
12 months
AUA £54bn £59bn
Net flows
4
£3.6bn £5.8bn
Total customers at period end 402k 403k
Total customers excluding EQi and
Share Centre migrated customers
300k 292k
New customers 29.2k 47.4k
AUA per customer £134k £145k
Daily average retail trading volumes 17.3k 21.9k
ii performance highlights
(full 12 months)
– ii has performed ahead of our original expectations
and is on track to deliver the planned double-digit
earnings accretion in 2023.
– Revenue was up 38%, with a reduction from lower
trading transactions being more than offset by an
increase in treasury income as interest rates
recovered from the historic lows seen in 2021.
– ii’s operational leverage achieving an efficiency ratio
of 15bps/AUA means this translates into a 109%
increase in adjusted operating profit with
cost/income ratio improving to 47%.
– Total customer numbers were 402,000 at
31 December 2022, compared with 403,000 at
December 2021. Over the year ii added 29.2k new
customers. This was offset by the loss of mainly less
active customers who had been brought onto the
platform through historic customer book acquisitions.
Excluding the tail run-off of the two most recently
acquired books, Share Centre and EQi, net customer
growth for the year was 3%.
– Net flows remain strongly positive at £3.6bn albeit
down from the record levels seen in 2021.
– AUA per customer of £134,000 is industry-leading.
25abrdn.comAnnual report 2022
STRATEGIC REPORT
Our vectors – Personal continued
Transforming our position in the
UK savings and wealth market
More and more people are now investing independently
of the institutions they previously relied on. With
improved direct-to-consumer technology and lower
costs to investment many are now accustomed and
confident to operate self-service for investments and
other financial transactions. Better tools continue to be
developed to help these consumers make informed
investment decisions for themselves and to enable
participation of many others in the market. This
notwithstanding, we see an enduring need for the
reassurance of financial guidance, support and advice,
demand for which, we believe, will continue to grow.
Within our Personal vector, we empower clients to be
better investors at all stages of their financial journey. To
maximise growth synergies, we realigned our existing
Personal Wealth business – discretionary, digital advice
and financial planning – to sit under Richard Wilson’s
leadership when he was appointed CEO of our entire
Personal vector in August 2022. Richard joined the
abrdn group in May 2022 as CEO of ii.
We aim to leverage the deep knowledge within the
Personal vector and its digital operating platform to
transform ii from the UK’s leading subscription-based
self-directed platform into the UK’s leading D2C wealth
platform.
Together, the high-tech, high-touch models of ii and
abrdn offer a range of propositions to enable clients to
become better investors. Richard is evolving the newly
combined Personal vector to deliver an end-to-end
client proposition, from simple online transactions to
more complex financial advice, ensuring its offerings
and scale are appropriate to deliver growth in revenue
and operating profits.
The Group has agreed the sale of abrdn Capital, its
discretionary fund management (DFM) business, to
LGT. The sale is expected to complete in the second
half of 2023, following satisfaction of certain conditions,
including receipt of customary regulatory approvals.
In order to succeed in the longer term in the DFM
market, abrdn’s view is that this part of the business
would need to build much greater scale. With abrdn’s
strategy for its Personal vector focused on integrating
the high-tech, high-touch model of ii with financial
planning, abrdn has concluded that another owner
would be better placed to invest to deliver greater scale
in the DFM business.
abrdn’s Managed Portfolio Service (MPS) business,
which is currently part of the DFM business, is better
aligned to its group strategy and will be carved out and
retained prior to completion of the transaction. abrdn
views MPS as an important growth channel that aligns
well to the way that the UK personal investment market
is developing. The MPS team will be moved to sit within
abrdn’s Adviser vector in order to maximise
opportunities available through that business’
distribution model.
A resilient operating model
benefiting from strong operational
leverage
The current economic environment in the UK remains
challenging for all industry participants. Volatile market
conditions and increasing economic uncertainties have
impacted the rate of new customer acquisition and,
since the first half of 2022, the levels of customers’
trading activity.
ii has diverse sources of income which continue to
record strong overall growth in continually changing
market conditions. This is underpinned by its
subscription-based model which means ii is less
dependent than others on stock market levels. This
model is favoured by customers because customers’
costs do not increase with the value of their investments,
which means more money working for them.
Revenue from subscriptions has continued to grow,
increasing by 17% to £56m for the full 12 months,
reflecting growth in average numbers and quality of
customers. Despite flat year-on-year total customers,
the number of customers holding a SIPP account
increased by 17% to 51.5k.
Although ii’s share of the UK cash market trades
increased by 2 ppts to 25% (Source: Compeer Q3 2022
report), ii’s daily average retail trades reduced to 17.3k
as a result of the reduction in investor confidence,
leading to a drop of 30% in revenue from trading
transactions to £55m. Whilst down from the peak
experienced in 2021, they remained above the levels
seen pre-COVID.
Revenue benefited from interest rates rising significantly
throughout 2022 following the exceptionally low levels in
2021. Treasury income contributed £71m compared
with £9m for 2021. Over the year ii’s average cash
margin was 120bps and the indicative ii average cash
margin for 2023 is 160-170bps. Customer cash
balances at 31 December 2022 were £6.0bn, around
11% of AUA.
ii’s operating model also benefits from strong
operational leverage. This is combined with a focus on
cost effectiveness which is embedded across the
organisation. This means that ii has delivered a net
operating revenue increase of 38%.
Our progress in 2022
In 2022 we made significant progress towards our
objective of becoming the UK’s leading direct-to-
consumer wealth platform. This has been driven by ii,
which is the largest part of our Personal business. Its
growth is underpinned by three drivers: strength of the
platform, compelling pricing and scale of the customer
base.
26 abrdn.com Annual report 2022
Strengthening our platform
ii already has a highly scalable platform powered by
future-fit digital and data infrastructure that will support
substantial further growth. The ii platform was further
strengthened over the past year:
– Expanded its pension offering, launching a low-cost,
standalone Pension Builder SIPP.
– Upgrades delivered to its mobile trading application,
with enhancements to information on transaction
history, cash withdrawals and regular investments.
– Core website improvements implemented in
January 2023.
The strength of the platform has also been recognised
externally:
– Consistently rated ‘Excellent’ on Trustpilot, with more
five-star ratings than the combined total of the rest of
the D2C sector.
– Platform of the Year and Best Low-Cost SIPP at the
Celebration of Investment Awards, as voted by
readers of Investors Chronicle.
– ii’s SIPP is recommended by Which? and gives people
choice and flexibility to support a wide range of direct
pension investors.
– ii’s Stocks and Shares ISA was rated the best low-cost
ISA over £50,000 by Boring Money.
Compelling pricing
ii continues to innovate its subscription-based pricing
bundles. The Friends and Family pricing bundle is
designed to attract younger customers and those with
smaller investment portfolios. It enables up to five
friends and family of existing customers to each join ii
without paying a monthly subscription fee.
In February 2023 ii launched Investor Essentials, an
entry-level addition to its subscription service. Through
this service plan customers can now invest up to
£30,000 for £4.99 a month. They benefit from free
regular investing and competitive trading fees of £5.99
for funds, investment trusts and UK/ US shares, all with
the same choice of investments.
Evolving the customer base
An important focus during 2022 has been on growth
through ii’s existing customer base:
– ii has substantially increased the scale of our Personal
vector, adding over 400,000 customers.
– While the impact of market conditions and
increasing economic uncertainties meant that
customer numbers remained relatively flat during
2022, ii has seen a continuing trend for a reduction in
customer lapse rates – the rate at which customers
choose not to renew their accounts – across all
segments. In 2022, ii added 29.2k new customers. This
was offset by customer lapses. After several years of
acquiring customers through customer book
acquisitions, ii’s customer lapsing rates remained
inflated in 2022 from the natural lapsing and inactivity
of some low value acquired customers. Acquired
customers were migrated from Share Centre and
EQi in 2021 and in 2022 books had lapse rates of 12%,
compared to the wider customer base where lapsing
was 5%.
– ii’s focus on its SIPP continues. ii has 51.5k SIPP
customers, which represents 13% of ii’s customer
base, and there is potential for that to increase
significantly to peer levels which are around 25-30%.
SIPP customer lapse rates are significantly lower than
non-SIPP holding customers.
– The launch of Investor Essentials allows ii to attract a
new customer demographic. This plan is designed to
appeal to investors with less to invest and those at the
beginning of their investment lifecycles. This product
is well positioned to deliver strong customer growth
and we also expect ii to be able to upsell these
customers to its full offering during their investment
journey.
As we move ahead, there is an increasing focus on
diversifying the client base through the connectivity
within the vector and our three-vector model:
– We are increasing the digital content and online
capability for clients through online tools and
resources in addition to the support they receive
from an adviser.
– We are exploring how we connect ii and abrdn
clients so that they can benefit from all of our
offerings. This ranges from simple online transactions,
advice and support with investing, to wealth
management for private clients, including tax, trust
and estate planning.
The need for financial advice is increasing. In November
2022 the FCA outlined plans to create a new regime
aimed at giving ‘mass market’ consumers access to
simplified advice. This presents an opportunity for ii to
explore new customer segments, as the wider financial
services industry looks to find simple solutions that can
break down barriers to advice, increase customer
confidence in accessing investment markets and
thereby, crucially, reduce the advice gap.
Our strategic focus for
2023
– Integrate our Personal vector and ii, and leverage
abrdn capabilities in investments and advice.
– Focus on organic growth with targeted
investment in brand, marketing and product.
– Introduce auto-investing solution.
1
2
3
27abrdn.comAnnual report 2022
STRATEGIC REPORT
Sustainability priorities – 2022 in review
Strategic focus
on sustainability
1. Net Zero Tracker. Energy and Climate Intelligence Unit, Data-Driven EnviroLab, NewClimate Institute, Oxford Net Zero. 2022.
Delivering for our clients, our people, and supporting a credible transition toward
a better world.
While a significant amount of work remains
to be done, I am proud of the progress we
have made to date.
Stephen Bird
Chief Executive Officer
The existential challenges the world is facing are
evolving at an unprecedented rate and continue to
increase in complexity. The pressures on businesses to
take stronger stances and help solve these crises have
also increased. Our role is to enable our clients to
navigate the sustainability impact of their investments,
lead by example in our own operations and by
collaborating with partners and third sector
programmes to drive societal change.
Climate change continued to dominate the
sustainability landscape in 2022, with extreme weather
devastating many parts of the globe. At the same time,
it is estimated that over 90% of global GDP has been
committed to net zero
1
. However, there is increasing
scepticism around the credibility of decarbonisation
actions towards net zero by 2050. COP27 was an
important milestone focused on addressing climate
justice and adaptation but did little to provide the
credible policy incentives needed to limit warming to
1.5°C. However, we saw encouraging progress in
moving action forward to preserve natural capital
through the Global Biodiversity Framework.
2022 was also a year in which the spotlight has been put
on transparency, with some progress being made
towards disclosure standardisation. Expected changes
to mandate clear, comparable disclosures from
companies across jurisdictions and a focus on
greenwashing mean the landscape has, and will
continue to, evolve awareness, and increase
expectations. We are supportive of consistent
mandatory disclosures as we believe they will provide
decision-useful information for investors and drive
positive change from a corporate perspective. That
said, it is acknowledged that international standards are
yet to coalesce and there are uncertainties related to
interoperability between jurisdictions. This will be a
challenge to manage both as a corporate, and as
investors as we assess the relative risks and
opportunities of the companies we invest in on behalf of
our clients.
Evolving our transparency
We continue to evolve our governance frameworks,
most notably in 2022 through increased collaboration
with our finance and audit functions. We are focused on
this in readiness for the emerging global standards for
sustainability disclosure.
In 2022, a new phrase entered the sustainability
vocabulary – ‘greenhushing’, as the antithesis of
‘greenwashing’, is used to label companies lacking
transparency as to their sustainability-related actions,
and intentions. The introduction of greenhushing
highlights the delicate balance between overstating our
actions and being transparent about our activities. To
help manage this, we have increased our efforts to drive
education across our business and evolve our
marketing and communication approval process.
Taking collective action
If 2022 was the year of transparency, 2023 must be a
year of collaborative action. A significant acceleration
of activity – individually, collectively, and globally is
required to address material sustainability topics.
We are focused on addressing our material
sustainability topics and our public targets address the
issues commonly considered material for our business –
as we look to reduce the impact we have on the climate
and support a fairer and more inclusive society.
The evolving sustainability landscape means periodic
assessments of material sustainability topics are more
relevant than ever to ensure we understand the
potential impacts to our business, communities, and the
natural world. Our most recent assessment, completed
in early 2023, reflects our latest understanding and will
support our thinking as we increasingly integrate
sustainability into our business and strategy. We detail
the process, and outcome of our assessment in our
Sustainability and TCFD report on pages 83 to 86. Our
strategic focus on sustainability is a commitment to
invest in our own capabilities, follow our view of best
practice, and enable better investment for our clients.
28 abrdn.com Annual report 2022
1. See the Glossary for definitions of key climate-related terms including net zero.
Environment
Progress and ambition
Our focus
–
Reducing the carbon intensity of our portfolios and absolute emissions from our direct operations.
–
Acting as a positive catalyst for the net zero transition and influencing real-world decarbonisation.
Our targets
–
Reduction of the carbon intensity of assets we invest in by 50% by 2030 from a 2019 benchmark.
In-scope assets for this target represent 30% of our total AUM with Phoenix accounting for 30% of
the total public market assets in-scope as at 31 December 2022. Read more on page 38.
–
We are targeting net zero
1
by 2040 in our direct operations, with an interim target of a 50%
emissions reduction by 2025 versus our 2018 base year. Read more on page 39.
Our progress
–
We set our target for the reduction of the carbon intensity of assets we invest in 2021 and report
our first progress against this target. As at 31 December 2022, in-scope public market portfolios
achieved a carbon intensity reduction of 27% versus a 2019 baseline. As at 31 December 2021,
in-scope real assets achieved a 31% reduction in carbon intensity versus a 2019 baseline.
–
We have reduced our operational emissions by 56% since 2018 (2021: 62%), with emissions from
business travel increasing in 2022 following the easing of travel-related restrictions associated with
the COVID-19 pandemic.
Our Task Force on Climate-related Financial Disclosures (TCFD) summary report is on pages 30 to 39 and our full TCFD
disclosure is included in the Sustainability and TCFD report, available at www.abrdn.com/annualreport
Social
Inclusivity and opportunity
Our focus
–
Increasing diversity, equity, and inclusion at all levels, and in all areas, of our business.
–
Supporting a fairer and more inclusive society and creating opportunities for our communities.
Our targets
–
Board and senior leadership targets of 40% women, 40% men and 20% any gender by 2025.
–
Equal gender representation in our global workforce by 2025 (+/-3% tolerance).
–
One additional board member who identifies as ethnic minority by 2025.
Our progress
–
Board comprised 45% women, 55% men and Senior Leadership comprised 39% women, 61% men
at 31 December 2022.
–
Gender representation of global workforce was 43% women, 57% men at 31 December 2022.
–
We have reduced our UK gender pay gap for the fifth year in a row and are listed as having the
highest percentage of female fund managers of any large firm in Citywire’s Alpha Female Report.
–
52% of graduates joined abrdn from a diversity partnership in 2022 (up from 37% in 2021).
–
We continued to support tomorrow’s generation through our charitable giving. More on this on
page 43 and in our Sustainability and TCFD report at www.abrdn.com/annualreport
You can find out more about our people strategy, including more detail on our targets, on pages 40 to 43.
Governance
Integrity and transparency
Our focus
–
Operating with integrity and transparency at all levels of our business.
–
Continuing to integrate sustainability risks and opportunities into our strategy and decision-making.
Our progress
–
In 2022 we integrated climate-related performance metrics into our executive remuneration
scorecard. The scorecard continues to include people metrics. Read more on pages 103 to 130.
–
We received a AAA MSCI ESG Rating in April 2022 and continue as constituents of the Dow Jones
Sustainability Indices (DJSI) in the 2022 assessment year.
Read about our stakeholder engagement and Section 172 statement on pages 44 to 47.
29abrdn.comAnnual report 2022
STRATEGIC REPORT
Sustainability – Environment
1. Highest-financed emitters refers to the absolute tonnes of CO
2
equivalent that are financed across both equity and credit holdings. The metric
attributes ownership of emissions based on the percentage of enterprise value including cash (EVIC) owned by the investor.
Our commitment to
tackling climate
change
Last year, we outlined our net zero-aligned
ambitions and continue our progress, with a
focus on enabling clients to achieve their
climate goals through real world impact.
To achieve a credible and just net zero transition, we all
need to do more. Globally, 2022 was another year of
rising emissions and limited progress for climate policy
that provides effective incentives to decarbonise at the
pace and scale needed to achieve net zero by 2050.
Our ambition is to be a catalyst for net zero, in support
of Paris Agreement objectives, and we can report
progress against our target to reduce the carbon
intensity of the assets we invest in on behalf of our
clients. We are targeting a 50% reduction in the carbon
intensity of our portfolios by 2030 versus a 2019
benchmark and we are on track with a 27% reduction
across in-scope public market portfolios as at 31
December 2022 and 31% reduction for in-scope real
estate as at 31 December 2021. Assets in-scope for our
target represent 30% of our total AUM. This is driven by
data availability, maturity of methodologies and control
over decision-making (more on page 38).
It is important to reflect that this process will not be
linear and that a credible transition requires real-world
decarbonisation, not just in portfolios. Our climate
strategy therefore centres on active investments in
transition leaders and backing firms on paths from high
to low carbon intensity. It is not enough to simply divest
from carbon intensive companies, which is why a focus
on transition credibility is key to our process. We assess
this through proprietary analysis and through direct
engagement with our highest-financed emitters where
we believe we can actively influence decision-making
1
.
In our own operations, we are targeting net zero by
2040, with an interim target of a 50% emissions
reduction by 2025 (versus our 2018 base year). We
continue our progress towards this target and a 56%
reduction as at 31 December 2022. Our own transition
to net zero is underway and we will outline our pathway
in line with the UK Transition Plan Taskforce Disclosure
Framework in 2023.
The 27th United Conference of the Parties on Climate
Change (COP27) took place in Egypt in 2022 and we
joined others in advocating for binding policy
commitments to address the implementation and
credibility gaps we have observed. Alongside
highlighting the role investors can play in achieving real-
world decarbonisation, which we believe requires an
enabling policy environment with the right incentives for
capital allocation.
Statement of the extent of consistency
with the TCFD framework
We continue to support disclosure against the
recommendations of the TCFD framework. This is
critical for us as investors as we assess our exposure
to climate-related risks and opportunities beyond
our physical operations.
We believe our own disclosure is consistent with the
11 recommendations of the TCFD framework. In line
with our 2021 approach, we provide disclosure at
two levels of granularity. The following 9 pages of
this report provide a concise overview against the 4
recommended pillars, and the full required
disclosure is provided as a discrete section of our
Sustainability and TCFD report. We believe this
approach is currently necessary to reflect the
detailed and technical nature of the
recommendations.
The availability of climate-related data continues to
be a challenge, with inconsistent disclosures by
region. We recognise that methodologies and our
internal data processes may continue to evolve over
time and we will review our approach as
appropriate. This may lead to changes in our metrics
and our reporting of progress in future periods.
However, we advanced our capabilities in 2022, with
the introduction of expanded metrics related to our
investments that align with the recommendations of
the Partnership for Carbon Accounting Financials
(PCAF), which we have joined. We will continue to
evolve and enhance our TCFD reporting, in line with
data and industry developments.
Location in
this report
Location in
Sustainability and
TCFD report
Governance Page 31 Page 9-10
Strategy Page 32-34 Page 11-21
Risk management Page 35-37 Page 22-27
Metrics and targets Page 38-39 Page 28-37
What is net zero?
It is generally accepted that net zero is the target of
completely negating the amount of greenhouse
gases produced by human activity. The following
pages outline our ambition to decarbonise in line
with this view, and in support of the objectives of the
Paris Agreement. We do not yet have all the data
required to determine what ‘completely negating’
means for abrdn, but we do have sufficient data to
monitor our progress against specific interim
milestones, which are outlined in this report. Our
next milestone will be to produce a Transition Plan,
in 2023, which will build on our existing objectives
and consolidate our long-term approach.
30 abrdn.com Annual report 2022
Governance
Our approach
In line with the recommendations of the TCFD, we have
an established climate governance framework with
defined responsibilities for our Board and Committees,
alongside management’s role in assessing climate-
related risks and opportunities.
We are also taking a forward-looking view and are
advancing our governance beyond climate and
towards sustainability as a whole. This approach is
aligned to emerging global standards for sustainability
disclosure and will strengthen our governance due to
the interlinked nature of sustainability topics. Related
risks and opportunities can manifest differently across
our diverse business and this approach will leverage the
strength of our vector model as we apply diverse
perspectives, and expertise, to emergent sustainability
topics. Our intention in 2023 is to establish a group-wide
sustainability decision-making forum to ensure a
cohesive abrdn view.
Our Sustainability and TCFD report illustrates our
approach in more detail.
The Board’s role in oversight
Climate change is a material issue for our business and
this is reflected in strategy, risk management, and
company culture. The Board and Directors oversee
these matters and provide challenge and approval to
management recommendations on both defined and
emergent issues.
Our Chief Executive Officer takes responsibility for
climate-related risks and opportunities and is
incentivised, alongside our Chief Financial Officer,
through climate-related remuneration targets in
variable bonus scorecards, which is aligned to company
objectives and set by our Remuneration Committee
(more detail on pages 103 to 130).
Our Board and Board Committees oversee a number of
climate-related issues and reports. The Board provides
oversight for our Sustainability and TCFD report and the
Audit Committee provides challenge to management
to support readiness for future disclosure requirements.
During 2022, Board agenda items included discussion
on progress against our climate commitments, the
challenges we face in achieving them, challenges in
data quality and availability, and how we engage with
our clients on climate change.
Management’s role in assessment
Our Chief Executive Officer delegates authority from
the Board to our Executive Leadership Team, and in turn
to our climate working groups, to support the
assessment of climate-related risks and opportunities
and to provide related recommendations.
We continue to benefit from the capability of our two
climate change working groups – covering both our
operations and investments respectively. These groups
are key to our climate-related governance structure
and consist of subject matter experts from across the
business. The groups meet quarterly to review and
discuss material climate risks and opportunities and
shape strategic approaches to climate change. These
groups are key forums for identifying material matters
to be escalated through the Executive Leadership
Team and to the Board for consideration.
In 2021, a primary focus for the groups was the
development of our targets and ambitions – in 2022 the
natural focus for our investments working group has
therefore been the implementation of our net zero
directed investing strategy. With specific focus on net
zero aligned investment solutions, climate research and
tooling, as well as active ownership.
Our wider sustainability expertise
In early 2022 we announced the evolution of our
sustainable investing approach with the appointment of
a Chief Sustainability Officer for the Investments Vector
alongside a newly established leadership team. The
team takes a global view and leads on sustainable
investing, active ownership, climate strategy, and
sustainability research capabilities. This is further
supported by our Sustainability Institutes in APAC and
Americas, which provide relevant regional capabilities
for our clients and wider reporting obligations. Our
abrdn Research Institutes also deliver sustainability
research including our climate scenario analysis.
Our operational activity is supported by a distinct
sustainability team, which includes a dedicated
Environment Manager with focus on climate and
advancing our operational net zero ambitions.
These teams support our climate working groups
through subject matter expertise – providing insight to
enable effective assessment of risks and opportunities
and as dedicated resources to support Board oversight.
Our Sustainability and TCFD report includes a visual to
illustrate our sustainability governance framework.
31abrdn.comAnnual report 2022
STRATEGIC REPORT
Sustainability – Environment continued
Overview of climate-related risks
and opportunities
Our sector is exposed to material climate-related risks
and opportunities. We continue to assess the potential
impacts and monitor this with a view to the resilience of
our operations and investment strategies.
The two types of climate-related risks – transition and
physical – are linked but will manifest differently. The
transition to a low-carbon economy will reflect in
markets, policy, and corporate reputation. The physical
consequences of climate change will be far-reaching
and impact individual operations and communities
without discretion. Our day-to-day business is
predominantly exposed to transition risk (and
opportunity) in the short, and medium term as markets,
policy, and reputations come to terms with alignment to
a net zero world. This is something we monitor through
our climate risk and opportunity radar to ensure we are
positioned to realise opportunities and mitigate risks.
The focus of the radar is likelihood and impacts of
material risks and opportunities to our business in the
short, and medium term. Our climate scenario analysis
enables a long-term view of potential implications for
our investments and the resilience of our strategies
(page 33).
One of the most material transition risks for us relates to
enhanced reporting regulations and costs of analysing
and gathering climate-related data. We expanded our
capability in 2022 but this remains an area of focus as
we build out more advanced tools and analysis. Our
most material opportunity is the anticipated need for
low-carbon financial products and services in line with
global economic transitions. This also represents a
significant risk should we not be positioned to respond
to shifting client preferences. We have outlined
sustainability as a strategic focus for abrdn, with further
detail on page 12.
Climate-related risks Potential financial impact to abrdn
Transition
Policy and
legal
Enhanced reporting
regulations
Cost of analysis, data gathering and publication
Cost of inadvertent non-compliance due to volume of regulation
Market Significant shifts on
consumer
preferences
Reduced revenue from decreased demand for products
Research highlights a high appetite for sustainable investing but education
on the topic is a barrier and can create missed opportunities
Lack of public policy
means emissions still
increasing
Uncertainty of pace and direction of public policy evolution creates
uncertainty for investing
Climate-related risks
impact the market
Lower AUMA, impacting clients and reducing revenue
Reputational Increased
stakeholder concern
or negative feedback
Reduced revenue from decreased demand for products
Growing litigation risk – both direct and from divestment decisions
Physical
Acute Increased severity of
extreme weather
events
Cost associated with damage to office facilities
Costs associated with transport and power disruptions
Costs associated with damage to IT networks and infrastructure
Climate-related opportunities Potential financial impact to abrdn
Transition
Products and
services
Development of
lower carbon
products and services
Revenue opportunity from demand for lower-carbon products and services
and products with enhanced sustainability performance
Resource
efficiency
Move to more
efficient buildings
Reduced operational costs, increased quality of working environment
Use of more efficient
modes of transport
Reduced operating costs
Use of more efficient
technology
Reduced operational costs of technology
Additional detail in our Sustainability and TCFD report.
32 abrdn.com Annual report 2022
Our climate scenario analysis journey to date
2020 Feb 2021 Nov 2021 Feb 2022 May 2022 2023
Research
and year one
analysis
Publication
of our first
white paper
Research
and year two
analysis
Focus on
sovereign
bonds
Focus on
APAC energy
transition
Year three
analysis and
platform
expansion
Building a more resilient strategy
using climate scenario analysis
Taking a long-term view
It is vital that investors understand how climate change
may affect the investment return of the companies and
markets they invest in. The impacts of climate change
will be felt across generations. Our climate scenario
analysis takes this long-term view to better understand
the impacts of physical and transition risks at sector,
regional, and individual security levels.
We have been developing our scenario analysis
platform for three years and consider this to be an
integral part of our climate strategy. We use a
combination of bespoke and industry standard
scenarios across a range of temperature rises
(between 1.3 and 3.2˚C by 2100) and transition
pathways up to a time horizon of 2050. This includes a
mean probability-weighted scenario that captures our
view of the most plausible energy transition.
This year we have expanded our scenario analysis to
incorporate company targets. It reflects that
companies have the opportunity to proactively alter
their strategies and take advantage of transition
opportunities. Many companies have set ambitious
targets, but some are more credible than others. In
response, we have built a bespoke credibility
assessment framework to assess target credibility,
which will enable us to value securities more accurately
and draw finer conclusions from our scenario analysis.
We will publish more detail on the application of the
credibility framework during 2023.
Climate scenario analysis is a strategic platform for
abrdn and we are committed to updating our insights
year-on-year. Our analysis is also expanding in 2023 to
look in detail at the physical and transition risk for our
real assets. It is however important to reflect the output
cannot be applied mechanically to investment
decisions due to a range of limitations and uncertainties.
Key uncertainties are present in relation to policy,
technology, and the modelling is reliant on high-quality
emissions data at company level.
Our insights from climate scenario analysis are
supporting key stages of our investment processes
across research, engagement, strategic asset
allocation, and investment product solutions.
Resilience of our strategy against climate
scenarios
We use scenario analysis to understand how resilient
our portfolios are to uncertain future transition
pathways. Our core insight is that there is a large
dispersion of risks and opportunities both within and
between sectors but relatively little impact at the
aggregate index level. In general, downward revisions to
long-term fair valuations are more common than
upward revisions, so greater discrimination in stock
selection is required to capture opportunities.
At fund level, our tools enable fund managers to use
scenario analysis results to test the valuation impact
under different scenarios and against the benchmark. It
is important to reflect that this is applicable to in-scope
asset classes and the use of the platform is not
mandatory for fund managers. Our climate scenario
analysis has focused on asset classes in which
valuations are largely derived from future corporate
earnings streams: listed equities and corporate bonds -
our analysis focuses on the financial impacts of climate-
transition and physical risk, though in most sectors the
financial impact is largely determined by transition
drivers.
Our Sustainability and TCFD report includes more detail
and initial conclusions from our year three analysis.
33abrdn.comAnnual report 2022
STRATEGIC REPORT
Sustainability – Environment continued
We aim to deliver on our commitment via three pillars of action:
Decarbonisation
Providing net zero solutions
Active ownership
We are committed to tracking
and reducing the average
carbon intensity of our portfolios
where data is available. That
means continuing to incorporate
carbon analysis into our
investment process and
supporting credible transition
leaders and climate solutions.
We have set decarbonisation
targets for our investments and
operations, which we report on in
pages 38 to 39.
We are committed to increasing
the proportion of assets flowing
into our climate solutions. Around
30% of our AUM is currently
expected to be managed in line
with net zero 2050. This has still to
be reflected in mandates and we
aim to increase this by continuing
actively engage with our clients,
developing capacity to identify
climate solutions and supporting
net zero goals with our fund
range.
We engage with our highest-
financed emitters in our equity
holdings and seek transparency
against transition milestones,
which are assessed against
relevant standards and our own
credibility assessment
framework. We support credible
transition and use our influence
via regular engagement and
voting, where we have voting
rights.
Strategic decarbonisation
Our strategy of net zero directed investing
is our commitment to enable clients to
achieve their climate goals
Sustainability is a strategic focus for abrdn and climate
change is near universally recognised as a material
issue. We have therefore developed a clear investments
strategy of net zero directed investing, which drives our
mitigation of climate risk and our intended realisation of
climate opportunity for our business.
Our commitment is to influence real world
decarbonisation by developing the right products for
our clients and using our influence to support credible
transition pathways. Our strategy is therefore
underpinned by four core beliefs:
– Understanding climate risks and opportunities will
improve long-term return for our clients.
– We can support a net zero transition by directing
capital to companies and assets with ambition and
credibility.
– Our influence as active owners is powerful and we will
challenge companies on their transition strategies.
– More ambitious climate policy is needed from
governments and we are advocates for action.
Our business is diverse and we have developed
approaches for different client needs and outcome
expectations. Climate considerations are incorporated
to varying levels across mandates and we have been
developing specific net zero directed solutions. In 2021
we launched four climate investments strategies and
the long-term insights from our scenario analysis
platform support our assessment of climate-related
risks and opportunities across in-scope asset classes.
Our largest client, Phoenix Group, has set a net zero
2050 goal and we are developing strategies to match
this ambition – for abrdn, realising the opportunity from
the climate transition requires us to be proactive in
developing solutions that meet client needs in the near
term and we are proactive in our approach.
Our operational climate
strategy
Our exposure to climate risk and opportunity as a
corporate entity is predominately transition based
as our actions must mirror our high expectations of
the companies we invest in, and reflect the ambition
of our clients. We are also subject to increasingly
significant reporting obligations with a significant
focus on climate metrics. Our intention is to lead by
example and we have set an ambitious operational
target to reach net zero by 2040 (more detail on
page 39) and have invested in our reporting
capabilities to ensure we are able to meet the
expectations of our stakeholders.
We are not complacent to physical risks – most
likely to manifest as extreme weather events – but
we operate with a blended working model, which
embeds the necessary agility needed to mitigate
risks from disruption. This was tested during the
COVID-19 pandemic and we remain confident that
the short-term risk is mitigated.
1 2 3
34 abrdn.com Annual report 2022
Climate-related risk management
Identifying and assessing climate-related
risks and opportunities
Our approach to identifying climate-related risk is long
standing and remains consistent with prior year
reporting. We have two climate change working groups
– covering both our operations and investments – that
monitor climate-related risk to the business. Our
assessment of climate-related risk is reflected through
our climate risk and opportunity radar (page 32) that is
developed using our risk and control self-assessment
process. This process assesses the inherent risk against:
– Likelihood, or the percentage chance of an event
occurrence in the next 12 months.
– Impacts, including: financial, customer, regulatory
and legal, reputational, and process.
Inherent risks are then scored with due consideration to
mitigation strategies and associated controls. Where
we identify material risks to the business within the radar
we escalate this through our governance structure
(page 31). The management process determines
whether we mitigate, transfer, accept or control risks.
Acknowledging the accelerating scrutiny
Our assessment of climate-related risk highlights a
predominant exposure to transition risk. The material
climate-related risks we face are tied closely to our
climate-related opportunity. Our ability to meet
deemed client demand for lower carbon products and
services is linked to our reputation and credibility in the
market. Our sector is subject to increased scrutiny and
enhanced standards of disclosure.
Our goal is to lead by example – however, international
standards are yet to coalesce and there are
uncertainties related to interoperability between
jurisdictions. This will provide challenge to us as a
corporate entity, but also to our ability as investors to
assess the relative risks and opportunities of the
companies we invest in on behalf of our clients. We are
supporters of efforts to establish a global framework
and – as early, voluntary, adopters of the TCFD
framework – we have demonstrated our support
through our actions and disclosure. We continue to
invest in our capabilities and have identified
sustainability as a strategic priority for the business.
Our management in practice
One operational example of managing climate-
related risk during the reporting year relates to the
integration of emissions data from ii into our
environmental management systems to ensure
relative completeness and accuracy of emissions
reporting for the group. We opted to take the
additional step to include the full year of ii emissions
in-scope for our annual voluntary external
assurance of this data to prioritise consistency of
this data and mitigate the risk of material
misstatement.
Managing climate-related risks
Our governance framework (page 31) supports the
management of climate-related risks and we address
asset manager-specific TCFD guidance for products
and engagement on pages 36 and 37.
Looking ahead toward a changing
landscape
Our assessment of the regulatory landscape and
developing stakeholder expectations is that, though
climate change will remain material, other thematic
sustainability will emerge as points of material focus.
This is already true to an extent, but climate-related
disclosure has led the first wave of regulatory
sustainability standards. We are alert to the shifting
landscape and completed our sustainability materiality
assessment in early 2023 to better inform our future
priorities and understand how our stakeholders view
climate versus other emergent topics.
Our Sustainability and TCFD report details the results of
our latest sustainability materiality assessment.
Integration into overall risk management
We operate ‘three lines of defence’ in the management
of risk with clearly defined roles and responsibilities
(page 64). Climate-related risk is included within our
Enterprise Risk Management (ERM) framework, which is
subject to Board oversight. Climate-related risk is
therefore considered amongst the principal risks and
uncertainties for our business (pages 65 to 67). We do
not define climate as a singular principal risk due to its
close association with other risk categories. In other
words, we view climate risk to be material, but it is better
perceived through financial or regulatory and legal risk
categories when considered at enterprise level.
35abrdn.comAnnual report 2022
STRATEGIC REPORT
Sustainability – Environment continued
Investment integration
We manage climate-related risks through
our research processes, data, and
decision-making
Research is the foundation of our approach to
understanding and managing climate-related risks and
opportunities. Our research provides insights on
regulatory and industry trends across regions. It also
helps us understand the physical and transition risks and
opportunities, enabling us to take informed decisions
about how and where to invest.
Climate-related research is carried out by our Research
Institute and Sustainability Insights Team. Our scenario
analysis platform enables us to take a forward-looking
view and we can use the results to test the valuation
impact on individual funds. Our insights are shared with
investment desks and often published publicly, in the
form of research papers, articles, and webinars. Our
catalogue of original research is extensive and this
expertise supports our decision-making and effective
management of climate-related risks.
Our Sustainability and TCFD report provides more detail,
with reference to key publications from 2022.
Our climate change toolkit
We have developed a range of tools to help integrate
climate-related risk into our decision-making for our
active investment process and we continue to build our
capabilities year-on-year. The underlying data is drawn
from a range of vendors with different levels of data
coverage.
Data coverage is limited by various factors including
lack of uniform disclosure and methodological
standardisations. This is a common challenge, as best
practice remains emergent despite accelerated efforts
toward global disclosure frameworks.
It is important to be clear that climate considerations
are not integral to every investment decision and form
part of a wider decision-making process. Our
Sustainability and TCFD report, page 24, provides
further detail as to the applicability of our climate toolkit
across asset classes.
Our existing toolkit:
Carbon metrics
This enables portfolio managers to understand the
carbon intensity and absolute emissions of their
portfolios and holdings and it provides a baseline for
benchmarking and decarbonisation. In 2021 we
expanded carbon metric capabilities to sovereign
bonds. In 2022 we introduced two EVIC-based
carbon metrics: Financed Emissions and Economic
Emissions Intensity, in line with Partnership for
Carbon Accounting Financials (PCAF)
methodologies. In 2022 we joined PCAF to support
industry best practice. We report Financed
Emissions metrics in our Sustainability and TCFD
report, page 33.
Climate policy index
We have developed an index which builds on the
Institutional Investors Group on Climate Change
(IIGCC) recommended Climate Change Policy
Index, incorporating it into our in-house climate
policy expertise and adding a weighting to reflect
the central role of policy action in the energy
transition.
Climate scenario analysis platform
Used to assess impact by geography, sector, and
individual company level. This enables us to assess
the financial impact of different climate scenarios
and embed this into our thinking so we can deliver
two main objectives:
– Climate resilient portfolio construction: make
current investment portfolios more resilient to
different climate transition pathways by
incorporating the risks and opportunities
identified in the climate scenario analysis into
our portfolio construction process.
– Climate driven solution development: develop
new climate driven products and benchmarks to
enable clients with climate specific goals to
achieve these in a research-founded,
measurable manner.
ESG House Score
We developed a scorecard for companies using
over 100 key performance indicators (KPIs)
arranged in categories aligned with industry
frameworks. This supports our analysis of the
possible adverse impact of our investment and the
impact on client portfolios. The scorecard includes
climate change and provides carbon data to assess
a company’s response to its climate risks.
Credibility assessments
We use a number of tools and data sources to
assess whether companies have credible transition
strategies. In 2023 we intend to launch our full
credibility assessment framework.
36 abrdn.com Annual report 2022
Our role as active owners
Engagement with companies and assets
helps to identify and manage climate risk
and opportunities
We have a duty to our clients, which necessitates
consideration of all material risks to our investments on
their behalf. Active ownership is one way for us to
manage climate-related risks and to improve the
financial resilience and performance of investments.
Our net zero directed investments strategy is focused
on investments in transition leaders, with credible
pathways to long-term decarbonisation. Understanding
this credibility is key and active ownership is a tool to
enable this. We expect companies to be able to
demonstrate effective management of their own
climate-related risks and opportunities and we are able
to explore this through independent and collaborative
engagements.
Our climate-related engagement strategy is focused
on the highest-financed emitters in equities, and their
relative commitment to decarbonisation towards net
zero. We have developed a framework, which we are
using to drive our climate-related engagement strategy
with the highest-financed emitters in equities. This
framework is based on a set of factors, including the
Climate Action 100+ Net Zero Company Benchmark,
the scope and coverage of greenhouse gas reduction
targets, and a focus on governance such as, climate-
related KPIs reflected in the LTIP and social impact of
the energy transition. Our expectation is that
companies are alert to the long-term risks from climate
change and we have outlined a clear process for
escalation should we see insufficient progress. In
specific terms, we would initially take voting action if
sufficient progress is not made, but we will ultimately
recommend divestment if the company has not shown
sufficient progress over a period of engagements.
Detail in relation to highest finance emitters is included
in the Sustainability and TCFD report at
www.abrdn.com/annualreport
We are signatories to the UK Stewardship Code and
report annually on the actions we take in regards to
the 12 principles.
Our full report provides specific detail on our
engagement and escalation processes.
See www.abrdn.com/annualreport
Exercising voting and ownership rights
We believe that voting at company meetings is one of
our most important activities when investing on behalf
of our clients. We are committed to transparency and
disclose all listed company voting decisions we make on
our website, the day after a general meeting.
Voting is a powerful tool to influence individual
companies toward a more credible transition to a low
carbon world. We updated our voting policy to use CDP
indicators to identify companies that may not be
fulfilling their climate commitments in 2023. This, in
conjunction with our own analysis, enables us to hold
climate inaction to account through votes against
company annual reports, or alternative resolutions.
We are also seeing increasing volumes of climate
specific resolutions being tabled at general meetings. In
2022 we voted on a total of 141 climate resolutions
(2021: 99). Our decisions are based on analysis of the
specific proposals and include our assessment of
proposal credibility and transition progress.
Climate change resolutions 2022
2022 2021
Resolutions voted 141 99
Votes in favour 56% 55%
Votes against management
26% 29%
Collaboration and influence
We work with industry associations, regulators and
policymakers globally to drive change, including
through improving standards, encouraging best
practice, influencing regulation and developing capital
allocation strategies. This is a way for us to exercise our
influence through our industry voice. Notable examples
from 2022 are our attendance at COP27 and response
to the International Sustainability Standards Board
(ISSB) consultation, in support of stronger climate policy
and global sustainability disclosure standards. Policy
advocacy is an important part of our strategy given the
critical importance of policy incentives to enable capital
allocation in line with net zero goals. We are signatories
to the Investor statement to Governments on
strengthening climate policy.
Disclosure and oversight
Fossil fuel financing
Lobbying
Say on climate
Targets and transition
33
19
751
31
37abrdn.comAnnual report 2022
STRATEGIC REPORT
Sustainability – Environment continued
1. The proportion of assets in-scope is expected to increase over time through improved data coverage. The reported metrics may be revised as we
continue to collect a more complete dataset from our assets across Europe for 2021 and subsequent reporting periods. Such data could positively
or negatively impact the portfolio emissions intensity.
Decarbonisation of investments
We are targeting the reduction of the
carbon intensity of the assets we invest in
to support the transition to net zero
In November 2021, we made a commitment to reduce
the carbon intensity of the in-scope assets we invest in
by 50% by 2030 versus a 2019 baseline.
Assets in-scope for our target represent 30% of our total
AUM, with Phoenix accounting for 30% of the total public
market assets in-scope as at 31 December 2022. The
reported coverage is driven by data availability (Scope
1 & 2) for the underlying assets. We track our
decarbonisation target with focus on revenue-based
Weighted Average Carbon Intensity (WACI), which is in
line with the original 2017 TCFD recommendations for
our sector and applicable to public markets asset
classes. For in-scope real assets, we currently use a
carbon intensity metric that normalises emissions by
gross asset value. Looking ahead, we plan to
complement this metric with data that supports the
calculation of emissions intensity by floor space
(CO
2
/m
2
), which is less volatile due to floor space being
a static denominator. Public markets and real asset
decarbonisation progress is therefore calculated
separately as the asset classes utilise different carbon
metrics. There is also a time lag associated with the
bottom-up collection, and calculation, of emissions data
for real assets. Therefore, data for real assets is
reported as at 31 December 2021. We recognise that
methodologies may continue to evolve over time, and
we will review our approach as appropriate. We also
monitor and report additional portfolio-level metrics
based on enterprise value including cash (EVIC) (as
opposed to revenue). This is in line with evolving industry
frameworks. However, it is important to reflect that
each metric tells a different story – and indeed can
move in opposite directions – so therefore must be
interpreted with clear understanding of such
implications. We outline the implications in detail in a
separate paper and these metrics are out of scope for
our existing decarbonisation target. More detail at
www.abrdn.com/annualreport
Updating on our progress
Net Zero Directed Investing means moving towards the
goal of net zero in the real world - not just in specific
investment portfolios.
At abrdn we seek to achieve this goal through a holistic
set of actions. This includes rigorous research into net
zero trajectories, developing net zero-directed
investment solutions and active ownership to influence
corporates and policy makers. We monitor our progress
in aggregate using our decarbonisation target.
We have a duty to our clients to consider climate risks
and opportunities, which we believe is part of long-term
performance, but we will not impose carbon targets on
funds unless desired by our clients. Therefore, some
asset classes and funds may contribute more towards
our reported target than others. Investing in transition
leaders may also include carbon-intensive sectors, with
some industries vital to enabling a credible transition. It is
important to note that we do not expect our 2030 target
to be achieved through linear annual decarbonisation
progress, but we have set an interim milestone of
achieving at least 20-30% WACI reduction by 2025.
We report our first progress against our
decarbonisation target this year. As at 31 December
2022, in-scope public market portfolios achieved a
carbon intensity reduction of 27% versus a 2019
baseline. As at 31 December 2021, in-scope real estate
achieved a 31% reduction in carbon intensity versus a
2019 baseline. Our Sustainability and TCFD report
provides further commentary as to our progress.
Using metrics to support daily
decision-making
Decarbonisation targets look backwards to annual
performance. We also take a forward-looking view and
have developed the tools to support our actively
managed products and company engagement. This
toolkit is available on-desk to our fund managers and
we continue to invest in our key capabilities, such as our
bespoke scenario analysis platform. We use climate
metrics from a range of industry vendors and are
building a unified data platform to support investment
integration.
WACI (tCO
2
e/$m Revenue) Scope 1 & 2:
Public markets decarbonisation (28% AUM)
Carbon Intensity (kgCO2e/£GAV) Scope 1 & 2:
Real estate decarbonisation (2% AUM)
1
Weighted Average
Carbon Intensity (WACI)
Calculates the
weighted average
emissions of a portfolio
normalised by revenue.
×
Investment in the company Company emissions
Portfolio value Company revenue
Carbon Intensity
Calculates the emissions
of a portfolio normalised
by gross asset value.
Real estate emissions
Gross asset value
’22
’19
234.4
171.5
’21
’19
0.0041
0.0028
38 abrdn.com Annual report 2022
Our operational targets and
emissions
We are targeting net zero by 2040 and
have set out clear milestones to measure
our progress
We aim to lead by example and believe that our actions
must mirror our high expectations of the companies we
invest in and reflect the ambition of our clients. In 2021 we
set out our goal to reach operational net zero by 2040 and
our interim target is to achieve a 50% reduction in
emissions by 2025 versus our 2018 base year. Our
operational impacts reflect the nature of our business.
We keep offices as collaboration spaces for colleagues
and to enable us to better deliver for our global clients.
Our material reported impacts are therefore the
energy use in our offices (Scope 1 & 2), business travel,
and estimated homeworking emissions (Scope 3). This
means we have focused our efforts on finding
efficiencies in our estate and remaining alert to our
impacts from travel. We have consolidated our office
locations and developed more agile ways of working in
recent years, which has enabled significant progress
towards our targets. Achieving our targets requires a
focus on absolute emissions reductions – but we also
recognise and support other measures such as:
renewable energy, credible offsetting, and new
technologies. We will further outline the long-term role
we see for these measures in our Transition Plan, which
we expect to publish in line with the UK Transition Plan
Taskforce Disclosure Framework in 2023.
Emissions intensity per full-time employee
equivalent (FTE)
1
: Scope 1 & 2
We have a supplementary target to procure 100%
renewable electricity in our global offices, which we are
close to achieving with 99.6% of energy procured on
green tariffs during 2022. (2021: 99.5%). Our partnership
with the eco app Pawprint also continues and we are
working closely with them to engage our colleagues to
learn more about their personal carbon footprint. We
also see the potential in using the app as a tool to
develop our understanding of our homeworking
emissions. Critical to our long-term progress is the
support of our colleagues and the accountability of our
leaders. In 2022 we included climate-related incentives
in our executive remuneration scorecards (read more
on pages 103 to 130).
Year-on-year commentary
In 2021 we reported a 62% reduction in our operational
emissions versus our 2018 base year, noting material
reductions, influenced by the pandemic, to business
travel and energy use in our offices. Our expectation
was that these emissions would increase as colleagues
spent more time in offices and travel restrictions eased.
We found this to be the case for business travel in 2022
and now report an 56% reduction versus our base year.
Our view is that we continue to be on track to meet our
2025 target and reflect that blended working models
supports a more travel-conscious working culture in the
long term.
Our methodology and future intent
Our reporting methodology aligns with the Greenhouse
Gas Protocol and we use an operational control
boundary. We report material Scope 3 emissions where
data is available, however notable exclusions include
estimated supply chain impact and investments
recorded on our balance sheet. We also reported our
estimated impacts from homeworking in 2020 and 2021
but the independent methodology lacks
standardisation and requires further refinement for
long-term utility. We provide an estimate again for 2022
but note our intention to reflect on our approach.
Further detail is provided in our Sustainability and TCFD
report at www.abrdn.com/annualreport
1. Based on FTE at 31 December 2022 of 5,130 (2021: 4,964).
2. Scope 1, 2, and some Scope 3 categories have been independently assured by Bureau Veritas. Bureau Veritas assurance is included in the
Sustainabilit
y
and TCFD report at www.abrdn.com/annualreport
‘18
1.57
‘21
0.70
‘22
0.56
’22
’21
’18
Scope 1: Refrigerant gases, natural gas, oil and
company-owned vehicles
Scope 2: Electricity and district heating
Scope 3: Working from home, business travel, waste,
and transmission and distribution
UK 4,181
Offshore 2,888
UK 1,609
Offshore 787
UK 1,305
Offshore 726
22,482
8,838
11,398
UK 2,629
Offshore 38
UK 1,008
Offshore 53
UK 776
Offshore 41
32,218
12,295
14,246
Total CO
2
emissions (tonnes)
2
14,246
’22
’21
’18
UK
Offshore
8,451
2,500
2,388
26,658
12,410
10,639
35,109
14,910
13,027
Total energy consumption (kWh ‘000s)
2
13,027
39abrdn.comAnnual report 2022
STRATEGIC REPORT
Sustainability – Social
1. Gender data for Board is self-reported, and for executive management is obtained from existing employee data set and includes Executive
Leadership Team and Company Secretary, excluding administration roles.
2. Senior positions on Board are Chief Executive Officer, Chief Financial Officer, Senior Independent Director and Chair.
3. Relates to the Executive Leadership Team including Company Secretary and excluding administration roles.
4. Ethnicity data for Board and executive management including Company Secretary and excluding administration is self-reported (using local
census data categories and collected where legally possible).
5. Includes one individual based in a country where we do not collect diversity data.
6. Relates to leaders one and two levels below CEO, excluding administration roles.
7. Relates to Directors of the Company’s direct subsidiaries as listed in Note 45 (a) of the Group financial statements and not classified above as Board
Directors or senior leadership.
8. 60 colleagues without gender data on our people system are excluded from the headcount data.
Diverse leaders
We have set 2025 targets to improve
diversity across abrdn
Our diversity targets have been in place since 2020 and
our gender representation targets extend beyond our
Board to both our senior leadership and global
workforce. The diversity of our Board is consistent with
the expectations outlined by the FCA reporting
requirements and we were also on target in the prior
year.
Building an inclusive and equitable workplace is plainly
the right thing to and we also believe it supports our
long-term success, as diversity of thought promotes
new perspective that help lead to better decision-
making. We serve global clients and our diversity is a
strength as we aim to deliver better experiences and
outcomes for our clients.
Our commitment is part of our purpose – learn more
about our actions and progress on the following page
and in our Sustainability and TCFD report.
Statement of the extent of consistency
with the FCA Listing Rules requirements
for reporting Board diversity
We are committed to creating a diverse, equitable and
inclusive abrdn and support the principle of increased
transparency on progress. Our policy applies to our
Board Committees and is available publicly.
Our disclosure is consistent with the FCA Listing Rules
requirements and the following statements reflect our
compliance.
The data below is our reference taken at 31 December
2022 and there have been no changes to the
composition of our Board in the interim period to
publication. The disclosed data is volunteered and
subject to a limited level of external assurance,
alongside other diversity KPIs.
Over 40% of our Board are women, including our Chief
Financial Officer, and one member identifies as
minority ethnic. We do not anticipate any risks meeting
Board diversity targets in 2023.
Board and executive management gender representation
1
Number of Board
members
Percentage
of the Board
Number of
senior positions
on the Board
2
Number in
executive
management
3
Percentage
of executive
management
Men 6 55% 3 12 86%
Women 5 45% 1 2 14%
Board and executive management ethnic representation
4
Number of Board
members
Percentage
of the Board
Number of
senior positions
on the Board
Number in
executive
management
Percentage
of executive
management
White British, or other White (including minority-white groups) 10 91% 4 10 72%
Asian/Asian British 1 9% - 1 7%
Not specified/prefer not to say
5
- - - 3 21%
Global representation against targets
Target 31 December 2022 31 December 2021 Target by 2025
Women at plc Board 45% (5 of 11) 45% (5 of 11) 40% women; 40% men;
20% any gender
Women in senior leadership
6
39% (52 of 132) 36% (62 of 171) 40% women; 40% men;
20% any gender
Women in subsidiary Director roles
7
48% (12 of 25) 35% (7 of 20) N/A
Women in global workforce
8
43% (2,226 of 5,147) 46% (2,297 of 5,033) 50% (+/- 3% tolerance)
Ethnic minority representation at plc Board –
No. of Directors who identify as ethnic minority
9% (1 of 11) 9% (1 of 11) 2 Directors
Our diversity data is voluntarily collected either through the onboarding process or through our management
information system, Workday, for employees. For Non-Executive Board members, we collect data voluntarily
through an offline system. Data measuring progress against gender targets for 31 December 2022 has been
independently assured by Bureau Veritas. Bureau Veritas assurance can be found at www.abrdn.com/annualreport
40 abrdn.com Annual report 2022
Our people
We create opportunities for our people to
thrive, giving them the environment, tools
and support to feed their curiosity, achieve
their ambitions and make a difference in
what they do
Our progress against targets
Creating opportunities for our people starts with
identifying where we need to take action to tackle
underrepresentation at different levels across our
business. Our public targets address gender and ethnic
representation at Board level and enhanced gender
representation for our senior leaders and global
workforce (page 40). Our approach aligns with best
practice and our performance is incentivised through
our executive director scorecard (pages 103 to 130).
Our targets are important indicators, but our focus is on
making abrdn an equitable and inclusive environment
for all our colleagues. Our latest UK gender pay gap
report available at www.abrdn.com/annualreport
outlined our progress for the fifth consecutive year; a
driver of our pay and bonus gaps is that we have more
men in senior roles and more women in more junior
roles. That is why many of our actions – from
recruitment, development, and succession planning –
look to address this imbalance.
Identifying, attracting and retaining talent
Segmenting the approach we take for talent at early,
mid and senior levels helps us focus on specific diversity,
equity, and inclusion priorities for each career stage.
At early career stages, we have had great success
improving the diversity of candidates attracted to us
globally and continue to use partnerships to help us
reach diverse talent. An example of this in action is that
61% of our graduate intake identify as women (2021:
45%) and 47% of our UK interns went to a non-Russell
Group university (2021: 38%).
At mid-career stage, we aim to identify a strong talent
pipeline and demonstrate the value of growing our
internal talent. Our development programme,
Accelerate, is available to all mid-career colleagues
globally, and includes courses that are run specifically
for women. Equally, we can demonstrate success in our
returners programme as we have retained 75% of our
2021 women returners cohort in permanent roles and
welcomed five new returners in 2022.
We also ensure that our Executive Leadership Team
succession pipeline has the breadth of experience and
diversity to bring the thought leadership required in an
effective team. Identifying and working with individuals
with the medium to long-term potential to be part of our
Executive Leadership Team has shaped our inclusive
Advance programme. Advance is an 18-month
selective programme, which includes learning
components tailored to areas of strategic importance
to our business – leadership, clients and futurist
mindsets.
Our Academies framework is well established, providing
dedicated support to develop skills for the future,
including digital, data and change. We will continue to
extend our senior talent programme focusing on the
future leaders of our business. In 2023, we will launch our
Leadership Academy, supporting leadership behaviours
at all levels of abrdn.
Our way of working
Our priority is to make sure that our people feel
connected and involved, that opportunities and
progression are equitable for all, and that managers
lead in a way that builds inclusive ways of working in
hybrid teams. Blended working is now our standard way
of working across abrdn. We are focused on what we
do, and what our clients need from us and our teams,
rather than where we do it.
Networks: inclusive safe spaces
Our networks are run by colleagues, for colleagues,
delivering DEI events and activities across a wide range
of topics. They also have direct engagement with our
Board and our most senior leaders.
Members from the networks can influence our business
processes and help shape design through bi-monthly
insights sessions. In 2021-22 teams including workplace,
talent acquisition and brand have all sought the diverse
perspectives our networks provide.
In the US, our networks have been supporting the
regional theme of ‘Self-Education and Brave
Conversations’ in 2022 with a wide range of activities
and colleague engagement. Alongside our colleague-
led networks, in 2022 we set up more informal peer-to-
peer ‘sharing communities’ where colleagues can
connect, share and learn from others in a safe space. So
far, we have communities covering topics relating to
menopause, neurodiversity and Christianity.
You can read more about our networks in our 2022
Diversity, equity and inclusion report.
41abrdn.comAnnual report 2022
STRATEGIC REPORT
Sustainability – Social continued
Listening to feedback and responding
with action
Listening to our colleagues is at the heart of our
people strategy. We have a comprehensive plan in
place which allows us to hear from our people,
whether that be through leadership engagement
activity or our more formal survey tool, which we
run throughout the year to ensure we keep in tune
with what is on the minds of our colleagues and can
take appropriate action. This is complemented by
our board engagement activity which is run
throughout the year by our designated Non-
Executive Director and our Board Employee
Engagement Plan.
Our latest engagement survey
Our annual engagement survey provides all colleagues
the opportunity to share their feedback and tell us what
it is like to work at abrdn.
Over 80% of colleagues took part in the survey with
nearly 14,000 verbatim comments giving us a rich
picture of where we are seeing improvements and the
areas we need to continue to focus. 2022 saw us
develop our cultural commitments and focus on the
overall colleague experience through what has been an
incredibly challenging year for markets, the business
and for our colleagues.
Through 2022 we saw improvements in our areas of
focus - career and talent, inclusion and both
transparency and communications. Our people leaders
and team relationships continue to be an area of
strength, which we will build on in 2023. We reported
that engagement levels at the beginning of the year
were at 51% and our most recent survey in January
2023 shows we have held that score at 50% through this
year of transformational change. Whilst we are not
where we need to be, we are moving in the right
direction, have clear plans in place and are committed
to continued listening through the year with more
regular check-ins on progress.
Building our culture
As a people business we want our colleagues to feel
empowered to drive the changes we need to make, to
feel involved and trusted, to strive for exceptional
performance and to always be led by our clients’ needs.
In 2022 we started a piece of work to define our culture
and alongside our Executive team, we worked with
hundreds of colleagues across the global business to
build a set of cultural commitments. These are
aspirational statements which will help us create a
business that all our people want to work for, to shape
what it feels like to be a colleague at abrdn and create
an environment where everyone can fulfil their full
potential. We also trained a group of internal facilitators
to help support conversations and the embedding of
our commitments across the organisation.
Our commitments
– We put the client first. From every seat in our
business, we understand our unique role in
enabling our clients to be better investors,
regardless of where we fit in the organisation.
– We are empowered. We speak up, challenge
and act. We take ownership for our work, we
accept accountability for our successes and,
when they happen, our failures too.
– We are ambitious. We strive for exceptional
performance. We also know when to balance
pace with perfection to get things done. We are
passionate about the positive impact we can
have on our business.
– We are transparent. We have the honest and
important conversations that fuel our
performance and build trusted relationships.
Our company behaviours underpin our
commitments and guide our day-to-day
actions
– Think and act like an owner: We think commercially
about where we focus our time, effort and money to
get the return on investment for our stakeholders.
– Focus on client and customer needs: We are
continuously learning what our clients and
customers need, so they are at the heart of our
decisions.
– Get it done together: By executing at pace and
working across teams to deliver better outcomes,
faster.
– Build the future now: We are being bold in building
today what stakeholders need tomorrow by
challenging the status quo and adapting quickly.
Over
1,600
colleagues are
members of
our networks
globally
76%
of colleagues
believe abrdn is
an inclusive
organisation
42 abrdn.com Annual report 2022
Our role in our
communities
We can make a positive impact through
our values, conduct, and charitable
contribution
Our role in society extends beyond how we deliver for
our clients as we work with others, amplify our values,
and support our communities through powerful
partnerships. We outline the standards of behaviour we
expect in our business and third-party relationships in
our global code of conduct (page 46). Our minimum
expectation is that we act with integrity and prioritise
socially inclusive outcomes for both our internal and
external relationships.
Supporting tomorrow’s generation
One of the most tangible ways we support our
communities and provide our people with the
opportunity to make a wider difference, is through our
charitable giving strategy and related partnerships. Our
giving strategy is embedded in our corporate
sustainability function and is focused on creating more
impact for tomorrow’s generation. We aim to create
fair and impactful charity partnerships and prioritise
projects that provide access to opportunity for people
and address negative impacts on the planet. Our role is
to partner with organisations with whom significant
funding will enable new capabilities and meaningful
positive impacts. Our giving strategy is governed
through the abrdn Charitable Foundation, who meet
quarterly to consider new partnerships and ensure we
measure progress.
In 2021, we announced our partnership with Hello
World, whose mission is to bridge the digital divide by
improving connectivity for disconnected communities.
Hello World partners with communities to build ‘Hello
Hubs’ – solar powered internet kiosks, fitted with eight
screens loaded with leading educational software, so
that children can learn, access digital educational
resources and improve their future by connecting
globally.
Our initial funding of £1 million is supporting the build of
64 abrdn ‘Hello Hubs’, which could provide up to 80,000
people with access to internet and digital education
content. Our investment as at 31 December 2022 has
enabled Hello World to operate at new scales and work
with 26 local communities who now have access to
internet through an abrdn Hello Hub. Our partnership
with Hello World demonstrates support for tomorrow’s
generation and we extended our commitment with a
further £1 million donation in 2022 – and we look
forward to sharing more on the evolution of our
partnership in 2023.
More detail on our charitable partnerships, including with
UNESCO and MyBnk in our Sustainability and TCFD report.
Focus on volunteering
Enabling our colleagues to support causes close to
them is a key part of our giving strategy. All colleagues
1
have the opportunity to take up to three volunteering
days annually and we enhance their support through
company matching initiatives, including payroll
matched giving for UK colleagues. We want to
encourage our people to be part of our local
communities, so our volunteering leave policy extends
to time spent outside of usual working hours. We have
set a goal to increase the proportion of colleagues
engaging with charitable causes and prioritise
partnerships with clear opportunities to develop
meaningful connections.
1. This does not include ii, who did not have a volunteering policy as at
31 December 2022.
The abrdn Yearbook
Our partnership with Sarabande supports artists
with great talent, as we lend our financial support
and expertise to help creative talent build financial
security. We brought our colleagues together in
celebration through the launch of the abrdn
Yearbook and exhibition. Over 70 colleagues from
our global offices shared stories to answer the
question ‘What inspires you?’, which in turn formed
the inspiration for painted portraits by a Sarabande
artist. The project is a powerful statement that we
are all part of something bigger, connected to
others, and shaped by our experiences. We
unlocked some incredible stories, which confirm
that our strength as abrdn comes from the diversity
of our perspective and the personal experiences
that shape each of us. Our business is built on nearly
200 years of history and the abrdn Yearbook is a
timely reminder of who we are today, and what
inspires us to create more tomorrow.
43abrdn.comAnnual report 2022
STRATEGIC REPORT
Sustainability – Governance
Stakeholder
engagement
Our responsibility to engage with all our
stakeholders plays a crucial role in the
long-term decisions we make
Our stakeholders are central to our strategy and critical
to the long-term success of our business, our Board
oversees our approach to engagement as we seek
feedback and make decisions toward the long-term
benefit of key stakeholders.
Identifying our stakeholders
In our pursuit of delivering against our client-led growth
strategy, we recognise that our pool of stakeholders is
growing and evolving with us. Their needs and wants
are also changing all the time. Recent additions to our
key stakeholder group include colleagues and
customers of ii and Finimize since their acquisition. We
continue to group our key stakeholders into our clients,
our communities, our people and our shareholders –
and are committed to positioning them as a central
factor in our decision-making.
Our clients See page 45
Our communities See page 43
Our people See page 41-42
Our shareholders See page 45
Section 172 statement
The Board recognises that the long-term success of
our business is dependent on the way it works with a
large number of important stakeholders.
Our Board has responsibility to consider matters
that include the:
– Likely consequences of any decisions in the long
term.
– Interests of the company’s employees.
– Need to foster the company’s business
relationships with suppliers, customers and
others.
– Impact of the company’s operations on the
community and environment.
– Desirability of the company maintaining a
reputation for high standards of business
conduct.
– Need to act fairly between members of the
company.
The Board has discussed these obligations
throughout the year, including how stakeholder
engagement is incorporated into our long-term
decision-making. You can read further details on
pages 74 to 78.
The Board’s decision-making considers both risk
and reward as our business aims to deliver long-
term value for all of our stakeholders, and protect
their interests. Awareness and understanding of the
current and potential risks, including both financial
and non-financial risks, are fundamental to how we
manage the business.
Further information on how risks are appropriately
assessed, monitored, controlled and governed is
provided in the Risk management section.
You can read more about how the Board engaged
with and considers the interest of stakeholders
on pages 74 to 78.
44 abrdn.com Annual report 2022
Clients
Our strategy is rooted in understanding
how we can deliver the outcomes that
clients expect, driven by their needs, wants
and aspirations. We organise our business
to reflect the diverse needs of our clients in
different markets and the different ways in
which our clients interact with us. The
launch of our single global brand also helps
to remove confusion from previously
having five client-facing brands.
Shareholders
The support of our shareholders is crucial
to growing our business, and we engage
with shareholders to ensure that we have
the support to pursue our strategic
objectives. As we deliver on our growth
strategy, we also know that generating
value for our shareholders remains hugely
important.
How we engage
In our Investments business, local investment teams,
aided by global ESG expertise, help clients anticipate,
and plan and invest for future scenarios. In our Adviser
business, we provide support, expertise and technology
for UK wealth managers and financial advisers to create
value for their businesses and their clients. In our
Personal business, we integrate financial planning and
discretionary investment management with digitally
enabled direct investing to enhance our offering.
We collaborate across our Investments, Adviser and
Personal businesses to connect our clients with wide
ranging expertise and diverse perspectives.
As individuals take greater responsibility for their own
savings needs, ii and Finimize continue to help us
respond to this trend. Both Finimize and ii are helping us
to build a bigger picture of data and insights of our
customer base.
In 2022 we have continued to build on our awareness
programme around our brand and celebrated 365
days of abrdn in July. We are continuing with the next
phase of our advertising campaign.
How we engage
Our Annual General Meetings offer shareholders the
opportunities to interact directly with our Chair and
Board, and importantly share their views. We also use
regular mailings to keep shareholders informed about
dividend payments, financial results and shareholder
meetings with institutional investors and analysts.
In 2022, we also held a General Meeting to invite
shareholders to vote on the acquisition of ii. This was
accompanied by shareholder mailings.
At this year’s AGM, we will be using a new voting
mechanism which will allow shareholders to vote on
resolutions remotely, live during the webcast.
Showcasing our ESG insights
A notable aspect of our awareness campaign is a
partnership with Bloomberg. Through a series of
micro-documentaries featuring internal and external
ESG experts, we address the most pressing issues
around ESG and how the finance sector can support
credible solutions. The series is hosted on both
Bloomberg and abrdn channels, with the first episode
going live in November 2022 to coincide with COP27.
The campaign showcases our capabilities, expertise
and insight across ESG factors, while helping our
clients to understand how we can help them navigate
this complex yet globally important topic.
45abrdn.comAnnual report 2022
STRATEGIC REPORT
Sustainability – Governance continued
Non-financial
information
Our vision for a better future starts with
asking more of ourselves, and we set high
standards to hold ourselves to.
Our global code of conduct describes the standards of
behaviour we expect in our business. We review it
annually, and all our colleagues are expected to read,
agree and adhere to its principles. The code focuses on
doing the right thing and putting our clients at the heart
of our business. This includes what colleagues should do
if they have concerns about issues such as bribery and
corruption, environmental or human rights.
The code details a number of our policies that we
expect them to read and adhere to, including our
modern slavery statement. We also have a legal and
regulatory duty to prevent, detect and deter financial
crime, including bribery and corruption, to protect our
business and our clients’ information and assets.
We strive to build effective and supportive relationships
with our third parties, and we expect them to follow the
same standards and principles that our teams and
colleagues do. Our global third-party code of conduct
sets out these expectations, and we expect them to
demand the same from their own supply chains. It also
details the whistleblowing procedures that we make
available to them as well as to our colleagues. On a
regular and risk proportionate basis, we carry out due
diligence of our third parties, covering key social issues.
Measuring our progress
Global code of conduct
Each year, colleagues complete an online training
module to confirm they understand and will comply
with our global code of conduct. This module also
included training on modern slavery issues. The
completion rate in 2022 was 99% and our 2023 module
launched in February this year. This percentage is
reported in aggregate and includes individuals out of
the business on extended leave, for example, who are
exempt from training until returning to work. Where
employees fail to complete mandatory training, we
have taken steps to ensure that managers and HR are
made aware.
Respect for human rights
We are committed to identifying and upholding the
human rights of our people, clients, communities and
everyone impacted by our suppliers, partners and the
companies we invest in. In our investments, we use our
internally developed human-rights index to help identify
high risk geographies, and we have published position
statements on integrating human rights into our
investment approach. We also publish the outcomes of
our engagements with investee companies, including
engagements on human rights matters in our annual
Stewardship Report. Our Modern Slavery Statement
sets out our approach to tackling all forms of modern
slavery. This ranges from human trafficking and forced
labour, to bonded labour and child slavery. We are
particularly alert to the human-rights risks from
interconnected supply chains and our annual
statement reports additional information on the actions
we are taking, as we take steps to enhance our due
diligence, track specific metrics, and support third party
suppliers with fair and inclusive practices. More detail at
www.abrdn.com/annualreport
Financial crime prevention
We have an effective approach to managing financial
crime risks, both within our business and among
suppliers and partners. Following an independent
assessment of our anti-money laundering framework,
we launched a multi-year transformation programme
in 2021 focused on implementing ongoing
enhancements to the framework, and carried out
extensive work to define and implement consistent anti-
money laundering standards across the company.
Mandatory compliance training
abrdn provides mandatory training to colleagues to
ensure clear understanding of critical regulatory and
legal obligations on the organisation and individuals.
Training is tailored to individuals depending on their role
and location, with topics including Anti-financial crime,
Conflicts of interest, and Privacy and Data Protection.
The content is refreshed annually and delivered via e-
learning modules, and we maintain an associated
compliance training policy to outline requirements, and
disciplinary actions linked to failure to complete the
learning. 99% of mandatory training had been
completed by abrdn colleagues globally as at
31 December 2022.
46 abrdn.com Annual report 2022
Non-financial and sustainability information statement
We aim to comply with the Non-Financial Reporting requirements contained in sections 414CA and 414CB of the
Companies Act 2006. This information is intended to help stakeholders better understand how we address key non-
financial matters. Details of our principal risks and how we manage those risks are included in the Risk management
section.
Reporting requirement Relevant policies and publications Where to find more information
Environment Our sustainability overview and TCFD report overview Sustainability overview (pages 28 and 29)
Sustainability – Environment (pages 30 to 39)
Employees Global code of conduct
1
Sustainability – Governance (page 46)
Employee policies Sustainability – Social (pages 40 to 43)
Human rights Global code of conduct
1
Sustainability – Governance (page 46)
Modern slavery statement
2
Sustainability – Governance (page 46)
Social matters Our people and communities Sustainability – Social (pages 40 to 43)
Global third-party code of conduct
1
Sustainability – Governance (page 46)
Other matters Anti-bribery and corruption Sustainability – Governance (page 46)
Business model Our business model (pages 10 and 11)
Non-financial KPIs Sustainability – Environment (pages 38 and 39)
Sustainability – Social (pages 40 and 42)
1. Group policy published on our website at www.abrdn.com/annualreport
2. Group statement published on our website at www.abrdn.com/annualreport
47abrdn.comAnnual report 2022
STRATEGIC REPORT
Key performance indicators
Our key performance
indicators
Net operating revenue
1
£1,456m
Cost/income ratio
82%
This measure is a component of adjusted operating profit and
includes revenue we generate from asset management
charges, platform charges and other transactional/advice
charges and treasury income.
This ratio measures our efficiency. We are focused on
improving our cost/income ratio by increasing revenue and
continued cost discipline.
Adjusted operating profit
£263m
Adjusted diluted earnings per share
10.5
p
Adjusted operating profit is our key alternative performance
measure and is how our results are measured and reported
internally.
This measure shows on a per share basis our profitability and
capital efficiency, calculated using adjusted profit after tax.
IFRS (loss)/profit before tax
(
£615m
)
Full year dividend per share
14.6
p
IFRS profit/loss before tax is the measure of profitability set out
in our financial statements. As well as adjusted profit, it includes
items such as restructuring costs, profit on disposal of interests
in associates and goodwill impairment.
The total annual dividend (interim and final) is an important
part of the returns that we deliver to shareholders and is
assessed each year in line with our stated policy to hold at
14.6p until it is covered at least 1.5 times by adjusted capital
generation.
Adjusted capital generation
£259m
This measure aims to show how adjusted profit contributes to
regulatory capital.
’22
’21
’20
82%
79%
85%
’22
’21
’20
(£615m)
£1,115m
£838m
’22
’21
’20
£263m
£323m
£219m
’22
’21
’20
10.5p
13.7p
8.8p
’22
’21
’20
14.6p
14.6p
14.6p
’22
’21
’20
£1,456m
£1,515m
£1,425m
’22
’21
’20
£259m
£366m
£262m
APMKPI
APMKPI
APMKPI APMKPI
KPI KPI
APMKPI
48 abrdn.com Annual report 2022
1. The revenue measure included within adjusted operating profit has been renamed from fee based revenue to net operating revenue. See page 53
for more information.
2. The calculation of investment performance has been revised to use a closing AUM weighting basis. 2021 comparatives have been restated. See
page 55 for more information.
Investment performance
2
(Percentage of AUM above benchmark over three years)
65%
Employee engagement survey
50%
This measures our performance in generating investment
return against benchmark. Calculations for investment
performance are made gross of fees except where the stated
comparator is net of fees.
This measure is important in gauging the engagement and
motivation of our people in their roles. It also enables our
managers at all levels to take local action in response to what
their teams are telling them.
Other indicators
AUMA
£500bn
Gross inflows
£69.0bn
Net flows — Total
(
£37.9bn
)
Net flows – excl. liquidity and LBG
tranche withdrawals
(
£10.3bn
)
IFRS diluted earnings per share
(
26.8
p)
Alternative performance measures
We assess our performance using a variety of performance
measures including APMs such as cost/income ratio, adjusted
operating profit, adjusted profit before tax and adjusted
capital generation.
APMs should be read together with the Group’s IFRS financial
statements. Further details of all our APMs are included in
Supplementary information.
’22
’21
’20
65%
78%
66%
’22
’21
’20
50%
51%
72%
’22
’21
’20
£69.0bn
£72.3bn
£74.3bn
’22
’21
’20
(£6.2bn)
(£29.0bn)
(£37.9bn)
’22
’21
’20
(£3.2bn)
(£12.3bn)
(£10.3bn)
’22
’21
’20
£500bn
£542bn
£535bn
’22
’21
’20
(26.8p)
46.0p
37.9p
APM
KPI
KPI
49abrdn.comAnnual report 2022
STRATEGIC REPORT
Chief Financial Officer’s overview
Stephanie Bruce Chief Financial Officer
Performance impacted in a difficult
macroeconomic environment
The impact and confluence of the challenging events of
2022 could not have been predicted. The IFRS result is a
loss before tax of £615m (2021: profit £1,115m) including
the impact of lower market levels on revenue,
impairment of intangible assets in the Investments
vector, and lower values for our significant listed
investments.
Our diversification of the business in order to harness the
changing market trends and improve the resilience of
the financial performance has proved beneficial in these
markets and has delivered results in 2022. While
adjusted operating profit of £263m (2021: £323m) is 19%
lower, this comprises a reduction of £139m in
Investments, principally due to the decline in revenue,
which is significantly offset by the increase of £76m in
profits from Adviser and Personal, including seven
months of ii and both businesses growing revenue and
profits.
The contribution from Adviser and Personal, both
operating in the UK savings and wealth arena,
represented 60% of the group’s adjusted operating profit
in 2022. The shape of the group has been transformed
following the acquisition of ii which completed in May
2022 and marked an important step forward in
delivering the strategy. Following the ii acquisition in May,
Adviser and Personal vectors contributed 76% of
adjusted operating profit in H2 2022.
Our discipline on both targeting cost savings and
reinvesting in areas of growth has continued. Following
gross cost savings of £267m in 2020 and 2021, further
savings of £84m or 7% benefited the results in 2022. All
vectors reduced costs over 2022 (assuming 12 months
of ii) although in Investments, responding to inflationary
pressures on staff costs contributed to the lower
reduction of 1% in the second half of 2022. The weak
operating margin in Investments reinforces why the
simplification of the operating model is underway and is
now expected to deliver net c£75m savings in 2023.
Acquisitions of ii, Tritax and Finimize which are all
generating revenue, increased costs for the group by
£65m (5%) in 2022. Foreign exchange impacts of c£20m
were notably higher in the second half of 2022 but were
more than offset by the benefits in revenue.
Our disciplined approach to capital management
continues, resulting in £1.1bn of capital resources
generated in 2022, including £0.8bn of capital from listed
stake sales. We redeployed £1.4bn for the purchase of ii
which has been immediately earnings accretive. We
returned £0.6bn to shareholders by way of £0.3bn in
dividends and £0.3bn in share buybacks. At 31
December 2022, our capital position remains strong, with
cash and liquid resources of £1.7bn and surplus
regulatory capital of £0.7bn.
Drivers of revenue performance in 2022
Assets under management and administration (AUMA)
have been impacted by three key factors in 2022:
market levels, the final withdrawals of LBG assets and
the acquisition of ii. At 31 December 2022, AUMA was
£500bn, 8% lower than prior year and average AUMA in
2022 was £478bn (excluding ii), 10% lower than 2021.
This decrease is concentrated in Investments. While
there had been some signs of markets improving in July,
the second half of the year saw continued volatility, with
the main global market indices ending the year lower,
with the exception of the FTSE 100. abrdn’s investment
bias in Asia and emerging markets increased the impact
suffered in revenue during 2022 as those indices
experienced double digit losses.
Given the reliance on market levels, the impact on net
operating revenue of lower AUMA is most marked in
Investments, contributing c£95m of the £161m reduction
in Investments’ revenue. Average AUM in Investments
declined by 11%, largely driven by LBG tranche
withdrawals and adverse market movements,
particularly in equities. In combination, this reversed the
progress seen in 2021, resulting in 13% lower
Investments revenue in 2022. Within the asset classes,
revenue in Public markets (equities, fixed income, multi-
asset, quantitatives and liquidity) declined by 18% to
£746m, while in Alternatives asset classes (real assets,
alternatives, private equity and private credit) revenue
of £324m, was 2% higher, benefiting from a full year
contribution from Tritax.
While AUMA as a driver has been negative for
Investments in 2022, our focus on diversification of the
group’s revenues has benefited performance. ii’s
subscription model does not rely on market levels and
account fees, together with higher net interest margin
on customer cash balances (treasury income) in 2022,
more than offset lower trading activity by customers. For
the period since acquisition, ii contributed £114m to
revenue in 2022. While Adviser is impacted by market
levels, continued net positive inflows in 2022, combined
with the benefit from higher treasury income, increased
revenue by 4% to £185m. Treasury income totalled
£69m across the Personal and Adviser vectors due to
increased interest rate levels throughout 2022.
50 abrdn.com Annual report 2022
Overall, the diversification that now drives our sources of
revenue has helped to mitigate the impact of the market
volatility in 2022, with an overall reduction in net
operating revenue of £59m (4%), to £1,456m.
Changing nature of our flows during 2022
Excluding LBG tranche withdrawals and liquidity, total
net outflows were £10.3bn, representing 2% of opening
AUMA, compared with c0.5% last year. Total net outflows
were £37.9bn (2021: £6.2bn) reflecting the final LBG
tranche withdrawal of £24.4bn.
Client and customer activity and resulting flows varied
by vector in these volatile markets.
In Investments, net outflows of £13.4bn (2021: outflows
£7.6bn) (excluding LBG tranche withdrawals and
liquidity) represent 3% of opening AUM, reflecting the
uncertain market environment which impacted the
wider industry.
Insurance flows are now largely represented by Phoenix
after the final LBG exits were completed this year.
Insurance activity benefited from £2.9bn of gross inflows
from bulk purchase annuities and £5.4bn of gross inflows
into low margin quantitatives which were offset in the
last quarter by the withdrawal of £6.3bn of actively
managed equity funds reflecting Phoenix’s change in
investment approach. Reflecting the annualised revenue
reduction of this withdrawal of £9m, a one-off
contractual payment was received in the last quarter,
equivalent to a year’s revenue.
Within the insurance sector more broadly, the changing
approach to asset strategies represents a headwind for
the margin of this business activity. We expect continued
changes in this area from certain active equity and fixed
income strategies to passive quantitative strategies
which, together with related pricing changes, will result in
further contraction of yields. The impact in 2023 will be
dependent on the timing of these changes during the
year.
Overall, gross inflows in Investments (excluding liquidity)
were 14% lower in 2022, reflecting lower client demand
for equities and fixed income funds. Redemptions
(excluding LBG tranche withdrawals and liquidity) were
3% lower.
Our UK wealth and savings businesses continue to
deliver net positive inflows, although lower than 2021 due
to overall muted levels of retail customer activity in the
second half of the year. Within Adviser, net inflows of
£1.6bn are 59% lower than 2021 reflecting lower client
activity across the industry due to ongoing market
uncertainty. Activity in Personal is dominated by ii where
net flows remain robust, while lower than the record
levels seen in 2021.
Continued reshaping of operating
expenses
We have focused on what we can control. We have
made further improvements in the shape of our cost
base by investing in areas of growth through the
acquisition of ii and Tritax, together with introducing
further variability into the cost base by outsourcing
specific activities across the group and reducing FTE
(excluding ii) by 14% over 2022. Operating margins in
both Adviser and Personal are efficient, while in
Investments, the operating margin continues to be
inefficient for the AUM and revenue generated in this
vector, reinforcing the activity required to simplify the
operating model.
Overall adjusted operating expenses were flat
compared with last year. Cost savings were 7% in 2022,
largely driven by disposals and staff and technology
reductions, while other cost actions were lower than
anticipated due to increased staff cost inflation in
Investments in the second half of the year. This was
offset by 5% higher costs due to investments into
revenue generating acquisitions, and adverse foreign
exchange movements which increased reported costs
by 2%.
Our ambition of a 70% cost/income ratio for the group
remains, however this requires us to significantly improve
the cost/income ratio in the Investments vector. In 2022,
Investments costs were 2% lower as a result of lower
staff and variable compensation levels. With the
investment platform integration completed in 2022, the
simplification of Investments’ operating model
commenced achieving small early successes. This
informed the expected savings profile. With the detailed
work on simplification now well underway, delivery of net
cost savings of c£75m in the Investments vector are now
targeted in 2023. This excludes any cost reductions that
may arise from non-core disposals in the vector. While
non-core disposals are an important component of the
plan, given the unpredictable nature of the timing of any
non-core disposals, these are excluded from our
expectations on costs movements until such time as
these transactions occur.
In Adviser, costs reduced by 5%, reflecting reduced
headcount as some of our colleagues transferred to our
major supplier under an improved outsourcing
arrangement.
Within Personal, ii’s costs of £47m reflected the period
since acquisition. Costs in both Adviser and Personal are
expected to grow in 2023 reflecting growth in revenue,
benefiting the group from their efficient cost models.
The overall group cost/income ratio (CIR) increased to
82% from 79% in 2021. At a vector level, Adviser and
Personal, CIRs were 54% (2021: 58%) and 64% (2021:
91%) respectively, while Investments CIR at 89% (2021:
79%) reflects lower revenue levels.
51abrdn.comAnnual report 2022
STRATEGIC REPORT
Chief Financial Officer’s overview continued
Disciplined approach to capital allocation
delivers shareholder value
Adjusted capital generation of £259m is 29% lower than
2021. During 2022, we completed a further buyback of
£300m at an average cost of £1.68 per share and
reducing the number of shares by 179m, benefiting
earnings per share by 3%. Reflecting the lower profit in
2022, adjusted diluted earnings per share reduced to
10.5p (2021: 13.7p) and the IFRS diluted earnings per
share was a loss of 26.8p (2021: profit 46.0p).
We also redeemed £92m of debt in December 2022
which had a rate of 5.5% and due to reset at a higher
rate. We now have in issue £210m of AT1 debt paying
fixed interest of 5.25% which was issued in December
2021 and Tier 2 debt of £569m swapped into sterling
and fixed at 3.2%. The debt stack is now optimised for
our funding needs, with interest rates locked in prior to
the rate increases experienced in 2022.
Following actions taken in recent years to reduce risk in
abrdn’s principal defined benefit pension plan, we are
working with the trustee on next steps. In connection
with this de-risking work, the trustee expects to submit a
petition to the Court of Session during H1 2023 that will
seek direction on the destination of any residual surplus
assets that remain after all plan-related obligations are
settled or otherwise provided for. Any such residual
surplus would be determined on a different basis to the
IAS 19 or funding measures of the plan surplus. The IAS
19 defined benefit plan asset is not included in abrdn’s
regulatory capital surplus.
Restructuring expenses of £169m (2021: £224m)
comprised severance, platform transformation and
specific costs to effect savings in Investments, which
reflected additional costs to complete platform
transformation and the acceleration of staff exits
compared to previous expectations. Corporate
transaction costs of £45m (2021: £35m) are higher than
2021 largely in relation to ii.
During 2022, we returned £0.6bn to shareholders,
£0.3bn through buybacks and £0.3bn in dividends. The
dividend cost has reduced to £295m, and cover at 0.9x
on an adjusted capital generation basis equates to a net
impact on capital of c£35m. Our dividend policy for
2022 remains unchanged at a total annual dividend of
14.6p per share until such time as the dividend is
covered 1.5x by adjusted capital generation.
The IFRS loss before tax of £615m reflects principally the
reduction of £187m in the value of the listed stakes in
HDFC Life, HDFC Asset Management and Phoenix and
impairments of £369m, comprising £328m in
Investments and £41m for Finimize which was
purchased in 2021. These impairments reflect lower
projected revenues as a result of the lower markets,
macroeconomic conditions and 2022 results being
below previous expectations. For Investments, the key
impairment drivers also include the expected reduction
in Phoenix revenue from asset strategy and related
pricing changes, and the further work required to
reduce the cost/income ratio and to improve net flows.
Our strong capital position provides us with resilience
during periods of economic uncertainty and volatility.
We have a disciplined approach to generation and
allocation of our capital:
– Our major capital investment in ii was completed at
a time when the impact of the current economic
conditions could not have been envisaged. ii is
performing ahead of our expectations, including a
stronger performance in treasury income. It is
evident that ii will be double digit earnings enhancing
for the group in the first full year of ownership. Based
on the last seven months of 2022, the £1.49bn
purchase price represents a multiple of 16 times
annualised post tax adjusted earnings.
– We will redeploy the proceeds from non-core
disposals into the business to support growth,
including covering future restructuring costs to
improve the efficiency of the business. Restructuring
costs (excluding corporate transaction costs) are
expected to be c£0.2bn in 2023, primarily related to
the continued reshaping of the Investments vector.
– Subject to economic conditions, we will continue to
explore inorganic investments that are bolt-on in
nature and we expect to allocate capital to support
such opportunities.
– Our capital strength also benefits from the value of
our listed stakes in HDFC Asset Management, HDFC
Life and Phoenix, which at 31 December 2022 had a
total value of £1.3bn and is additional to the
regulatory capital surplus.
– As part of our approach to allocating capital, the
buffer of £0.5bn provides a level of management
flexibility and capital strength and resilience during
periods of volatility.
– We are committed to return a significant proportion
of capital generated from further stake sales by way
of further share buybacks which will continue to
reduce the share count, benefiting earnings per
share and lowering the absolute cost of the dividend.
Looking forward
The outlook for global markets remains uncertain and
while this presents risks, we are taking actions to put our
Investments business on a better footing through both
focusing on our key areas of strength to drive revenue
growth and simplifying the operating model to enable
an efficient cost base. In the short term, additional
headwinds arise from changing client demand and
preferences. The benefits of diversification are already
evident with our Adviser and Personal vectors on a
stronger trajectory of growth with more efficient
operating margins.
We will continue to be disciplined in our allocation of
capital to invest in the business in order to drive growth
and to support continued returns to shareholders. We
understand the importance of dividend income to a
large portion of our shareholder base and are
committed to our stated dividend policy, together with
returning a significant proportion of proceeds from
further stake sales through share buybacks. We
returned £0.6bn of capital to shareholders by way of
dividends and buybacks in 2022, and intend to return a
similar level in 2023.
52 abrdn.com Annual report 2022
1. The revenue metric included within adjusted operating profit has been renamed from fee based revenue to net operating revenue. For 2022
this measure is aligned to net operating revenue as presented in the IFRS consolidated income statement. For 2021 this measure of segmental
revenue excludes £28m of net operating revenue as presented in the IFRS consolidated income statement which was classified as adjusting items.
See page 177 for more information.
2. This reflects the estimated impact on net operating revenue of net outflows in both current and prior years, as a percentage of prior year revenue.
3. See Supplementary information for a reconciliation to IFRS staff and other employee related costs.
Results summary
Analysis of profit
2022
£m
2021
£m
Net operating revenue
1
1,456 1,515
Adjusted operating expenses (1,193) (1,192)
Adjusted operating profit
263 323
Adjusted net financing costs and investment return (10) -
Adjusted profit before tax
253 323
Adjusting items including results of associates and joint ventures (868) 792
IFRS (loss)/profit before tax
(615) 1,115
Tax credit/(expense) 66 (120)
IFRS (loss)/profit for the year (549) 995
The IFRS loss before tax was £615m (2021: profit £1,115m) largely due to adjusting items of £868m:
– Impairments of goodwill and customer intangibles were £369m (2021: £nil). See page 59 for more details.
– Losses of £187m (2021: losses £298m) from the change in fair value of significant listed investments (HDFC Asset
Management, HDFC Life and Phoenix) as a result of the fall in the share price of these companies in 2022.
– Restructuring expenses were £169m (2021: £224m). Corporate transaction expenses were £45m (2021: £35m)
reflecting principally the acquisition of ii.
– Adjusting items in 2021 benefited from a profit on disposal of interests in associates of £1,236m.
Adjusted operating profit was 19% lower than 2021, largely due to 4% lower revenue as a result of lower market levels
which particularly impacted high yielding equities. The 2022 results include a contribution from ii for the seven months
to 31 December 2022 which benefited net operating revenue by £114m and adjusted operating profit by £67m.
Net operating revenue
1
Net operating revenue reduced by 4% reflecting:
– Impact from net outflows
2
excluding LBG of 2%
(2021: 4%), and adverse yield movements.
– Significant c£109m impact of adverse markets on
AUMA.
– Net benefit from corporate actions of c£100m mainly
due to £114m from ii. This was partly offset by the net
impact of other corporate actions during 2021 and
2022 relating to the disposals of Parmenion, Nordics
and Bonaccord, and acquisitions of Tritax and
Finimize.
– Other includes a benefit from FX movements of
c£24m and the £9m one-off Phoenix payment, partly
offset by the impact of lower LBG revenue following
the final tranche withdrawals. Performance fees
were £30m (2021: £46m) from Asia, real assets and
insurance.
Adjusted operating expenses
2022
£m
2021
£m
Staff costs excluding variable
compensation
527 517
Variable compensation 85 126
Staff and other related costs
3
612 643
Non-staff costs 581 549
Adjusted operating expenses
1,193 1,192
Adjusted operating expenses were broadly flat after the
inclusion of £47m of ii expenses for the post acquisition
period, reflecting:
– 3% lower staff costs (excluding variable
compensation and ii), with the benefit of lower FTEs
(14%), partly offset by wage inflation.
– Lower variable compensation in line with
Investments vector performance.
– 6% increase in non-staff costs, principally due to ii.
Excluding ii, non-staff costs increased by 1% with
cost savings offset by the impact of inflation, IT costs
associated with regulatory change and c£20m from
adverse FX movements.
The cost/income ratio increased to 82% (2021: 79%) as
a result of the lower revenue in Investments.
Markets
Yield
2022
Net flows
(
excl LBG
)
Corp
actions
Perf fees, FX
and other
2021
£1,515m
£1,456m
(£23m)
(£109m)
£4m
£100m
(£31m)
53abrdn.comAnnual report 2022
STRATEGIC REPORT
Chief Financial Officer’s overview continued
Investments
Total Institutional and Wholesale Insurance
2022 2021 2022 2021 2022 2021
Net operating revenue
1
£1,070m £1,231m
Adjusted operating expenses (£956m) (£978m)
Adjusted operating profit
£114m £253m
Cost/income ratio 89% 79%
Net operating revenue yield
25.4bps 25.9bps 36.1bps 38.8bps 10.5bps 10.0bps
AUM
£376bn £464bn £231bn
2
£253bn £145bn
2
£211bn
Gross flows
£59.3bn £63.4bn £36.5bn £41.9bn £22.8bn £21.5bn
Redemptions
(£100.3bn) (£74.0bn) (£48.1bn) (£47.0bn) (£52.2bn) (£27.0bn)
Net flows
(£41.0bn) (£10.6bn) (£11.6bn) (£5.1bn) (£29.4bn) (£5.5bn)
Net flows excluding liquidity
3
(£37.8bn) (£7.6bn) (£8.4bn) (£2.1bn) (£29.4bn) (£5.5bn)
Net flows excluding liquidity and LBG
3,4
(£13.4bn) (£7.6bn) (£8.4bn) (£2.1bn) (£5.0bn) (£5.5bn)
Investments vector faced market headwinds
Adjusted operating profit
–
£139m (55%) reduction compared to 2021,
reflecting 13% lower revenue and 2% lower costs.
–
Cost reduction driven by lower staff costs, reflecting
lower FTEs and lower variable compensation. This is
partly offset by the impact of staff cost
inflation in H2
2022 and higher IT costs associated with regulatory
change and the adverse impact of FX.
Net operating revenue
–
13% lower than 2021 largely due to lower market
performance
impacting average AUM, particularly in
equities.
–
Performance fees of £30m (2021: £46m) including
strong performance fees from real assets, albeit the
overall total is lower than the level seen in 2021.
–
Revenue in 2022 includes £9m one-off benefit as
compensation for the £6.3bn Phoenix asset
withdrawal.
Institutional and Wholesale
Net operating revenue
–
13% lower at £878m (2021: £1,012m) due to £14bn
reduction in average AUM to £236
bn (2021: £250bn).
This reflects lower market values in equities, fixed
income and multi-asset AUM, partly offset by a full
year of revenue in Tritax, compared with nine
months in 2021, and c25% growth in Tritax average
AUM.
Revenue yield
–
2.7bps lower to 36.1bps largely due to the decrease
in the higher margin equities average AUM
impacting the asset mix. Equities are 24% (2021:
28%) of average AUM at a yield of 62.5bps while real
assets accounted for 18% (2021: 14%) at 44.4bps.
–
Multi-asset revenue yield has declined as in 2022
MyFolio accounts for the majority of AUM in this asset
class.
Gross flows
–
Excluding liquidity, £9.0bn (25%) lower at £26.3bn
(2021: £35.3bn) mainly in fixed income and equities.
This reflected the client response to the uncertain
market environment which impacted the wider
industry, as many clients delayed investment
decisions.
Net flows
–
Net outflows were £6.3bn higher than 2021 at £8.4bn
(excluding liquidity), largely due to the lower level of
gross inflows partly offset by a £2.7bn improvement
in redemptions.
–
Excluding liquidity, net outflows represent 4% of
opening AUM compared with 1% in 2021.
1. Includes performance fees of £30m (2021: £46m).
2. Following completion of the LBG tranche withdrawals, the remaining LBG AUM of c£7.5bn which has been retained was reallocated to quantitatives
in Institutional/Wholesale.
3. Institutional and Wholesale liquidity net flows excluded.
4. Flows excluding LBG do not include the tranche withdrawals of £24.4bn (2021: £nil) relating to the settlement of arbitration with LBG.
Adjusted
operating profit
£114m
Net operating
revenue
£1,070m
Net operating
revenue yield
25.4bps
Net flows (excl
liquidity & LBG)
(£13.4bn)
54 abrdn.com Annual report 2022
1. The calculation of investment performance has been revised to use a closing AUM weighting basis. 2021 comparative has been restated. We
believe that this approach provides a more representative view of current investment performance. Calculations for investment performance are
made gross of fees except where the stated comparator is net of fees. Benchmarks differ by fund and are defined in the investment management
agreement or prospectus, as appropriate. These benchmarks are primarily based on indices or peer groups. Further details about the calculation of
investment performance including the revised methodology are disclosed in the Supplementary information section.
Insurance
Net operating revenue
–
12% lower in 2022 at £192m (2021: £219m),
including the impact of LBG tranche withdrawals
and lower average AUM, offset by the £9m one-off
Phoenix compensation in 2022.
Revenue yield
–
Net operating revenue yield improved slightly to
10.5bps. Excluding the one-off Phoenix
compensation of £9m, the yield was flat at 10.0bps.
AUM
–
LBG AUM within Insurance is £nil (2021: £33.6bn). This
reflects the final tranche withdrawal of £24.4bn in H1
2022 with c£7.5bn of assets retained under a new
quantitatives mandate included within I
nstitutional to
better reflect how the relationship is now being
managed.
–
Phoenix AUM decreased £32bn or 18% largely due
to £28bn of adverse market movements.
Gross flows
–
£1.3bn higher than 2021, with £5.4bn of gross inflows
into low margin quantitatives partly offset by lower
bulk purchase annuity inflows of £2.9bn (2021:
£5.2bn).
Net flows
–
Net outflows of £5.0bn (2021: outflows £5.5bn)
excluding LBG tranche withdrawals of £24.4bn.
–
Net outflows include withdrawal by Phoenix of
£6.3bn of UK equities in Q4 2022 due to a change in
Phoenix’s approach to asset allocation strategies.
This is partly offset by the higher gross inflows into
low margin quantitatives highlighted above.
Investment performance
% of AUM ahead of benchmark
1
1 year 3 years 5 years
2022 2021 2022 2021 2022 2021
Equities 30 37 63 74 65 65
Fixed income 65 58 72 79 79 81
Multi-asset
13 72 50 73 22 70
Real assets
57 86 63 58 52 62
Alternatives
88 87 100 98 100 98
Quantitative
17 99 27 15 29 42
Liquidity
84 89 97 92 97 92
Total
41 66 65 78 58 77
Investment performance over the key three-year time period has weakened, with 65% of AUM covered by this
metric ahead of benchmark (2021: 78%). The sharp rotation in equities from growth to value in late 2021 and H1 2022
impacted many of our equity strategies which focus on quality and growth outcomes. One-year performance was
particularly impacted, however longer term equities performance remains robust.
Over the key three-year time period, we have consistently delivered strong performance in alternatives as well as
fixed income in the unprecedented interest rate environment. Multi-asset performance over one, three and five
years was weaker with absolute return strategies relying on traditional portfolio diversification, primarily equities and
fixed income, suffering negative returns.
Real assets valuation yields have weakened given the higher interest rate backdrop which has impacted one-year
performance, however, long-term sector conviction remains strong.
55abrdn.comAnnual report 2022
STRATEGIC REPORT
Chief Financial Officer’s overview continued
1. Source: UK Adviser platform, Fundscape Q3 2022.
Adviser
2022 2021
Net operating revenue £185m £178m
Adjusted operating expenses (£99m) (£104m)
Adjusted operating profit
£86m £74m
Cost/income ratio 54% 58%
Net operating revenue yield
26.1bps 24.9bps
AUA
£69bn £76bn
Gross flows
£6.6bn £9.1bn
Redemptions
(£5.0bn) (£5.2bn)
Net flows
£1.6bn £3.9bn
Resilient performance from leading Adviser platforms
Adjusted operating profit
–
Profit increased to £86m, against a backdrop of
challenging market conditions.
–
Cost/income ratio improved to 54% with lower
operating expenses benefiting from outsourcing
activity in 2022.
Net operating revenue
–
4% higher than 2021 with net interest margin on
client cash balances increasing to £11m
(2021: £1m), reflecting the rise in interest rates. This
was partly offset by the impact of lower average
AUA.
–
The average margin earned on client cash balances
during 2022 was c85bps. The indicative Adviser
average cash margin for 2023 is 160-180bps.
Revenue yield
–
Increased to 26.1bps. due to the higher revenue
explained above.
–
Average AUA of £71bn is 1% lower than 2021.
AUA
–
10% decrease in 2022 due to adverse markets,
partly offset by net inflows.
–
Retained our number one position in UK adviser
platform market by AUA
1
.
Gross flows
–
Sales activity reduced by 27% in 2022, reflecting
muted client activity across the industry due to
ongoing market uncertainty and focus on short term
spending goals amongst the UK consumer base.
Net flows
–
Reduction in net inflows to £1.6bn reflects lower
gross flows and included a £0.2bn impact from a
client exit in H1 2022 due to the acquisition by a
consolidator.
Adjusted
operating profit
£86m
Net operating
revenue
£185m
Net operating
revenue yield
26.1bps
Net flows
£1.6bn
56 abrdn.com Annual report 2022
1. Net operating revenue yield is shown for Personal Wealth only. Revenue for interactive investor is not aligned with AUA and therefore revenue yield
is not presented.
2. Cash dividends which are retained on the ii platform are included in net flows for the ii business. See the Glossary for further details.
3. Results for interactive investor included following the completion of the acquisition on 27 May 2022.
Personal
Total interactive investor
3
Personal Wealth
2022 2021
7 months to
31 Dec 2022 N/A 2022 2021
Net operating revenue £201m £92m £114m £87m £92m
Adjusted operating expenses (£129m) (£84m) (£47m) (£82m) (£84m)
Adjusted operating profit
£72m £8m £67m £5m £8m
Cost/income ratio 64% 91% 41% 94% 91%
Net operating revenue yield
1
59.2bps 61.0bps
AUMA
£67.1bn £14.4bn £54.0bn £13.1bn £14.4bn
Gross flows
£5.6bn £1.7bn £4.1bn £1.5bn £1.7bn
Redemptions
(£3.7bn) (£1.1bn) (£2.5bn) (£1.2bn) (£1.1bn)
Net flows
2
£1.9bn £0.6bn £1.6bn £0.3bn £0.6bn
Accelerating revenue diversification with acquisition of ii
Adjusted operating profit
–
Higher profit reflects the inclusion of £67m for the
seven months results for ii.
–
ii has continued to perform well against an uncertain
market environment, with profit performance
remaining ahead of our expectations.
–
Personal Wealth’s adjusted operating profit in 2021
included a one-off benefit of c£3m which when
excluded highlights stable underlying performance
in 2022 at £5m.
–
Cost/income ratio improved to 64% as a result of ii’s
efficient operating leverage.
Net operating revenue
–
The increase in revenue reflects inclusion of £114m
from ii.
–
ii revenue continues to benefit from diverse revenue
streams. Treasury income for the seven months
contributed £58m, benefiting from interest rates
rising significantly throughout H2 2022. Revenue
from subscriptions continued to grow, including the
benefit from increased average customer numbers
compared with 2021. Trading revenue was
impacted by muted levels of customer activity given
the uncertain market conditions.
–
Personal Wealth revenue reduced by £5m due to
adverse market movements impacting AUMA and
lower margins from pricing and product mix.
Revenue yield
–
Personal Wealth revenue yield decreased to 59.2bps
resulting from pricing pressure and changes in
product mix. Average AUMA was £13.5bn, 4% lower
than 2021.
–
ii’s AUM of £55bn at acquisition was reported as a
corporate action in the year. As at 31 December
2022, ii’s AUA of £54bn reflects the benefit from net
inflows offset by adverse market movements and
includes customer cash balances of £6.0bn.
–
Personal Wealth AUMA decreased to £13.1bn
reflecting lower markets through 2022.
–
Total discretionary clients increased by 4% to
c16,600 (2021: c16,000).
–
ii customer numbers were broadly stable at
c402,000 (2021: c403,000). Excluding the tail run-off
of the two most recently acquired books (Share
Centre and EQi), net customer growth for the year
was 3%.
–
Number of ii customers holding a SIPP account
increased by 17% to c51,500 (2021: c43,900).
Gross and net flows
–
Total net flows of £1.9bn included £1.6bn for the
seven months of ii flows.
–
Reductions in gross and net flows for Personal
Wealth include the impact of market uncertainty
which has resulted in lower and more muted activity
by individuals across the industry. This included a
more modest tax year-end period.
AUMA
Adjusted
operating profit
£72m
Net operating
revenue
£201m
Net operating
revenue yield
59.2bps
Net flows
£1.9bn
57abrdn.comAnnual report 2022
STRATEGIC REPORT
Chief Financial Officer’s overview continued
1. Investments net flows exclude Institutional/Wholesale liquidity and LBG tranche withdrawals.
2. Adjusted operating loss consists of net operating revenue £nil (2021: £14m) and adjusted operating expenses £9m (2021: £26m). 2022 comprises of
only certain corporate costs. 2021 also included the Parmenion business which was held for sale. The sale of Parmenion completed in June 2021.
Overall performance
Adjusted operating profit AUMA Net flows
Segmental summary
2022
£m
2021
£m
2022
£bn
2021
£bn
2022
£bn
2021
£bn
Investments
1
114 253 376 464 (13.4) (7.6)
Adviser 86 74 69 76 1.6 3.9
Personal
72 8 67 14 1.9 0.6
Corporate/strategic
2
(9) (12) - - - 0.3
Eliminations
- - (12) (12) (0.4) (0.4)
Total
263 323 500 542 (10.3) (3.2)
Liquidity net flows (3.2) (3.0)
LBG tranche withdrawals (24.4) -
Total net flows (including liquidity and LBG)
(37.9) (6.2)
Analysis of profit
2022
£m
2021
£m
Net operating revenue 1,456 1,515
Adjusted operating expenses (1,193) (1,192)
Adjusted operating profit
263 323
Adjusted net financing costs and investment return (10) -
Adjusted profit before tax
253 323
Adjusting items including results of associates and joint ventures (868) 792
IFRS (loss)/profit before tax
(615) 1,115
Tax credit/(expense) 66 (120)
IFRS (loss)/profit for the year (549) 995
Adjusted net financing costs and investment return
Adjusted net financing costs and investment return resulted in a loss of £10m (2021: £nil):
– Investment losses, including from seed capital and co-investment fund holdings, were £34m (2021: gain £4m) due
to adverse market conditions in the year.
– Reduced net finance costs of £5m (2021: £21m) reflecting a higher rate of interest on cash and liquid assets.
– Higher net interest credit relating to the staff pension schemes of £29m (2021: £17m) reflecting an increase in the
opening discount rate due to a rise in corporate bond yields.
Adjusted
operating profit
£263m
IFRS loss
before tax
(£615m)
Adjusted
capital
generation
£259m
58 abrdn.com Annual report 2022
Adjusting items
2022
£m
2021
£m
Profit on disposal of interests in associates 6 1,236
Profit on disposal of subsidiaries and other operations - 127
Restructuring and corporate transaction expenses
(214) (259)
Amortisation and impairment of intangible assets acquired in business combinations and through
the purchase of customer contracts
(494) (99)
Change in fair value of significant listed investments
(187) (298)
Dividends from significant listed investments
68 71
Share of profit or loss from associates and joint ventures
2 (22)
Loss on impairment of interests in associates
(9) -
Other
(40) 36
Total adjusting items including results of associates and joint ventures
(868) 792
Profit on disposal of interests in associates of £6m relates
to the sale of our stake in Origo Services Limited in May
2022. The 2021 profit of £1,236m primarily related to
one-off accounting gains of £965m following the
reclassification of our HDFC Asset Management and
Phoenix shareholdings from associates to investments
measured at fair value. 2021 also included a £271m gain
from the sale of a 5% stake in HDFC Asset Management.
Profit on disposal of subsidiaries and other operations in
2021 primarily related to the sales of Parmenion and
Bonaccord.
Restructuring and corporate transaction expenses were
£214m, comprising restructuring costs of £169m in
severance, platform transformation and specific costs
to effect savings in Investments, and £45m of corporate
transaction costs largely in relation to the ii acquisition.
Further details are included in the Supplementary
information section.
Amortisation and impairment of intangible assets
acquired in business combinations and through the
purchase of customer contracts increased to £494m,
mainly due to the impairment of goodwill and customer
intangibles of £369m (2021: £nil). The impairments
comprise £328m in Investments and £41m for Finimize
which was purchased in 2021. These impairments
reflect lower projected revenues as a result of lower
markets, macroeconomic conditions and 2022 results
being below previous expectations; and for Investments
the expected reduction in Phoenix revenue from asset
strategy and related pricing changes, and further work
being required to reduce costs and grow to a net inflow
position. Further details are provided in Note 13 of the
Group financial statements.
Change in fair value of significant listed investments of
negative £187m from market movements is analysed in
the table below:
2022
£m
2021
£m
Phoenix (44) (82)
HDFC Asset Management (105) (164)
HDFC Life
(38) (52)
Change in fair value of significant
listed investments
(187) (298)
Dividends from significant listed investments relates to
our shareholdings in Phoenix (£52m), HDFC Asset
Management (£15m) and HDFC Life (£1m). In 2021,
dividends received from Phoenix were £69m (prior to
the reduction in our shareholding from 14.4% to 10.4% in
January 2022) and £2m from HDFC Life.
Share of profit or loss from associates and joint ventures
increased to a profit of £2m. Phoenix and HDFC Asset
Management were classified from associates in 2021.
The reduction in HASL reflects mainly lower investment
returns in 2022. Other relates principally to the share of
loss from our shareholding in Tenet Group Ltd.
2022
£m
2021
£m
HASL 7 19
Virgin Money UTM – (6)
Phoenix
– (56)
HDFC Asset Management
– 21
Other
(5) -
Share of profit or loss from
associates and joint ventures
2 (22)
Loss on impairment of interests in associates of £9m
relates to an impairment of Tenet Group Ltd.
Other adjusting items in 2022 primarily relates to a single
process execution event provision of £41m. See Notes
11 and 34 for further details. Other adjusting items in
2021 included a one-off £25m net release of deferred
income following the transfer of workplace pensions
marketing staff to Phoenix.
See pages 172 and 186 for further details on adjusted
operating profit and reconciliation of adjusted operating
profit to IFRS profit. Further details on adjusting items are
included in the Supplementary information section.
59abrdn.comAnnual report 2022
STRATEGIC REPORT
Chief Financial Officer’s overview continued
Tax policy
We have important responsibilities in paying and
collecting taxes in the countries in which we operate.
Our tax strategy is therefore guided by a commitment
to high ethical, legal and professional standards and
being open and transparent about what we are doing
to meet those standards.
Tax expense
The total IFRS tax credit attributable to the loss for the
year was £66m (2021: expense £120m), including a tax
credit attributable to adjusting items of £88m (2021:
expense £94m), resulting in an effective tax rate of 11%
on the total IFRS loss (2021: 11%). The difference to the
UK Corporation Tax rate of 19% is mainly driven by:
– Goodwill impairments that are not deductible for tax
purposes.
– Movements in the fair value of our investment in
HDFC Asset Management being tax effected at the
Indian long-term capital gains tax rate, which is
lower than the UK Corporation Tax rate.
– Fair value movements relating to our investments in
Phoenix and HDFC Life not being subject to tax.
– Offset by dividends from significant listed
investments not being subject to tax in the UK.
The tax expense attributable to adjusted profit is £22m
(2021: £26m), an effective tax rate of 9% (2021: 8%).
This is lower than the 19% UK rate primarily due to the
benefit of certain deferred tax assets being expected to
arise after the UK Corporation Tax rate increases to
25% in 2023.
Total tax contribution
Total tax contribution is a measure of all the taxes abrdn
pays to and collects on behalf of governments in the
territories in which we operate. Our total tax
contribution was £443m (2021: £447m). Of the total,
£186m (2021: £190m) was borne by abrdn whilst
£257m (2021: £257m) represents tax collected by
abrdn on behalf of the tax authorities. Taxes borne
mainly consist of corporation tax, employer’s national
insurance contributions and irrecoverable VAT. The
taxes collected figure is mainly comprised of pay-as-
you-earn deductions from employee payroll payments,
employees’ national insurance contributions, VAT
collected and income tax collected on behalf of HMRC
on platform pensions business.
You can read our tax report on our website
www.abrdn.com/annualreport
Earnings per share
– Adjusted diluted earnings per share decreased to
10.5p (2021: 13.7p) due to the lower adjusted profit
after tax and the interest payment on the AT1 debt.
This was partially offset by a benefit from the share
buyback.
– Diluted earnings per share was a loss of 26.8p
(2021: profit 46.0p) reflecting the factors above,
impairments and fair value losses of significant listed
investments.
Dividends
The Board has recommended a final dividend for 2022
of 7.3p (2021: 7.3p) per share. This is subject to
shareholder approval and will be paid on 16 May 2023
to shareholders on the register at close of business on
31 March 2023. The dividend payment is expected to be
£142m.
External dividends are funded from the cumulative
dividend income that abrdn plc receives from its
subsidiaries and associates (see below for details of
cash and distributable reserves). The need to hold
appropriate regulatory capital is the primary restriction
on the Group’s ability to pay dividends. Further
information on the principal risks and uncertainties that
may affect the business and therefore dividends is
provided in the Risk management section.
As a result of the decline in revenue in the year, dividend
cover on an adjusted capital generation basis was 0.9
times.
The adjusted capital generation trend and related
dividend coverage is shown below:
It remains the Board’s current intention to maintain the
total annual dividend at 14.6p (with the interim and final
both at 7.3p per share), until it is covered at least 1.5
times by adjusted capital generation, at which point the
Board will seek to grow the dividend in line with its
assessment of the underlying medium-term growth in
profitability.
Return of capital
On 6 July 2022, we commenced a £300m return of
capital to shareholders which completed on
12 December 2022. A total of 179m shares were
repurchased at an average price of £1.68 per share.
’22
’21
’20
£259m
£366m
£262m
0.84x
1.18x
0.88x
’22
’21
’20
£443m
£447m
£484m
60 abrdn.com Annual report 2022
Capital and liquidity
Adjusted capital generation
Adjusted capital generation, which shows how
adjusted profit contributes to regulatory capital,
decreased by 29% to £259m.
2022
£m
2021
£m
Adjusted profit after tax 231 297
Less net interest credit relating to
the staff pension schemes
(29) (17)
Less AT1 debt interest
(11) -
Add dividends received from
associates, joint ventures and
significant listed investments
68 86
Adjusted capital generation
259 366
Net movement in IFPR surplus regulatory
capital
The indicative surplus regulatory capital at
31 December 2022 was £0.7bn (2021: £1.8bn)
following the acquisition of ii. Disposal of part of our
Phoenix, HDFC Asset Management and HDFC Life
stakes in January 2022, August 2022 and September
2022 respectively generated sale proceeds of £0.8bn.
Key movements in surplus regulatory capital are
shown in the table below.
Analysis of movements in surplus
regulatory capital (IFPR basis)
2022
£bn
2021
£bn
Opening surplus regulatory capital
1
1.8 1.2
Sources of capital
Adjusted capital generation
0.3 0.4
HDFC Life, HDFC Asset Management and
Phoenix sale proceeds
0.8 0.9
Parmenion and Bonaccord sale proceeds
- 0.1
Issuance of AT1 debt
- 0.2
Uses of capital
Restructuring and corporate transaction
expenses (net of tax)
(0.2) (0.2)
Dividends
(0.3) (0.3)
Acquisition of interactive investor
2
(1.4) -
Acquisitions of Tritax and Finimize
- (0.3)
Share buyback
(0.3) -
Other
- (0.2)
Closing surplus regulatory capital
0.7 1.8
1. The Group reported capital under CRD IV until 31 December 2021.
2021 figures are therefore indicative.
2. Acquisition price of £1.5bn less capital resources acquired.
The full value of the Group’s significant listed
investments is excluded from the capital position under
IFPR and represents additional value for shareholders.
Note 43 of the Group financial statements includes a
reconciliation between IFRS equity and surplus
regulatory capital and details of our capital
management policies.
Cash and liquid resources and distributable
reserves
Cash and liquid resources remained robust at £1.7bn at
31 December 2022 (2021: £3.1bn) following the £1.5bn ii
acquisition. These resources are high quality and mainly
invested in cash, money market instruments and short-
term debt securities. Further information on cash and
liquid resources, and a reconciliation to IFRS cash and
cash equivalents, is provided in Supplementary
information.
At 31 December 2022, distributable reserves were £3.2bn
(2021: £2.8bn), benefiting in July 2022 from a £1.1bn
transfer from the capital redemption reserve.
IFRS net cash flows
– Net cash inflows from operating activities were £110m
(2021: inflows £14m) which includes outflows from
restructuring costs net of tax of £111m (2021: £179m)
and corporate transaction costs, net of tax, of £38m
(2021: £11m). 2021 inflows were reduced by working
capital movements.
– Net cash outflows from investing activities were £86m
(2021: inflows £755m), primarily reflecting a £1.4bn
outflow for acquisition of ii (net of cash acquired)
offset by £1.3bn net proceeds from the sale of
financial investments (mainly £0.8bn from the Phoenix
and HDFC stake sales and £0.4bn from the net sale of
money market instruments primarily related to ii
transaction funding).
– Net cash outflows from financing activities were
£761m (2021: £243m). The higher outflows reflected
the 2022 £0.3bn share buyback and the £0.1bn
repayment of subordinated liabilities. 2021 included
the £0.2bn proceeds from the Additional Tier 1 debt
issue.
The cash inflows and outflows described above resulted
in closing cash and cash equivalents of £1,166m as at
31 December 2022 (2021: £1,875m).
IFRS net assets
IFRS net assets attributable to equity holders decreased to
£5.7bn (2021: £7.6bn) mainly due to the IFRS loss before
tax, the reduced pension scheme surplus discussed below
and dividends paid in the year:
– Intangible assets increased to £1.6bn (2021: £0.7bn) as
a result of the ii acquisition (see Note 1), partly offset
by impairments of intangibles (see Note 13).
– The principal defined benefit pension scheme, which is
closed to future accrual, continues to have a
significant surplus of £0.8bn (2021: £1.6bn). The
reduction in surplus in 2022 is primarily due to higher
yields and other market movements, and reflects that
the investment strategy aims to protect the surplus on
a different basis to the IAS 19 accounting basis.
– Financial investments decreased to £2.9bn (2021:
£4.3bn) primarily due to the £0.8bn stakes sales, £0.2bn
reduced values in our significant listed investments
and £0.4bn net sale of money market instruments. At
31 December 2022, financial investments included
£1.3bn (2021: £2.3bn) in relation to significant listed
investments (Phoenix £634m, HDFC Asset
Management £477m and HDFC Life £203m).
61abrdn.comAnnual report 2022
STRATEGIC REPORT
Chief Financial Officer’s overview continued
Viability
statement
Longer-term prospects
The Directors have determined that three years is an
appropriate period over which to assess the Group’s
prospects. In addition to aligning with our business
planning horizon, this reflects the timescale over
which changes to major regulations and the external
landscape affecting our business typically take place.
The Group’s prospects are primarily assessed through
the strategic and business planning process. These
prospects have been enhanced as a result of actions
taken during the year, in particular the acquisition of
interactive investor.
The assessment reflects the Group’s focus on its
strategic priorities as set out on pages 12 to 13 and
how this is expected to drive client-led growth in
abrdn’s three vectors.
In forming their assessment of the Group’s longer-term
prospects, the Directors have also taken into account:
– The Group’s capital position as set out on page 61.
– The Group’s substantial holdings of cash and liquid
resources as well as holdings in listed equity
investments, as set out on page 61.
– The Group’s principal and emerging risks as set
out on pages 64 to 67.
Assessment of prospects
The Directors consider the Group’s focus on its
strategic priorities will deliver growth while
allowing the Group to maintain its strong
regulatory capital position and the dividend policy
described on page 60.
Viability
The Directors consider that three years is an appropriate
period for assessing viability as this is in line with the
horizon used for our business planning and stress testing
and scenario analysis processes.
In considering the viability statement, the Board
performed a thorough assessment of the Group’s
principal risks in order to understand potential
vulnerabilities for the business. In addition to this, the
Directors assessed the Group’s viability taking into
account:
– Output from the Group’s business planning process.
– Results from the Group’s stress testing and scenario
analysis programme.
– Results from the Group’s reverse stress testing
exercise.
– Work performed in connection with the UK’s FCA and
PRA rules on operational resilience.
The business planning process includes the projection of
profitability, regulatory capital and liquidity over a three
year period, based on a number of assumptions. This
includes assumptions regarding the economic outlook
which reflect various factors including the changing
market conditions following the significant geopolitical
and economic developments of 2022.
The Group has no debt maturing over the next three
years and, based on business planning projections, there
is no expectation that the Group will need to draw down
on its £400m revolving credit facility described on page
234.
The Group’s stress testing and scenario analysis programme
applies severe stresses to the business plan to understand
the Group’s financial resilience. This includes (i) exploring the
impacts of market-wide stresses, (ii) stresses that are
specific to abrdn, and (iii) stresses that combine both these
elements. Whilst all of the Group’s principal risks could
potentially impact on the Group’s financial resilience, our
combined stress testing scenarios focused on those risks
expected to have the most significant impact:
– Financial risk was considered under a range of
stresses to market levels, flows, and margins. The
scenarios that were explored included revenue
reductions due to (i) equity markets falling
approximately 22% in Q1 2023 and net outflows
occurring over the planning horizon reducing the year
end AUMA by up to 11% and (ii) the UK Base rate falling
to 0.1% by Q1 2024.
– Operational risks were considered in the context of the
Group incurring £40m of operational losses which
were assumed to represent the cumulative impact of
a number of severe losses across a range of principal
risk categories, such as: process execution and trade
errors, technology risk, security and resilience risk, or
fraud and financial crime risks.
62 abrdn.com Annual report 2022
All the scenarios explored resulted in the Group
experiencing reduced profitability and, in some cases,
losses over the planning horizon. Projections of capital
and liquid resources fell as a result of these losses.
The Group had sufficient capital and liquid resources
to withstand all of the stresses and did not need to
take any management actions other than those
assumed within the business plan. This reflects the
strength and quality of the Group’s financial position.
In the event that the Group was to experience more
severe stresses than those explored under the
Group’s stress testing and scenario analysis
programme, the Group has a diverse range of
management actions it would be able to take,
including a number of sizeable management actions
wholly within the Group’s control. This includes
drawing down on the revolving credit facility, reducing
discretionary expenditure, and dividend
management actions.
During the year, additional stress testing and scenario
analysis was performed to support the Group’s
capital management activity. The results of this were
also taken into consideration in the Directors’
assessment of viability.
The Group is considered to be resilient to adverse
climate change over the three year horizon; the
stresses to market levels and flows explored under the
stress testing and scenario analysis programme are
deemed to capture the possible consequences of
climate change over this period.
Reverse stress testing involves exploring the
quantitative and/or qualitative impacts of extreme
scenarios which could threaten the viability of our
business model. For this year’s exercise, we
investigated possible economic conditions that could
lead to non-viability. This involved exploring more
extreme versions of the scenarios developed under
the stress testing and scenario analysis programme,
focusing on increasing the size of the equity market
shock in Q1 2023.
The reverse stress testing exercise highlighted how
the Group’s risk appetite monitoring processes,
including defined escalation processes, support the
early identification of possible issues and provide time
for actions to be taken before these issues crystallise.
The exercise found that equity market falls required
to threaten viability were viewed as being very
remote. This, and the Group’s range of mitigants in
place to respond to the scenario, supports the
assessment of viability and no qualification is
considered necessary.
Over recent years the Group has also explored
reverse stress tests including the failure of a critical
third party administrator in the Investments vector,
the loss of critical staff and a significant cyber attack.
The work performed concluded that these events
had a low likelihood of occurrence and were not
considered likely to threaten the Group’s viability. These
conclusions are considered to remain valid.
Operational resilience reflects the ability of firms and the
financial sector as a whole to prevent, adapt and respond
to, and recover and learn from operational disruptions. In
addition to causing potential harm to customers and
threatening market integrity, such operational disruptions
and the unavailability of important business services have
the potential to threaten viability.
The UK’s FCA and PRA introduced new regulations on 31
March 2022 requiring that by March 2025 abrdn is able to
operate the important business services it provides to its
clients and customers within set impact tolerances in
order to avoid causing ‘intolerable harm’.
The Group has identified the important business services
that it provides to clients and customers and, during 2022,
performed operational stress testing against a severe but
plausible operational scenario to determine whether the
Group could remain within the set impact tolerances. This
work highlighted that the Group’s important business
services could operate within the set impact tolerances
and there was no threat to the Group’s viability.
Assessment of viability
The Directors confirm that they have a reasonable
expectation that abrdn plc will be able to continue in
operation and meet its liabilities as they fall due over
the next three years.
63abrdn.comAnnual report 2022
STRATEGIC REPORT
Risk management
1. See Note 35 for disclosure relating to the financial impact of climate-related risk on the 2022 financial statements.
Managing risk for
better outcomes
Our approach to risk management
A clear and effective Enterprise Risk Management (ERM)
framework underpins our commitment to put clients and
customers first and safeguard the interests of our
shareholders. Our Board has ultimate responsibility for
risk management and oversees the effectiveness of our
ERM framework.
ERM framework
We operate ‘three lines of defence’ with defined roles
and responsibilities. There is ongoing evolution in our ERM
framework to ensure that we meet the changing needs
of the company and to make sure it keeps pace with
industry best practice. In 2022, improvements to the
framework included:
– Refinements to risk appetites.
– Extending our risk taxonomy.
– Enhancing our Conflicts of Interest framework.
– Reviewing our policy register.
We commenced a review of our Risk and Control Self
Assessments during 2022, and this will continue during
2023.
Business risk environment
The commercial environment was challenging during
2022 as the Russian/Ukraine conflict led to a surge in
energy prices, higher inflation and a rapid tightening of
monetary policy by central banks thereby putting
pressure on asset prices. These conditions impacted
market levels and client flows over the year.
The acquisition of interactive investor in the first half of
2022 helped to diversify our earnings drivers away from
ad valorem fee revenues. The incorporation of ii into our
risk governance framework was handled smoothly.
Though we started 2022 dealing with the effects of
Omicron, the impact of COVID-19 on our operating
environment was much less pronounced as ‘blended
working’ became the default arrangement for our
people.
Client and customer interests are at the heart of our
business. We keep close focus on the outcomes which
we deliver across our businesses. During 2022, we
progressed the company-wide programme to
implement the FCA’s new Consumer Duty within the
relevant regulatory timelines.
A significant process execution event occurred during
2022. This has been thoroughly investigated and
appropriate remedial actions are being taken.
We continue to manage a lot of change across the
business which creates operational stretch on top of
our core client servicing activities. We have also put a
strong emphasis on simplification of our operating
environment and greater automation.
An additional challenge in this area is an uptick in staff
turnover across various skillsets in the financial services
industry post-COVID. That said, this also creates
opportunities in the management and development of
talent.
We maintain heightened vigilance over risks to our
operations from financial crime and cyber intrusion.
Given the complexity of our business, we have rolled
out a comprehensive and consistent suite of financial
crime standards that are in-line with jurisdictional
requirements and we continue to strengthen our
operating models to understand the risk profiles of our
clients and customers effectively and efficiently.
Evolving and emerging risks
We are vigilant to risks that could crystallise over
different horizons and impact our strategy and
operations. These risks vary in nature as they cover
geopolitical, economic, societal, technological, legal,
regulatory and environmental themes. We distil internal
and external research to consider how risks could
emerge and evolve
Some notable risks (and opportunities) for our business
include tightness in labour markets, rising input costs,
evolving cyber threats, disruptive financial
technologies, unprecedented market shifts and
climate change.
Sustainability risks
1
We have a responsibility to shareholders, clients,
customers and all stakeholders to assess, report on,
manage and mitigate our sustainability risks. As a
FTSE100 investment firm, we need to consider both the
impact of our corporate activities and the impact of the
investments that we are making on behalf of our
clients. We continue to deepen our understanding of
these risks for the benefit of all stakeholders and use
these insights to advocate for positive policy change.
Against a backdrop of a complex and challenging
regulatory environment, during 2022 we made good
progress against a number of key milestones, including
EU SFDR deliverables;
enhancing our climate and
carbon analytical tools; completing the integration of
ESG data into our investment data platform for 2023
regulatory reporting; and the use of the ESG screening
and exclusion tool.
64 abrdn.com Annual report 2022
Principal risks and uncertainties
We categorise our risks across 12 principal risk categories which have both internal and external drivers. Within our
ERM framework, we have developed a more detailed taxonomy of risks under these principal risk categories. This
allows us to systematically monitor the risk profile of our business. Principal and emerging risks are subject to active
oversight and robust assessment by the Board. These risks are described in the following table.
Risk to our business How we manage this risk
Strategic risk
–
These are risks that could prevent us from achieving our
strategic aims and successfully delivering our business
plans.
–
These could include failing to meet client expectations,
poor strategic decision-making or failure to adapt.
We continued to develop our single global brand during
2022. As well as materially diversifying our revenue base, the
acquisition of interactive investor further strengthened our
position in the marketplace.
Each of our vectors has a clear organic growth strategy.
Inorganic growth, such as through acquisitions, is rigorously
assessed, drawing on market intelligence, for its contribution
to our core strategy and the opportunities it presents to help
us better understand different client needs.
Financial risk
–
This is the risk of having insufficient financial resources,
suffering losses from adverse markets or the failure or
default of counterparties. It is impacted by our flows
experience, global market conditions and the fees we
charge on investment mandates, platforms and wealth
management services.
–
Our strong capital and liquidity position enabled the
acquisition of interactive investor and the launch of a
share buyback programme during the year while still
maintaining a strong capital position.
Business planning and stress testing is used to project our
financial resources under a range of scenarios and confirm
the financial resilience of our business. During 2022 we had
the first year of operation of the UK Investment Firms
Prudential Regime which determines regulatory capital and
liquidity requirements for the group and a number of its key
entities. We monitor the adequacy of our financial
resources in line with regulatory requirements and also
taking into account risk events which either occur or are
classed as near misses.
Our Treasury Policy includes minimum standards for
managing liquidity, market and counterparty risks, including
the credit quality of our counterparties.
Conduct risk
–
Our business relies on our ability to deliver good service
and fair client and customer outcomes, and there is a risk
that we fail to achieve this through our operational
activities and the implementation of our change
programmes.
–
This could lead to customer and client harm, reputational
damage and loss of income.
Being client and customer-led is an essential aspect of our
culture. This means having a continuous focus on client and
customer outcomes in all that we do.
Our ERM framework supports the management of conduct
risk with clear expectations around conduct goals and
responsibilities. In 2022 we refreshed our framework for
managing conflicts of interest and launched a programme
to implement the FCA’s new Consumer Duty.
Regulatory and legal risk
–
High volumes of regulatory change can create
interpretation and implementation risks.
–
Compliance failures can lead to poor customer and
client outcomes, sanctions, reputation damage and
income loss.
–
During 2022 the company managed a heavy
programme of regulatory implementation, including in
relation to ESG investment, anti-money laundering,
operational resilience, fund liquidity risk management
and the new Consumer Duty.
We monitor the regulatory landscape globally using an
automated scanning tool. This allows us to identify potential
areas of change early and communicate internally as
required. We also invest in compliance and monitoring
activity across the business. The evolution of regulatory
divergence between the UK and EU rulebooks is a particular
focus for the group in view of our business footprint.
Our relationships with key regulators are based on trust and
transparency while our compliance and legal teams
support senior managers across our business.
1
2
3
4
65abrdn.comAnnual report 2022
STRATEGIC REPORT
Risk management continued
Operational risks (5-12)
Risk to our business
How we manage this risk
Process execution and trade errors
–
This is the risk that processes, systems or external events
could produce operational errors. Some of these errors can
arise from operational complexity and manual activity.
–
During 2022 there was continued management focus on
process execution and trade errors.
We have well-established disciplines for managing
incidents, risk events and issues. We monitor
underlying causes of error to identify areas for action,
promoting a culture of accountability and
continuously improving how we address issues. Any
systems outages were dealt with using established
incident management processes.
Many of our business improvement initiatives are
aimed at reducing complexity and where possible
eliminating manual activity.
Incidents that adversely impact our clients are
investigated and appropriate remedial actions taken.
People
–
In line with the wider economy, employee turnover has
increased in all regions as a consequence of tight labour
markets conditions, increases in the cost of living and
continued labour market adjustment following the
pandemic.
–
The risk associated with increased turnover includes
knowledge loss, operational inefficiencies and the
potential for fraud.
–
Engaging with our people, and supporting their wellbeing,
is critical to our strategy and the success of our business.
We have responded to increased competition for
talent in our industry, using targeted approaches to
support retention and recruitment for our key business
functions.
Since the onset of the pandemic we have successfully
adapted, providing online tools to support
collaboration and moving our learning and
development offering online.
Technology
–
There is a risk that our technology may fail to keep pace with
business needs. There is also the significant risk of
unauthorised access of our systems and cyber-attack.
–
These risks are relevant to a wide range of potential threats
to the business including internal failure, external intrusion,
supplier failure and weather events.
–
Our current IT estate is complex and there are dependencies
on third party suppliers that need to be managed in a
dedicated way.
We have an ongoing programme to invest in and
enhance our IT infrastructure controls. We
benchmark our IT systems environment to identify
areas for improvement and further investment.
We maintain heightened vigilance for cyber intrusion,
with dedicated teams monitoring and managing
cyber security risks. We carry out regular testing on
penetration and crisis management.
Security and resilience
–
Incidents that can impact business resilience and continuity
include environmental issues, terrorism, economic
instabilities, cyber-attacks and operational incidents.
–
The risk of disruption from inside the organisation is broadly
stable. However, tools for exploiting IT vulnerabilities are
becoming more widely available globally and are frequently
used by criminal groups to enable ransomware attacks.
We continue to enhance our operational resilience
framework and strengthen our response to disruption.
Crisis management and contingency planning
processes are regularly reviewed and tested, enabling
us to minimise disruption as the balance of hybrid
working has shifted over the year. We completed our
programme to implement FCA/PRA Operational
Resilience regulations, which came into force during
2022.
5
6
7
8
66 abrdn.com Annual report 2022
Risk to our business
How we manage this risk
Fraud and financial crime
–
As a business that handles clients’ money, we are exposed to
the risk of fraudulent and dishonest activity.
–
As we engage with a wide number of external parties, we
have to be vigilant to the risk that these parties are connected
with criminal behaviour, or subject to sanctions by national or
global authorities.
Processes are in place to identify client activity linked
with financial crime, globally. These include controls
for anti-money laundering, anti-bribery, fraud and
other areas of financial crime. A company-wide
programme to invest in systems, controls and
processes to improve our management of these risks
is in progress.
During 2022 significant work was carried out globally
to revise and implement consistent anti-money
laundering and sanctions policies and standards. This
included a targeted remediation, to these standards,
of the due diligence information held for high risk
customers.
We continue to work with the financial authorities and
our industry peers to assist those targeted by scams.
Change management
–
As a diverse, global investment firm, we are continually
implementing change to improve our business or meet
regulatory expectations. As well as being costly, failure to
deliver change effectively can lead to poor client and
customer outcomes and/or regulatory non-compliance.
For major change projects, we have established
governance processes with ring-fenced project
resources and clearly defined roles across the three
lines of defence.
Third party management
–
We outsource various activities to third party suppliers who
specialise in the delivery of certain services. While managing
resource, specialisation and cost risks in this way, we are
exposed to a variety of delivery, regulatory and reputational
risks as a result.
Our Third Party Risk Management framework is well
embedded and continues to evolve in line with
external developments, industry practice and
regulatory developments. We monitor the quality of
third party oversight and take actions where
weaknesses are identified.
We actively monitor delivery from third parties and
take action where we have concerns.
Financial management process
–
We have extensive financial reporting obligations to clients,
customers, shareholders, regulators and other stakeholders.
Failures in these processes could impact decision-making
and lead to regulatory and litigation risk.
Our financial reporting activities align to external
reporting standards and industry best practice. These
activities are subject to extensive Internal control and
appropriate governance.
The cover to page 67 constitute the Strategic report which was approved by the Board and signed on its behalf by:
Stephen Bird
Chief Executive Officer
abrdn plc
(SC286832)
28 February 2023
9
10
11
12
67abrdn.comAnnual report 2022
STRATEGIC REPORT
Governance
68 abrdn.com Annual report 2022
Contents
2
Board of Directors 70
3
Corporate governance statement 74
3.1
Audit Committee report 86
3.2
Risk and Capital Committee report 95
3.3
Nomination and Governance Committee report 99
3.4
Directors’ remuneration report 103
4
Directors’ report 131
5
Statement of Directors’ responsibilities
137
69abrdn.comAnnual report 2022
GOVERNANCE
2. Board of Directors
Our business is overseen by our Board of Directors. Biographical details (and shareholdings)
of the Directors as at 28 February 2023 are listed below.
Sir Douglas Flint CBE –
Chairman
Stephen Bird –
Chief Executive Officer
Stephanie Bruce –
Chief Financial Officer
Appointed to the Board
November 2018
Age
67
Nationality
British
Shares
200,000
Board committees:
NC
Appointed to the Board
July 2020
Age
56
Nationality
British
Shares
782,355
Appointed to the Board
June 2019
Age
54
Nationality
British
Shares
545,960
Sir Douglas’ extensive experience of board
leadership in global financial services helps to
focus Board discussion and challenge on the
design and delivery of our strategy. His wide-
ranging expertise in international, financial
and governance matters is an important
asset to abrdn, while his collaborative
approach helps to facilitate open and
constructive boardroom discussion.
In other current roles, Sir Douglas is chairman
of IP Group plc, chairman of the Royal
Marsden hospital and charity and is a
member of a number of advisory boards and
trade associations through which he keeps
abreast of industry, regulatory and
international affairs of relevance to his public
company responsibilities.
Previously, Sir Douglas served as Group
Chairman of HSBC Holdings plc from 2010 to
2017. For 15 years prior to this he was HSBC’s
group finance director, joining from KPMG
where he was a partner. From 2005 to 2011
he also served as a non-executive director of
bp plc. He has extensive experience of
business in Asia, having been a member of
both the Mayor of Shanghai and Mayor of
Beijing’s Advisory Boards. He also served as
HM Treasury’s Special Envoy for Financial and
Professional Services to China’s Belt and
Road Initiative between 2017 and 2022.
Sir Douglas was awarded the CBE in 2006
and his knighthood in 2018, both in
recognition of his service to the finance
industry. In June 2022, he was awarded an
honorary degree by the University of
Glasgow, his alma mater, in recognition of his
services to the business community.
Stephen brings a track record of delivering
exceptional value to clients, creating high-
quality revenue and earnings growth in
complex financial markets, and deep
experience of business transformation during
periods of technological disruption and
competitive change.
Stephen joined the Board in July 2020 as
Chief Executive-Designate, becoming Chief
Executive Officer in September 2020. He is an
abrdn representative director to the US
closed-end fund boards and the SICAV fund
boardswhere abrdn is the appointed
investment manager.
Previously, Stephen served as chief executive
officer of global consumer banking at
Citigroup from 2015, retiring from the role in
Novembe r 2019. His re sponsibilities
encompassed all consumer and commercial
banking businesses in 19 countries, including
retail banking and wealth management, and
operations and technology supporting these
businesses. Prior to this, he was chief
executive for Citigroup’s Asia Pacific business
across 17 markets, including India and China.
Stephen joined Citigroup in 1998. Over 21
years he held leadership roles in banking,
operations and technology across its Asian
and Latin American businesses. Before this,
he held management positions at GE Capital,
where he was director of UK operations from
1996 to 1998, and at British Steel.
Stephen is a member of the Investment
Association’s board of directors, the
Confederation of British Industry’s President’s
Committee, and the Financial Services
Growth and Development Board in Scotland.
He holds an MBA in Economics and Finance
from University College Cardiff and is an
Honorary Fellow.
Stephanie joined the Board of abrdn plc in
June 2019 as Chief Financial Officer.
Stephanie is also our representative director
on the Board of Phoenix Group Holdings.
Stephanie is a highly experienced financial
services practitioner with significant sector
knowledge, both commercial and technical.
She brings wide ranging experience of
working with boards and management
teams of financial institutions in respect of
specialist areas that include capital, financial
and commercial management, reporting,
risk and control frameworks and regulatory
requirements.
Before joining abrdn, Stephanie was a
partner at PwC from 2002, where she led the
financial services assurance practice and
was a member of the Assurance Executive.
Her responsibilities comprised strategy and
business growth, client service, product
development, operations and talent
management across the UK business.
Previously, she led various business areas in
PwC, with the primary responsibilities being
for clients, business growth and people.
During her career, she has specialised in the
financial services sector working extensively
with organisations across asset
management, insurance and banking, with
national and international operations. She has
also undertaken directorships with HDFC Life
and Virgin Money Investments.
Stephanie is a member of the Institute of
Chartered Accountants of Scotland and
served as chair of the Audit Committee. She is
an associate of the Association of Corporate
Treasurers and holds a Bachelor of Laws
(LLB) from the University of Edinburgh. She is
also a trustee of the digital education charity
Hello World.
70 abrdn.com Annual report 2022
Key to Board committees
Remuneration Committee
Risk and Capital Committee
Audit Committee
Nomination and Governance Committee
Committee Chair
R
RC
A
NC
Jonathan Asquith –
Non-executive Director and Senior
Independent Director
Catherine Bradley CBE –
Non-executive Director
John Devine –
Non-executive Director
Appointed to the Board
September 2019
Age
66
Nationality
British
Shares
153,714
Board committees:
R NC
Appointed to the Board
January 2022
Age
63
Nationality
British and French
Shares
12,181
Board committees:
A
NC RC
Appointed to the Board
July 2016
Age
64
Nationality
British
Shares
28,399
Board committees:
RC
A NC
Jonathan has considerable experience as a
non-executive director within the investment
management and wealth industry. This
brings important insight to his roles as Senior
Independent Director and Chair of our
Remuneration Committee.
Jonathan is a non-executive director of
CiCap Limited and its regulated subsidiary
Coller Capital Limited. He is also a non-
executive director of BFlexion Group Holdings
SA, the parent company of Swiss private
investment firm BFlexion, and a number of its
subsidiaries including Capital Four Holding
A/S and Vantage Infrastructure Holdings.
Previously, he has been deputy chairman of
3i Group plc and chairman of Citigroup
Global Markets Limited, Citibank International
Limited, Dexion Capital PLC and AXA
Investment Managers. He has also been a
non-executive director of Tilney, Ashmore
Group plc and AXA UK PLC.
In his executive career Jonathan worked at
Morgan Grenfell for 18 years, rising to
become group finance director of Morgan
Grenfell Group, before going on to take the
roles of chief financial officer and chief
operating officer at Deutsche Morgan
Grenfell. From 2002 to 2008 he was an
executive director of Schroders plc, during
which time he was chief financial officer and
later executive vice chairman.
He holds an MA from the University of
Cambridge.
Catherine has more than 30 years of
executive experience advising global
financial institutions and industrial companies
on complex transactions and strategic
opportunities. She brings knowledge from
working across Europe and Asia, serving on
the boards of leading consumer-facing
companies and working with regulators and
standard setters.
Catherine is a non-executive director of
Johnso n Ele ctric Holdings Limited and of
easyJet plc, where she chairs the finance
committee. She is also senior independent
director of Kingfisher plc.
Previously, Catherine has served on the
boards of leading industrial and consumer-
facing companies in the UK, France and Hong
Kong. She was appointed by HM Treasury to
the Board of the Financial Conduct Authority
in 2014 and played an important role in
establishing the FICC Markets Standards
Board in 2015. Catherine stepped down from
these boards in 2020. Between 2021 and
2022 she was also a board member of the
Value Reporting Foundation, where she co-
chaired the audit committee.
In her executive career, Catherine has held a
number of senior finance roles in investment
banking and risk management: in the US with
Me rrill Lynch, in the UK and Asia w ith Cre dit
Suisse, and finally in Asia with Société
Générale. She returned to Europe in 2014 to
start her non-executive career.
Catherine graduated from the HEC Paris
School of Management with a major in
Finance and International Economics. She
was awarded a CBE in 2019.
John’s previous roles in asset management,
his experience in the US and Asia and his
background in finance, operations and
technology, are all areas of importance to
our strategy. John’s experience is important
to the Board’s discussions of financial
reporting and risk management.
John was appointed a Director of our
business in July 2016, at that time Standard
Life plc. From April 2015 until August 2016, he
was non-executive Chairman of Standard
Life Investments (Holdings) Limited.
He is non-executive chairman of Credit
Suisse International and of Credit Suisse
Securities (Europe) Limited, and a non-
executive director of Citco Custody Limited
and Citco Custody (UK) Limited.
From 2008 to 2010, John was chief operating
officer of Threadneedle Asset Management
Limited. Prior to this, he held a number of
senior executive positions at Merrill Lynch in
London, New York, Tokyo and Hong Kong.
He holds an MBA in Banking from Bangor
University, is a Fellow of the Chartered
Instit ute of Public Finance and Accounting
and a member of the Chartered Banker
Institute.
71abrdn.comAnnual report 2022
GOVERNANCE
2. Board of Directors continued
Hannah Grove –
Non-executive Director
Pam Kaur –
Non-executive Director
Brian McBride –
Non-executive Director
Appointed to the Board
September 2021
Age
59
Nationality
British and American
Shares
33,000
Board committees:
NC R
Appointed to the Board
June 2022
Age
59
Nationality
British
Shares
Nil
Board committees:
A RC
Appointed to the Board
May 2020
Age
67
Nationality
British
Shares
Nil
Board committees:
R
Hannah brings more than 20 years of
leadership experience in the global financial
services industry. Her expertise includes
leading brand, client and digital marketing
and communications strategies, including
those for major acquisitions, which she
combines with deep knowledge of regulatory
and governance matters. She is also our
designated non-executive Director for
employee engagement, and sits as a non-
executive director on the boards of Standard
Life Savings Limited and Elevate Portfolio
Services Limited.
Before joining our Board, Hannah enjoyed a
22-year career at State Street. This included
12 years as Chief Marketing Officer, retiring
from the role in November 2020. She was a
member of the company’s management
committee, its business conduct & risk and
conduct standards committees, and a board
member for its China legal entity.
Before joining State Street, Hannah was
marketing director for the Money Matters
Institute, supported by the United Nations, the
World Bank and private sector companies to
foster sustainable development in emerging
economies.
In other current roles, Hannah is a member of
the advisory board of Irrational Capital. She
has also received significant industry
recognition as a champion of diversity and
inclusion and is a member of the board of
advisors for reboot, an organisation that aims
to enhance dialogue around race both at
work and across society.
Pam has more than 20 years’ experience of
leadership roles in business, risk, compliance
and internal audit within several of the world’s
largest and most complex financial
institutions, during periods of significant
change and public scrutiny. She brings
considerable expertise in leading the
development and implementation of
compliance, audit and risk frameworks and
adapting these to changing regulatory
expectations.
Pam currently holds the role of Group Chief
Risk and Compliance Officer at HSBC.
Between 2019 and 2022, she served as a
non-executive director on the board of
Centrica, where she was also a member of
the audit and risk committee, the nomination
committee and the safety, environment and
sustainability committee.
Since qualifying as a chartered accountant
with Ernst & Young, Pam has progressed
through a range of technical, compliance,
anti-fraud and risk roles with Citigroup, Lloyds
TSB, Royal Bank of Scotland, Deutsche Bank
and HSBC. These positions have given her
extensive insight into the benefits of effective
internal control systems that recognise
external regulatory requirements.
She holds an MBA and B.Comm in
Accountancy from Punjab University, and is a
Fellow of the Institute of Chartered
Accountants of England and Wales.
Brian brings a wealth of digital experience
and global leadership experience in both
executive and non-executive directorship
roles. His direct experience of developing
digital strategies and solutions in consumer-
facing businesses, in rapidly evolving markets,
is of great benefit to the Board’s discussions.
Brian is currently chair of Trainline PLC and
the lead non-executive director on the board
of the UK Ministry of Defence. He is also a
senior adviser to Scottish Equity Partners. In
June 2022 he was appointed as president of
the Confederation of British Industry, having
held the role of vice president since February
2022.
In his executive career, Brian has worked for
IBM, Crosfield Electronics and Dell before
serving as chief executive officer of T-Mobile
UK and then managing director of
Amazon.co.uk. As a non-executive director,
Brian has served on the boards of AO.com,
the BBC, Celtic Football Club PLC,
Computacenter PLC, Kinnevik AB and S3
PLC, and as chair of ASOS PLC. He has also
served as a non-executive director on the
boards of Standard Life Savings Limited and
Elevate Portfolio Services Limited.
He holds an MA (Hons) in Economic History
and Politics from the University of Glasgow.
72 abrdn.com Annual report 2022
Key to Board committees
Remuneration Committee
Risk and Capital Committee
Audit Committee
Nomination and Governance Committee
Committee Chair
R
RC
A
NC
Michael O’Brien –
Non-executive Director
Cathleen Raffaeli –
Non-executive Director
Appointed to the Board
June 2022
Age
59
Nationality
Irish
Shares
Nil
Board committees:
A RC
Appointed to the Board
Au
g
ust 2018
Age
66
Nationality
American
Shares
9,315
Board committees:
R RC
Mike has held executive leadership roles
within a number of leading global asset
managers in London and New York. He brings
extensive asset management experience,
with a key focus throughout his career on
innovation and technology-driven change in
support of better client outcomes. A qualified
actuary, during his executive career with JP
Morgan Asset Management, BlackRock
Investment Management and Barclays
Global Investors, he was responsible for
developing and leading global investment
solutions, distribution and relationship
management strategies.
Mike is a non-executive director of Carne
Global Financial Services Limited, and he is a
senior adviser to Osmosis Investment
Management. He is also an investment
adviser to the British Coal Pension Funds.
Previously, Mike served on the board of the UK
NAPF and was a member of the UK NAPF
Defined Benefit Council. He retired in 2020
from his role as Co-Head, Global Investment
Solutions at JP Morgan Asset Management.
Prior to his move to BlackRock in 2000, Mike
qualified as an actuary with Towers Watson,
where he served as an investment and risk
consultant.
Mike graduated from Limerick University with
a BSc in Applied Mathematics. He is also a
Chartered Financial Analyst and a Fellow of
the Institute of Actuaries.
Cathi has strong experience in the financial
technology sector and background in the
platforms sector, as well as international
board experience. She brings these insights
as non-executive chairman of the boards of
Standard Life Savings Limited and Elevate
Portfolio Services Limited. Her role provides a
direct link between the Board and the
platform businesses that help us connect
with clients and their advisers.
Cathi is managing partner of Hamilton
White Group, LLC which offers advisory
services, including business development, to
companies in financial services growth
markets. In addition, she is managing
partne r of Soho Venture P artners Inc, which
offers third party business advisory services.
Previo usly, Cathi w as le ad dire cto r of
E*Trade Financial Corporation, non-
executive director of Kapitall Holdings, LLC
and president and chief executive officer of
ProAct Technologies Corporation. She was
also a non-executive director of Federal
Home Loan Bank of New York – where she
was a member of the executive committee,
and vice chair of both the technology
committee and the compensation and
human resources committee.
She holds an MBA from New York University
and a BS from the University of Baltimore.
73abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement
The Corporate governance statement and the Directors’
remuneration report, together with the cross references to
the relevant other sections of the Annual report and
accounts, explain the main aspects of the Company’s
corporate governance framework and seek to give a
greater understanding as to how the Company has
applied the principles and reported against the provisions
of the UK Corporate Governance Code 2018 (the Code).
Statement of application of and compliance
with the Code
For the year ended 31 December 2022, the Board has
carefully considered the principles and provisions of the
Code (available at www.frc.org.uk) and has concluded
that its activities during the year and the disclosures made
within the Annual report and accounts comply with the
requirements of the Code, with one minor exception as
noted below
1
. The statement also explains the relevant
compliance with the FCA’s Disclosure Guidance and
Transparency Rules Sourcebook. The table on page 136
sets out where to find each of the disclosures required in
the Directors’ report in respect of all of the information
required by Listing Rule 9.8.4 R.
(i) Board leadership and company purpose
Purpose and Business model
The Board ratifies the Company’s purpose set out on page
3 of the Strategic report, and oversees implementation of
the Group’s business model, which it has approved, and
which is set out on pages 10 and 11. Pages 2 to 67 show
how the development of the business model in 2022
supports the protection and generation of shareholder
value over the long term, as well as underpinning our
strategy for growth. A significant development in 2022
supporting these objectives was the diversification of the
business model through sharpening the focus of the
Investments vector, continued investment in the Adviser
vector and the acquisition of ii. The Board’s consideration
of current and future risks to the success of the Group is set
out on pages 64 to 67, complemented by the report of the
Risk and Capital Committee on pages 95 to 98.
Oversight of culture
The Board and the Nomination and Governance
Committee play a key role in overseeing how the
management of the Group assesses and monitors the
Group’s culture. Through engagement surveys and the
Board Employee Engagement programme, the Board
acquires a clear view on the culture evident within the
Group’s businesses and how successfully expected
behaviour is being embedded across the group in ways
that will contribute to our success.
The Board hold management to account for a range of
engagement and diversity, equity and inclusion outcomes,
which are seen as important indicators of culture, and
which form a key part of the executive scorecard.
The Board and the executive leadership team (ELT) have
defined a set of Commitments – Client First, Empowered,
Ambitious and Transparent - which embody our cultural
aspirations at abrdn and are designed to create the best
working environment for our colleagues, so contributing to
better customer experience and outcomes. Our culture is
defined by these Commitments and the behaviours which
underpin them, which are set out on page 42.
Stakeholder engagement
The Annual report and accounts explains how the
Directors have complied with their duty to have regard to
the matters set out in section 172 (1) (a)-(f) of the
Companies Act 2006. These matters include
responsibilities with regard to the interests of customers,
employees, suppliers, the community and the
environment, all within the context of promoting the
success of the Company. The table on pages 76 and 77
sets out the Board’s focus on its key relationships and
shows how the relevant stakeholder engagement is
reported up to the Board or Board Committees.
Engaging with investors
The Group’s Investor Relations and Secretariat teams
support the direct investor engagement activities of the
Chairman, Senior Independent Director (SID), CEO, CFO
and, as relevant, Board Committee chairs. During 2022, we
carried out an extensive programme of meetings with
domestic and international investors, with greater face-to-
face contacts as Covid restrictions were lifted. The wide
range of issues discussed included progress on the
integration of ii into the Group, the delivery of
transformation to drive revenue growth and productivity,
business strategy, financial performance and share price,
capital allocation and strategy for returns to shareholders,
the realisation of the value from stakes in HDFC Asset
Management and HDFC Life, the relationship with Phoenix
and the role of the share stake, the plans for refocusing the
Investments vector, and corporate governance, including
diversity, equity and inclusion. The Chairman, SID, CEO and
CFO bring relevant feedback from this engagement to the
attention of the Board.
1. Jutta af Rosenborg and Martin Pike stood down from the Audit Committee and the Board on 18 May 2022. Mike O’Brien and Pam Kaur were appointed to the
Committee on their appointment to the Board on 1 June 2022. Consequently, for the period 19 May to 31 May the Audit Committee consisted of two
members, rather than three as required under Provision 24 of the Code. The Committee did not meet nor consider any matters during this period.
74 abrdn.com Annual report 2022
The Board ensures its outreach activities encompass the
interests of the Company’s circa one million individual
shareholders. Given the nature of this large retail
shareholder base, it is impractical to communicate with all
shareholders using the same direct engagement model
followed for institutional investors. Shareholders are
encouraged to receive their communications
electronically and around 400,000 shareholders receive all
communications this way. The Company actively
promotes self service via the share portal, and more than
180,000 shareholders have signed up to this service.
Shareholders have the option to hold their shares in the
abrdn Share Account where shares are held electronically
and around 90% of individual shareholders hold their
shares in this way.
To give all shareholders easy access to the Company’s
announcements, all information reported via the London
Stock Exchange’s regulatory news service is published on
the Company’s website. The CEO and CFO continue to
host formal presentations to support both the full year and
half year financial results with the related transcript and
webcast available from the Investors’ section of the
Company’s website. During 2023, we intend to publish
regular online versions of our Shareholder News to give
shareholders access to Company updates in an easily
accessible format.
The 2022 Annual General Meeting (AGM) was held in
Edinburgh on 18 May 2022. Shareholders were invited to
submit questions in advance via the Company’s website
and arrangements were made for an ‘enhanced
webcast’. This allowed shareholders to view the meeting
live, and to submit questions during the meeting via a ‘chat
box’, many of which were then posed to the Chairman by
a moderator. The Chairman and CEO presentations
addressed the main themes of the questions which had
been submitted prior to the meeting. 48% of the shares in
issue were voted and all resolutions were passed by at
least 80% of votes cast.
Our 2023 AGM will be held on 10 May in Edinburgh. The
AGM Guide 2023 will be published online at
www.abrdn.com in advance of this year’s meeting. The
voting results, including the number of votes withheld, will
be published on the website at www.abrdn.com after the
meeting.
Engaging with employees
Hannah Grove continued as our designated non-
executive Director to support workforce engagement. The
Board Employee Engagement (BEE) programme, led by
Hannah, is designed to both ensure that views from
employees are heard and understood by the Directors
and help to inform their decision-making, and that
employees understand the role of the Board. During 2022,
the programme comprised four primary pillars: (i)
Listening Sessions to engage employees across all levels of
the organisation in informal gatherings – both virtual and in
person – and gather feedback on matters including
culture, strategy, engagement and business trends; (ii)
‘Meet the NEDs’ events for employees to meet with Board
members and ask questions about everything from
business to markets to career paths; (iii) Employee
Resource Group/Network gatherings – focused on abrdn’s
six employee networks/affinity groups to garner feedback
as well as to show appreciation for the role the networks
play in abrdn’s overall culture; and lastly (iv) floor walks and
informal office visits to meet as many team members as
possible. Based on this strategy, below is a summary of
activity:
– Ten ‘Listening sessions’ were held spanning all
businesses and geographies. A major outcome of these
sessions was to ramp up overall abrdn executive
visibility and communications, particularly at a time of
significant change both within abrdn as well as in the
broader market.
– Three ‘Meet the NEDs’ sessions were held: (i) with
abrdn’s ‘Future Leaders’ cohort – a new programme to
help drive greater internal development and mobility
and to help nurture top talent; (ii) with Finimize
colleagues, who joined abrdn as a result of acquisition;
and (iii) a panel Q&A for Edinburgh-based employees.
– Meetings were held with all six Network Chairs
individually to understand priorities, challenges and how
the Board can better support diversity, equity and
inclusion: a mid-year Network appreciation event was
held; and lunch with Diversity, Equity and Inclusion
Networks in Philadelphia.
– Quarterly meetings with the Employee Forum leads to
understand employee issues and provide another lens
into sentiment.
– Lastly, office visits and floor walks were carried out in
Boston, Edinburgh, London, New York and Philadelphia.
Hannah provided regular updates on the BEE programme
to the Board throughout the year, including on the issues
that had been raised through the discussions, and the
Board considered how abrdn’s ELT were actioning the
points raised. This included particular attention being paid
to the process and outcomes from cost of living salary
adjustments as well as the impacts of the Company’s
ongoing transformation on our colleagues.
The programme will continue to evolve in 2023 to take
account of feedback received over the year. As well as
continuing to do regular ‘Listening sessions’, Hannah plans
to further increase NED visibility, for example with plans for
her to visit local offices such as Tokyo and the ii office in
Manchester, and provide more frequent updates on the
programme to employees.
75abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Summary of Stakeholder engagement activities
In line with their obligations under s.172 of the Companies Act 2006, the Directors consider their responsibilities to
stakeholders in their discussions and decision-making. The table below illustrates direct and indirect Board engagement
with various stakeholders. More details of stakeholder engagement activities can be found on pages 41 to 45.
Key stakeholders Direct Board engagement Indirect Board engagement Outcomes
Clients
– The CEO meets with key clients
as required and reports to the
Board on such meetings.
– The CEO takes part in key client
pitches to hear directly from
clients on their requirements.
– The Chairman meets with peers
and key clients at conferences
and industry membership and
advisory boards where he
represents the Group.
– Board members feed into Board
discussions any feedback
received directly from clients.
– The CEOs of the Vectors report
at Board meetings on key client
engagement, support
programmes and client
strategies.
– Market share data and
competitor activity are reported
to the Board.
– Results of client perceptions
survey/customer sentiment
index are reported.
– Engagement supported the
development of the key client
management process, and our
client solutions and ESG
approaches.
– The Vectors position the
business around client needs
with performance
accountability measured on
that basis.
– Investment processes are driven
by understanding client needs
and designing appropriate
solutions taking into account
client risk appetite and
sophistication.
Our people
– ‘Meet the NEDs’ BEE sessions for
a diverse mix of staff at all levels
allows direct feedback in
informal settings.
– Employee engagement NED in
place and active with the
employee diversity networks as
well as with employees through
their representatives. The BEE
NED reports regularly to the
CEO and the Board.
– Each year, the Chairman and
NEDs all mentor one or two
CEO-1 or -2 level emerging
talent.
– The CEO and CFO run ‘Town
Hall’ sessions.
– The Chief People Officer (CPO)
reports to the Nomination and
Governance Committee
meeting on key hires and
employee issues including
development needs to support
succession planning.
– The CPO produces reporting for
the Board drawing out key
factors influencing staff
turnover, morale and
engagement.
– Viewpoints and employee
surveys collect aggregate,
regional and functional trend
data which is reported to the
Board.
– Engagement feedback
recognised in Board discussions
on new ways of working.
– Engagement feedback is a key
input to talent and development
programmes and the design of
reward philosophy.
76 abrdn.com Annual report 2022
Key stakeholders Direct Board engagement Indirect Board engagement Outcomes
Community
Business
partners/ supply
chain
– CEO oversees the Phoenix, FNZ
and Citigroup relationships and
meets with his opposite
numbers as required.
– CFO representation on the
Phoenix board and the Virgin
Money Unit Trust Managers
Limited Board.
– ED direct meetings with core
suppliers.
– The Risk and Capital
Committee reviews the
dependency on critical
suppliers and how they are
managed.
– The Audit Committee leads an
assessment of external audit
performance and service
provision.
– The Board received detailed
papers supporting the
outsourcing of technology and
business services.
– The Board hears reports on first
line key supplier relationships
and their role in transition and
transformation activities.
– Supplier due diligence surveys
are undertaken.
– Tendering process includes
smaller level firms.
– Access and audit rights in place
with key suppliers.
– Modern slavery compliance
process in place.
– Procurement/payment
principles and policies in place.
– Certain key suppliers regularly
discussed at Audit Committee,
Risk and Capital Committee
and Board.
– Oversight of key outsourcing
arrangements reported to the
Board.
– The development of our
business through our
relationships with partners is a
critical element of the Board’s
strategy.
– Transformation discussions
have included a focus on the
quality, service provision,
availability and costs of relevant
suppliers.
– The overriding guidelines for
business partnerships have
been established as working for
both parties and creating
efficient operations.
– The Board sought executive
assurance on the operation and
working practice of key
suppliers.
Communities
– Board members present at
relevant events and
conferences.
– Chairman/CEO/CFO represent
the Group on public policy and
industry organisations.
– Board is kept up to date with the
activities of the abrdn Financial
Fairness Trust.
– Stewardship/sustainability
teams report regularly to the
Board and Committees.
– Feedback on annual
Stewardship and TCFD reports.
– Review of charitable giving
strategy.
– ESG presentations to the Board.
– Considered as input to the
Group’s charitable giving
programmes.
– Engagement drives the
expression of our purpose.
Regulators/
policymakers/
governments
– Regular engagement by CEO,
CFO, Chairman and
Committee Chairs.
– FCA has access to the Board.
– ‘Dear Board/CEO’ letters issued
from regulators.
– Relevant engagement with
regulators in overseas
territories.
– CFO and Chief Risk Officer
(CRO) update the Board
regularly.
– Board hears reports on the
results of active participation
through industry groups.
– Relevant Board decisions
recognise regulatory impact
and environment.
Shareholders
– Results, AGM presentations and
Q&A.
– Chairman, CEO and CFO
meetings with investors.
– Chairman, Committee Chairs,
Senior Independent Director
and BEE NED round table with
governance commentators.
– Remuneration Committee
Chair meetings with institutional
investors.
– Chairman/CEO direct
shareholder correspondence.
– Regular updates from the EDs/
Investor Relations Director/
Chairman/Chair of
Remuneration Committee
summarising the output from
their programmes of
engagement.
– Analyst/Investor reports
distributed to the Board.
– As relevant, feedback from
corporate brokers.
– Publication of Shareholder
News.
– Dedicated mailbox and
shareholder call centre team.
– In advance of recommending
the remuneration policy to
shareholders as part of the
business at the 2023 AGM, the
chair of the Remuneration
Committee undertook direct
consultation with our top 15
institutional shareholders and
relevant proxy/ shareholder
representatives to gather their
views on the terms of the
proposed policy.
Shareholders
77abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Speaking up
The workforce has the means to raise concerns in
confidence and anonymously, and these means are well
communicated. The Audit Committee’s oversight of the
whistleblowing policy and the Audit Committee Chair’s role
to report to the Board on whistleblowing matters is covered
in the Audit Committee report on page 86.
Outside appointments and conflicts of interest
The Board’s policy encourages executive Directors to take
up one external non-executive director role, as the
Directors consider this can bring an additional perspective
to the Director’s contribution. At the moment, Stephen Bird
and Stephanie Bruce have representative director roles,
either on the board of one of our charity partners, on fund
boards where abrdn is the appointed investment manager
or on industry bodies such as the Investment Association.
For part of 2022, Stephanie Bruce served as a director on
one our joint venture boards (VMUTM) and, since July 2022,
as a result of the strategic partnership agreement, she has
been a shareholder representative director on the board of
Phoenix Group Holdings plc.
Any proposed additional appointments of the non-
executive Directors are firstly discussed with the Chairman
and then reported to the Nomination and Governance
Committee prior to being considered for approval. The
Senior Independent Director takes that role in relation to the
Chairman’s outside appointments. The register of the
Board’s collective outside appointments is reviewed
annually by the Board. Directors’ principal outside
appointments are included in their biographies on pages 70
to 73. These appointments form part of the Chairman’s
annual performance review of individual non-executive
Directors’ contribution and time commitment, and similarly
that of the Senior Independent Director of the Chairman.
The Directors continued to review and authorise Board
members’ actual and potential conflicts of interest on a
regular and ad hoc basis in line with the authority granted
to them in the Company’s Articles. As part of the process to
approve the appointment of a new Director, the Board
considers and, where appropriate, authorises their
potential or actual conflicts. The Board also considers
whether any new outside appointment of any current
Director creates a potential or actual conflict before, where
appropriate, authorising it. All appointments are approved
in accordance with the relevant group policies. At the start
of every Board and Committee meeting, Directors are
requested to declare any actual or potential conflicts of
interests and in the event a declaration is made, conflicted
Directors can be excluded from receiving information,
taking part in discussions and making decisions that relate
to the potential or actual conflict.
78 abrdn.com Annual report 2022
(ii) Division of responsibilities
The Group operates the following governance framework.
Governance framework
Board
The Board’s role is to organise and direct the affairs of the Company and the Group in accordance with the Company’s constitution, all relevant
laws, regulations, corporate governance and stewardship standards. The Board’s role and responsibilities, collectively and for individual Directors,
are set out in the Board Charter. The Board Charter also identifies matters that are specifically reserved for decision by the Board. During 2022, the
Board’s key activities included approving, overseeing and challenging:
– The updated strategy and the 2023 to 2025 business plan to
implement the strategy.
– Capital adequacy and allocation decisions including the decision to
sell stakes in Phoenix, HDFC Life and HDFC Asset Management.
– Oversight of culture, our standards and ethical behaviours.
– Dividend policy including the decision framework governing when to
return the dividend to growth.
– Financial reporting.
– Risk management, including the Enterprise Risk Management (ERM)
framework, risk strategy, risk appetite limits and internal controls and
in particular how this was adapted for blended working including
working from home.
– Significant corporate transactions including the acquisition of interactive
investor.
– Succession planning, in particular in the Investments vector in relation to
the appointment of a Chief Investment Officer.
– The quarterly performance of the Investments vector.
– The ESG approach, both as a corporate and as an asset manager.
– Significant extern al communications.
– The work of the Board Committees.
– Appointments to the Board and to Board Committees.
– Matters escalated from subsidiary boards to the Board for approval.
The Board regularly reviews reports from the Chief Executive Officer and from the Chief Financial Officer on progress against approved strategies
and the business plan, as well as updates on financial market and global economic conditions. There are also regular presentations from the Vector
CEOs and business functional leaders.
Chairman
– Leads the Board and ensures that its
principles and processes are maintained.
– Promotes high standards of corporate
governance.
– Together with the Company Secretary, sets
agendas for meetings of the Board.
– Ensures Board members receive accurate,
timely and quality information on the Group
and its activities.
– Encourages open debate and constructive
discussion and decision-making.
– Leads the performance assessments and
identification of training needs for the Board
and individual Directors.
– Speaks on behalf of the Board and represents
the Board to shareholders and other
stakeholders.
Chief Executive Officer (CEO)
The CEO operates within authorities delegated by
the Board to:
– Develop strategic plans and structures for
presentation to the Board.
– Make and implement operational decisions.
– Lead the other executive Director and the ELT in
the day-to-day running of the Group.
– Report to th e Board with relevant and timely
information.
– Develop appropriate capital, corporate,
management and succession structures to
support the Group’s objectives.
– Together with the Chairman, represent the
Group to external stakeholders, including
shareholders, customers, suppliers, regulatory
and governmental authorities, and the local and
wider communities.
Senior Independent Director (SID)
The SID is available to talk with our
shareholders about any concerns
that they may not have been able to
resolve through the channels of the
Chairman, the CEO or Chief
Financial Officer, or where a
shareholder was to consider these
channels as inappropriate.
The SID leads the annual review of
the performance of the Chairman.
Non-executive Directors (NEDs)
The role of our NEDs is to participate
fully in the Board’s decision-making
work including advising, supporting
and challenging management as
appropriate.
Nomination and Governance
Committee (N&G)
– Board and Committee
composition and appointments.
– Succession planning.
– Governance framework.
– Culture, Diversity, Equity &
Inclusion (DEI).
Audit Committee (AC)
– Financial reporting.
– Internal audit.
– External audit.
– Whistleblowing.
– Regulatory financial reporting.
– Non-financial reporting (ESG).
Remuneration Committee (RC)
– Development and
implementation of
remuneration philosophy and
policy.
– Incentive design and setting of
executive Director targets.
– Employee benefit structures.
Risk and Capital Committee (RCC)
– Risk management framework.
– Compliance reporting.
– Risk appetites and tolerances.
– Transactional risk assessments.
– Capital adequacy.
– Anti-financial crime.
Executive leadership team (EL T)
The ELT supports the CEO by providing clear leadership, line of sight and accountability throughout the business. The ELT is responsible to the CEO
for the development and delivery of strategy and for leading the organisation through challenges and opportunities.
Vectors
Vector CEOs support the CEO to
deliver growth across the business:
– Investments.
– Adviser.
– Personal.
Talent
The Chief People Officer (CPO)
supports the CEO in developing
talent management and
succession planning and
culture initiatives.
Efficient Operations
Strategy, Technology, Legal an d
Finan ce ELT members, including
the CFO, support the CEO by
overseeing global functions and
the delivery of functional
priorities.
Control
The Chief Risk Officer (CRO)
supports the ELT and the CEO in
their first line management of risk.
79abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
The framework is formally documented in the Board
Charter which also sets out the Board’s relationship with the
boards of the key subsidiaries in the Group. In particular, it
specifies the matters which these subsidiaries refer to the
Board or to a Committee of the Board for approval or
consultation.
You can find the Board Charter on our website
www.abrdn.com
Board balance and director independence
The Directors believe that at least half of the Board should
be made up of independent non-executive Directors. As at
28 February 2023, the Board comprises the Chairman,
eight independent non-executive Directors and two
executive Directors. The Board is made up of six men (55%)
and five women (45%) (2021: men 50%, women 50%).
Cecilia Reyes stepped down from the Board on 30
September 2022. As announced, Brian McBride will retire on
10 May 2023 and will not offer himself for re-election.
The Chairman was independent on his appointment in
December 2018. The Board carries out a formal review of
the independence of non-executive Directors annually. The
review considers relevant issues including the number and
nature of their other appointments, any other positions they
hold within the Group, any potential conflicts of interest they
have identified and their length of service. Their individual
circumstances are also assessed against independence
criteria, including those in the Code. Following this review,
the Board has concluded that all the non-executive
Directors are independent and consequently, the Board
continues to comprise a majority of independent non-
executive Directors.
Jonathan Asquith served as Senior Independent Director
throughout 2022. In this role, he is available to provide a
sounding board to the Chairman and serve as an
intermediary for the other Directors and the shareholders.
He also led the process to review the Chairman’s
performance.
The roles of the Chairman and the CEO are separate and
are summarised on page 79. Each has clearly defined
responsibilities, which are described in the Board Charter.
The Directors have access to the governance advice of the
Company Secretary whose appointment and removal is a
matter reserved to the Board.
You can find out more about our Directors in their
biographies in Section 2.
(iii) Board composition, succession, diversity and
evaluation
The Board’s policy is to appoint and retain non-executive
Directors who bring relevant expertise as well as a wide
perspective to the Group and its decision-making
framework. The Board continues to support its Board
Diversity statement which states that the Board:
– Believes in equity and supports the principle that the best
person should always be appointed to the role with due
regard given to the benefits of diversity, including
gender, ethnicity, age, and educational and professional
background when undertaking a search for candidates,
both executive and non-executive.
– Recognises that diversity can bring insights and
behaviours that make a valuable contribution to its
effectiveness.
– Believes that it should have a blend of skills, experience,
independence, knowledge, ethnicity and gender
amongst its individual members that is appropriate to its
needs.
– Believes that it should be able to demonstrate with
conviction that any new appointee can make a
meaningful contribution to its deliberations.
– Is committed to maintaining its diverse composition.
– Supports the CEO’s commitment to achieve and
maintain a diverse workforce and an inclusive
workplace, both throughout the Group, and within the
ELT.
– Has a zero tolerance approach to unfair treatment or
discrimination of any kind, both throughout the Group
and in relation to clients and individuals associated with
the Group.
Board Diversity
Gender
Nationality
Diversity activities and progress to meet our targets are
covered in the Our people section of the Strategic report on
page 41. The ELT’s diversity policy is covered in the Diversity,
equity and inclusion section of the Directors’ report on page
134.
Male: 6
Female: 5
British and French: 1
Irish: 1
British: 7
American: 1
British and American: 1
80 abrdn.com Annual report 2022
Board changes during the period are covered above and in
the Directors’ report on page 133.
Ethnicity
Board appointment process, terms of service and role
Board appointments are overseen by the Nomination and
Governance Committee and more information can be
found on page 101.
Each non-executive Director is appointed for a three-year
fixed term and shareholders vote on whether to elect/re-
elect them at every AGM. Once a three-year term has
ended, a non-executive Director can continue for a
maximum of two further terms, if the Board is satisfied with
the non-executive Director’s performance, independence
and ongoing time commitment. Taking account of their
appointment dates the current average length of service of
the non-executive Directors is three years. For any non-
executive Directors who have already served two three-
year terms, the Nomination and Governance Committee
considers any factors which have the potential to impact
their independence or time commitment prior to making
any recommendation to the Board. During 2022, the
Committee reviewed and supported the recommendation
that Jonathan Asquith and John Devine’s appointments be
continued for a second and third term respectively. When
considering John Devine’s continued appointment in
particular, the Committee discussed and agreed that the
knowledge and experience he had gained from his time on
the Board would be very beneficial to the newer board
members, and there were no indications that his six years
of service had impacted the independence of his views in
any way. They also reviewed his other appointments and
time commitments, and based on this, agreed that it was
appropriate to recommend his continued appointment to
the Board.
External search consultants may be used to support Board
appointments. As disclosed in last year’s report, MWM
Consulting was engaged to support the appointments of
Mike O’Brien and Pam Kaur. The Group has additionally
used the services of MWM Consulting to support other
senior management searches. MWM Consulting has no
other connection to the Group or the Directors.
Time commitment
The letter of appointment confirms that the amount of time
each non-executive Director is expected to commit to
each year, once they have met all of the approval and
induction requirements, is a minimum of 35 days.
When appointing a non-executive Director, the Nomination
and Governance Committee carefully considers time
commitments, investor guidelines and voting policies and
their application on current directorships. The Committee
also reviews in detail the planned changes to a non-
executive Director’s portfolio and overall capacity, including
the balance of listed and non-listed non-executive Director
roles. Having carefully reviewed each non-executive
Director’s contribution and capacity in 2022, the
Committee concluded that all non-executive Directors
continue to have sufficient time to dedicate to their role as
independent non-executive Directors of abrdn plc.
The service agreements/letters of appointment for
Directors are available to shareholders to view on request
from the Company Secretary at the Company’s registered
address (which can be found in the Shareholder
information section) and will be accessible for the 2023
AGM. Non-executive Directors are required to confirm that
they can allocate sufficient time to carry out their duties
and responsibilities effectively. Their letters of appointment
confirm that their primary roles include challenging and
holding to account the executive Directors as well as
appointing and removing executive Directors.
Director election and re-election
At the 2023 AGM, all of the Directors will retire and stand for
re-election. As announced, Brian McBride will stand down
from the Board on 10 May 2023. As well as in Section 2, the
AGM Guide 2023 includes background information about
the Directors, including the reasons why the Chairman,
following the Directors’ annual reviews, believes that their
individual skills and contribution support their election or re-
election.
Details of Directors’ outside appointments can be
found in their biographies in Section 2.
Advice
Directors may sometimes need external professional
advice to carry out their responsibilities. The Board’s policy is
to allow them to seek this where appropriate and at the
Group’s expense. Directors also have access to the advice
and services of the Company Secretary. With the
exception of professional advice obtained by the
Remuneration Committee, as detailed in page 118, no
independent professional advice was sought in 2022.
Board effectiveness
Review process
The Board commissions externally facilitated reviews
regularly. Following two internally facilitated reviews in 2020
and 2021, Independent Board Evaluation (IBE) was
appointed as the external facilitator and carried out the
2022 review. IBE has no other connection to the Group or
the Directors.
To carry out the review, a senior representative of IBE was
in attendance and observed a Board meeting and a
meeting of each Board Committee in December 2022.
They also had access to the papers for each of these
meetings. In addition to this observation and analysis, they
held individual meetings with each Board member,
members of the ELT who are regular attendees at Board
meetings and the key members of the Board and
Committee support teams. Following this, IBE prepared a
White: 10
Asian: 1
81abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
draft report for review and discussion. A representative of
lBE presented the report and recommendations
at a standalone session attended by a number of the
Directors, ahead of it being reviewed and discussed at the
Board.
The main report covered the Board and its Committees.
The tone of the feedback received was positive
overall, recognising the effective Board dynamics and
Committee structure, and the knowledge and
experience of recent appointments to the Board. The
report noted the number of changes to the Board since the
last external review, the current macroeconomic
environment and the continued transformation and
reshaping of the Group. In this context, the
report highlighted the need to continue to evolve
management information and reporting to support Board
and Committee oversight as well as the effective
delegation to Committees. This work is in train, with
information flows supported by the appointment of abrdn
plc directors to the boards of certain principal subsidiaries.
As part of its conclusions, the report noted the strong levels
of Board engagement and participation, both in formal
meetings and other Board initiatives, such as Board
mentoring involving certain senior management and the
BEE programme.
Chairman
The review of Sir Douglas’s performance as Chairman was
led by the SID, Jonathan Asquith, supported by IBE. It was
based on feedback given in individual interviews between
the external facilitator and each Director as well as focused
discussions between the SID and the other non-executive
Directors. The feedback was summarised into a report
which was reviewed by the SID and distributed to all non-
executive Directors, except Sir Douglas. The Directors, led
by Jonathan Asquith and without Sir Douglas being present,
met to consider the report. They concluded that the
Chairman's industry experience, style and development of
the Board continued to be of significant benefit to the
Group. Jonathan Asquith met with Sir Douglas to pass
feedback from the review directly to him.
Directors
As part of the review, IBE prepared an individual evaluation
of each member of the Board to support the Chairman’s
annual round of feedback to Directors and to assist him in
leading the Nomination and Governance Committee’s
ongoing succession planning. Sir Douglas discussed the
individual results with each Director. These discussions also
considered overall time commitment and capacity and
individual training, development and engagement
opportunities.
Director induction and development
The Chairman, supported by the Company Secretary, is
responsible for arranging a comprehensive preparation
and induction programme for all new Directors. The
programme takes their background, knowledge and
experience into account. If relevant, Directors are required
to complete the FCA’s approval process before they are
appointed and Directors self-certify annually that they
remain competent to carry out this aspect of their role.
These processes continue to adapt to meet evolving best
practice in respect of the Senior Managers and
Certification Regime.
The formal preparation and induction programme
includes:
– Meetings with the executive Directors and the members
of the ELT.
– Focused technical meetings with internal experts on
specific areas including the three Vectors, regulatory
reporting, ESG, conduct risk, risk and capital
management, and financial reporting.
– Visits to business areas to meet our people and gain a
better insight into the operation of the business and its
culture.
– Meetings with the external auditors and contact with the
FCA supervisory teams.
– Meetings with the Company Secretary on the Group’s
corporate governance framework and the role of the
Board and its Committees.
– Meetings with the Chief Risk Officer on the risk
management framework as well as meetings on their
individual responsibilities as holders of a Senior
Management Function role.
Background information is also provided including:
– Key Board materials and information, stakeholder and
shareholder communications and financial reports.
– The Group’s organisational structure, strategy, business
activities and operational plans.
– The Group’s key performance indicators, financial and
operational measures and industry terminology.
The induction programme provides the background
knowledge new Directors need to perform to a high level as
soon as possible after joining the Board and its Committees
and to support them as they build their knowledge and
strengthen their performance further.
When Directors are appointed to the Board, they make a
commitment to broaden their understanding of the
Group’s business. The Secretariat, Finance, Risk and
Reward teams monitor relevant external governance and
risk management, financial and regulatory developments
and keep the ongoing Board training and information
programme up to date. Specific Board and Committee
awareness and deep-dive sessions took place on:
– Enterprise Technology strategy.
– Cyber resilience.
– abrdn’s Internal Capital and Risk Assessment (being a
risk management process introduced by the Investment
Firm Prudential Regime).
– Operational resilience self-assessment.
(iv) Audit, risk and internal control
The Directors retain the responsibility to state that they
consider the Annual report and accounts, taken as a whole,
is fair, balanced and understandable, presents an
assessment of the Company’s position and prospects and
presents the necessary information for shareholders to
assess the business and strategy. They also recognise their
responsibility to establish procedures to manage risk and
oversee the internal control framework. The Directors’
responsibilities statement is on page 137. The reports from
the Audit Committee and the Risk and Capital Committee
82 abrdn.com Annual report 2022
Chairs show how the Committees have supported the
Board in meeting these responsibilities.
The Board’s view of its principal and emerging risks and
how they are being managed is contained in the risk
management section of the Strategic report on pages 64
to 67.
Annual review of internal control
The Directors have overall responsibility for the governance
structures and systems of the group, which includes the
ERM framework and system of internal control, and for the
ongoing review of their effectiveness. The framework is
designed to manage, rather than eliminate, risk and can
only provide reasonable, not absolute, assurance against
material misstatement or loss. The framework covers all of
the risks as set out in the risk management section of the
Strategic report.
In line with the requirements of the Code, the Board has
reviewed the effectiveness of the system of internal control.
The Audit Committee undertook the review on behalf of
the Board and reported the results of its review to the
Board. The system was in place throughout the year and
up to the date of approval of the Annual report and
accounts 2022.
The review of abrdn’s risk management and internal
control systems was carried out drawing on inputs across
the three lines of defence. The first line management
conducted risk and control self-assessments (RCSAs)
throughout 2022; Risk & Compliance undertook a review of
the effectiveness of the ERM framework (including RCSAs)
and how internal controls were operating within the first
line; and internal audit produced a Control Environment
Assessment using abrdn’s risk taxonomy. Collectively these
provide a view of the firm’s control environment from each
of the three lines of defence. Where the review identified
weaknesses in the system of controls, the relevant root
causes have been investigated and actions are in train to
strengthen the relevant controls and to reinforce the
application of the ERM framework.
2022 has seen the business continue to strengthen controls
within its operating model through better definition of
accountability and processes. Technology advances and
regulatory developments such as IFPR, the Operational
Resilience regulation and UK SoX continue to drive further
change in the design of operational processes and internal
controls.
The Finance function operates a set of defined processes
which operate over all aspects of financial reporting, which
includes the senior review and approval of financial results,
controlled processes for the preparation of the IFRS
consolidation, and the monitoring of external policy
developments to ensure these are adequately addressed.
These processes include the operation of a Technical
Review Committee and the Financial Reporting Executive
Review Group to provide senior review, challenge and
approval of relevant disclosures, accounting policies, and
changes required to comply with external developments.
The Board’s going concern statement is on page 136 and
the Board’s viability statement is on page 62.
(v) Remuneration
The Directors’ remuneration report (DRR) on pages 103 to
130 sets out the work of the Remuneration Committee and
its activities during the year, the levels of Directors’
remuneration and the shareholder approved
remuneration policy. The Company’s approach to investing
in and rewarding its workforce is set out on page 114 of the
DRR. The Board believes that its remuneration policies and
practices are designed to support the Company’s strategy
and long-term sustainable success. More information
about the policies and practices can be found in the DRR.
An updated Remuneration Policy will be put to
shareholders for their approval at the Company’s Annual
General Meeting on 10 May 2023.
Other information
You can find details of the following, as required by FCA
Disclosure and Transparency Rule 7.2.6, in the Directors’
report and in the Directors’ remuneration report:
Share capital
– Significant direct or indirect holdings of the Company’s
securities.
– Confirmation that there are no securities carrying
special rights with regard to control of the Company.
– Confirmation that there are no restrictions on voting
rights in normal circumstances.
– How the Articles can be amended.
– The powers of the Directors, including when they can
issue or buy back shares.
Directors
– How the Company appoints and replaces Directors.
– Directors’ interests in shares.
83abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Board meetings and meeting attendance
The Board and its Committees meet regularly, operating to an agreed timetable. Meetings are usually held in Edinburgh or
London. During the year, the Board held specific sessions to consider the Group’s strategy and business planning. The
Chairman and the non-executive Directors also met during the year, formally at each Board meeting, and informally,
without the executive Directors present and where matters including executive performance and succession and Board
effectiveness were discussed. The Board scheduled eight formal meetings and a focused strategy meeting in 2022. An
additional Board meeting was called in 2022 in relation to Board decisions regarding the recommendation to acquire the
interactive investor business.
Directors are required to attend all meetings of the Board and the Committees they serve on, and to devote enough time
to the Company to perform their duties. Board and Committee papers are distributed before meetings other than, by
exception, urgent papers which may need to be tabled at the meeting. If Directors are not able to attend a meeting
because of conflicts in their schedules, they receive all the relevant papers and have the opportunity to submit their
comments in advance to the Chairman or to the Company Secretary. If necessary, they can follow up with the Chairman
of the meeting. Recognising that some Directors may have existing commitments they cannot change at very short notice,
the Board has established the Standing Committee as a formal procedure for holding unscheduled meetings. The
Standing Committee meets when, exceptionally, decisions on matters specifically reserved for the Board need to be taken
urgently. All Directors are invited to attend Standing Committee meetings. The Standing Committee did not meet during
2022.
The Chairman is not a member of the Audit, Risk and Capital, or Remuneration Committees. He is invited to attend
meetings of all Committees, by invitation, in order to keep abreast of their discussions and routinely does so. The table
below reflects the composition of the Board and Board Committees during 2022 and records the number of meetings and
members’ attendance.
Board
Group Audit
Committee
Nomination and
Governance
Committee
Remuneration
Committee
Risk and Capital
Committee
Chairman
Sir Douglas Flint 10/10 – 4/4 – –
Executive Directors
Stephanie Bruce 10/10 – – – –
Stephen Bird
10/10 – – – –
Non-executive Directors
Jonathan Asquith 10/10 – 4/4 8/8 –
Brian McBride
10/10 – – 7/8 –
John Devine
9/10 6/7 4/4 - 8/8
Hannah Grove
1
10/10 - 4/4 3/3 -
Pam Kaur
2
6/6 4/4 – – 4/4
Cathleen Raffaeli
10/10 – – 8/8 8/8
Catherine Bradley
3
10/10 7/7 2/2 - 2/2
Mike O’Brien
4
6/6 4/4 – – 4/4
Former members
Jutta af Rosenborg (stood down on 18 May
2022)
4/4 3/3 – 3/3 –
Martin Pike (stood down on 18 May 2022) 4/4 3/3 2/2 – 4/4
Cecilia Reyes (stood down on 30 September
2022)
7/8 – – 5/5 6/6
1. Hannah Grove was appointed to the Remuneration Committee on 1 October 2022.
2. Pam Kaur was appointed to the Board and the Audit and Risk and Capital Committees on 1 June 2022.
3. Catherine Bradley was appointed to the Nomination and Governance Committee on 18 May 2022 and the Risk and Capital Committee on 1 October 2022.
The Board appointed Catherine Bradley as Chair of the Audit Committee, effective from 18 May 2022.
4. Mike O’Brien was appointed to the Board and the Audit and Risk and Capital Committees on 1 June 2022.
84 abrdn.com Annual report 2022
Tenure as at February 2023 Executive and Non-executive mix
Board Committees
The Board has established Committees that oversee,
consider and make recommendations to the Board on
important issues of policy and governance. At each Board
meeting, the Committee chairs provide reports of the key
issues considered at recent Committee meetings, and
minutes of Committee meetings are circulated to the
appropriate Board members. This includes reporting from
the Chair of the Audit Committee on any whistleblowing
incidents which have been escalated to them. The
Committees operate within specific terms of reference
approved by the Board and kept under review by each
Committee.
These terms of reference are published within the
Board Charter on our website at www.abrdn.com
All Board Committees are authorised to engage the
services of external advisers at the Company’s expense,
whenever they consider this necessary. With the
exception of fees paid to external advisers of the
Remuneration Committee, as detailed on page 118, no
such expense was incurred during 2022.
Committee reports
This statement includes reports from the chairs of the
Audit Committee, the Risk and Capital Committee and the
Nomination and Governance Committee. The report on
the responsibilities and activities of the Remuneration
Committee can be found in the Directors’ remuneration
report in Section 3.4.
The Committee Chairs are happy to engage with you
on their reports. Please contact them via
questions@abrdnshares.com
abrdn plc Board
Remuneration
Committee
Nomination
and
Governance
Committee
Risk and
Capital
Committee
Audit
Committee
0-3 years: 6
3-5 years: 4
5+ years: 1
Executive: 2
Non-executive: 9
85abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
3.1 Audit Committee report
The Audit Committee assists the Board in discharging its
responsibilities for external financial reporting, internal
controls over financial reporting and the relationship with
the external auditors.
I am pleased to present my first report as Audit Committee
(the Committee) Chair, having taken on the role from John
Devine in May 2022. John remains a member of the Audit
Committee and has taken on the role of Chair of the Risk
and Capital Committee, of which I am also a member. This
ensures a high degree of connectivity between the Audit
and Risk responsibilities of the Board.
During the year and up to the date of issuing the annual
report, the Committee:
– Discussed and reviewed the impact on financial
reporting of the ii acquisition, having assessed the
financial information required to be included in the
related Class 1 Circular.
– Considered the impact on the internal audit function of
Chief Internal Auditor changes.
– Reviewed the plans for sustainability and ESG reporting.
– Reviewed reporting on financial crime and anti-money
laundering controls. (Duty now transferred to the RCC).
– Received reports on compliance with the FCAClient
Assets Sourcebook (CASS) rules in the Company’s CASS
permissioned regulated legal entities.
The Committee also continued to focus on the quality of
financial reporting. In July 2022 we received a letter from
the FRC informing us that they had carried out a review of
our Annual report and accounts 2021. I am pleased to
report that the FRC letter noted there were no questions or
queries they wished to raise with us at this stage, and did
not require a substantive response to their letter. The FRC
asked us to make clear the inherent limitations of their
review, which we have set out in the financial reporting
section of this report.
The report is structured in four parts:
1. Governance
2. Report on the year
3. Internal audit
4. External audit
Catherine Bradley
Chair, Audit Committee
3.1.1 Governance
Membership
All members of the Audit Committee are independent non-
executive Directors. For their names, the number of
meetings and committee member attendance during
2022, please see the table on page 84.
The Board believes Committee members have the
necessary range of financial, risk, control and commercial
expertise required to provide effective challenge to
management, and have competence in accounting and
auditing as well as recent and relevant financial experience.
Catherine Bradley is a non-executive director of Johnson
Electric Holdings Limited and of easyJet plc, where she
chairs the finance committee. She is also senior
independent director of Kingfisher plc. Catherine has
previously chaired the audit committees of Groupe
Peugeot Citroen and of the Financial Conduct Authority.
John Devine is a member of the Chartered Institute of
Public Finance and Accounting. Pam Kaur is a qualified
chartered accountant. Mike O’Brien is a fellow of the
Institute and Faculty of Actuaries. The Committee
members are also members of audit committees related
to their other non-executive Director roles.
Invitations to attend Committee meetings are extended on
a regular basis to the Chairman, the Chief Executive
Officer, the Chief Financial Officer, the Group Financial
Controller, the Chief Internal Audit Officer and the Group
Chief Risk Officer.
The Audit Committee meets privately for part of its
meetings and also has regular private meetings separately
with the external auditors and the Chief Internal Audit
Officer. These meetings address the level of co-operation
and information exchange and provide an opportunity for
participants to raise any concerns directly with the
Committee.
Key responsibilities
The Audit Committee’s responsibilities are to oversee, and
report to the Board on:
– The appropriateness of the Group’s accounting and
accounting policies, including the going concern
presumption and viability statement.
– The findings of its reviews of the financial information in
the Group’s annual and half year financial reports.
– The clarity of the disclosures relating to accounting
judgements and estimates.
– Its view of the ‘fair, balanced and understandable’
reporting obligation.
– The findings of its review of certain Group prudential
external disclosures.
86 abrdn.com Annual report 2022
– Internal controls over financial reporting.
– ESG disclosures relating to financial and quantitative
information.
– Outcomes of investigations resulting from
whistleblowing.
– The appointment or dismissal of the Chief Internal Audit
Officer, the approved internal audit work programme,
key audit findings and the quality of internal audit work.
– The skills of the external audit team and their
compliance with auditor independence requirements,
the approved audit plan, the quality of the firm’s
execution of the audit, and the agreed audit and non-
audit fees.
In carrying out its duties, the Committee is authorised by the
Board to obtain any information it needs from any Director
or employee of the Group. It is also authorised to seek, at
the expense of the Group, appropriate external
professional advice whenever it considers this necessary.
The Committee did not need to take any independent
advice during the year.
In accordance with the Senior Managers and Certification
Regime the Audit Committee Chair is responsible for the
oversight of the independence, autonomy and
effectiveness of our policies and procedures on
whistleblowing including the procedures for the protection
of employees who raise concerns related to detrimental
treatment. Throughout the year the Audit Committee
Chair met regularly with the Chief Internal Auditor, the Chief
Sustainability Officer - Investments and the Global Head of
Corporate Sustainability to discuss their work, findings and
current developments.
Committee effectiveness
The effectiveness review was conducted externally by IBE.
The review included observation of a meeting, access to
papers and interviews with Committee members. A
representative of IBE provided feedback on the
performance of the Committee directly to the Chair and
the report and recommendations were discussed by the
Committee. Details of the 2022 review are on page 81 and
reflect the themes raised across the Board and its
Committees.
3.1.2 Report on the year
Audit agenda
As well as regular reporting, agenda items were aligned to
the annual financial cycle as set out below:
–
Annual report and accounts 2021.
–
Strategic report and financial highlights 2021.
–
Discussed the financial information required to
be included in the Class 1 Circular in relation to
the proposed acquisition of ii.
–
Financial reporting judgements.
–
Liaison with the Remuneration Committee on
any financial reporting matters related to the
achievement of targets and measures.
–
External auditors’ review of Full year results.
–
CASS reporting update.
–
Financial crime and whistleblowing.
–
Internal audit findings.
–
Regulatory reporting including Pillar 3.
–
Initial financial reporting matters for Half year
2022.
–
Financial crime and whistleblowing.
–
External auditors’ management letter, and audit
strategy including fees.
–
Half year results 2022.
–
External auditors’ review of Half year results.
–
External auditors’ independence.
–
Internal audit findings.
–
Sustainability and ESG reporting.
–
Whistleblowing.
–
Initial financial reporting matters for Full year
2022, including pension scheme assumptions.
–
Non-audit services policy.
–
The internal audit plan and charter.
–
Internal audit findings.
–
Effectiveness of the external auditors and
related non-audit services.
–
Effectiveness of the internal audit function.
–
Whistleblowing.
–
Sustainability and ESG reporting.
–
Risk management and internal control system
annual review and future plans.
–
CASS reporting update.
Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
87abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
The indicative proportion of time spent on the business of
the Committee is illustrated below:
Detail of work
The focus of work in respect of 2022 is described below.
Financial and non-financial reporting
Our accounts are prepared in accordance with
International Financial Reporting Standards (IFRS). The
Committee believes that some Alternative Performance
Measures (APMs), which are also called non-GAAP
measures, can add insight to the IFRS reporting and help to
give shareholders a fuller understanding of the
performance of the business. The Committee considered
the presentation of APMs and related guidance as
discussed further in the ‘Fair, balanced and
understandable’ section below.
The Committee reviewed the Group accounting policies
and confirmed they were appropriate to be used for the
2022 Group financial statements. This year there were no
new accounting standards which had a significant impact
on the Group accounting policies.
The Committee reviewed the basis of accounting and in
particular the appropriateness of adopting the going
concern basis of preparation of the financial statements. In
doing so, it considered the Group’s cash flows resulting
from its business activities and factors likely to affect its
future development, performance and position together
with related risks, as set out in more detail in the Strategic
report. The Committee recommended the going concern
statement to the Board.
In addition, the Committee considered the form of the
viability statement and in particular whether the three-year
period remained appropriate, and concluded that it did.
This reflects both our internal planning cycle and the
timescale over which changes to major regulations and the
external landscape affecting our business typically take
place. In formulating the statement, the Committee
considered the result of stress testing and reverse stress
testing presented to the Risk and Capital Committee. The
Committee recommended the viability statement to the
Board.
During 2022, the Committee reviewed the Annual report
and accounts 2021 and the Half year results 2022. For both
periods it received written and/or oral reports from the
Chief Financial Officer, the Company Secretary, the Chief
Internal Audit Officer and the external auditors. The
Committee used these reports to aid its understanding of
the composition of the financial statements, to confirm that
the specific reporting standards and compliance
requirements had been met and to support the accounting
judgements and estimates. Following its reviews, the
Committee was able to recommend the approval of each
of the reports to the Board, being satisfied that the full and
half year financial statements complied with laws and
regulations and had been appropriately compiled.
In July 2022 we received a letter from the FRC informing us
that they had carried out a full scope review of our Annual
report and accounts 2021 and there were no questions or
queries they wished to raise with us at this stage. The FRC
asked us to note that their letter provides no assurance that
our report and accounts are correct in all material respects,
and that the FRC’s role is not to verify the information
provided but to consider compliance with reporting
requirements. The FRC noted that their review is based on
our report and accounts and does not benefit from
detailed knowledge of our business or an understanding of
the underlying transactions entered into.
The Committee recognises the importance of sustainability
and ESG reporting. During 2022 the Committee discussed
and reviewed the sustainability reporting landscape and
the related governance framework at a number of
meetings. In particular, as part of the review of the Annual
report and accounts 2022, the Committee reviewed Task
Force on Climate-Related Financial Disclosures (TCFD).
The Committee ‘s review focused on ensuring metrics and
outcomes were appropriately explained and validated.
Other matters/controls (including CASS,
whistleblowing, review of external developments)
Financial reporting (including ESG reporting
and the acquisition of ii)
External audit
Internal audit
88 abrdn.com Annual report 2022
Accounting estimates and judgements
The Audit Committee considered all estimates and judgements that Directors understood could be material to the 2022
financial statements. The Committee also focused on disclosure of these key accounting estimates and judgements.
Significant accounting estimates, judgements and assumptions for the year ended 31
December 2022
How the Audit Committee addressed
these significant accounting estimates and assumptions
Acquisition of interactive investor (ii)
On 27 May 2022 abrdn completed the acquisition of ii.
The identification and valuation of intangible assets arising
from the acquisition and determination of the related useful
lives is a key area of judgement.
The Committee spent time discussing the acquisition and the
related purchase price allocation at two meetings.
The most significant area of judgement related to the valuation
of the customer relationships intangible asset relating to ii’s
customer base at the date of acquisition. The Committee
challenged the underlying assumptions, including those related
to revenue per customer growth, and market interest rate
assumptions which impact ii’s expected treasury income. The
Committee agreed that the assumptions were within a
reasonable range and supported the disclosure of these
assumptions. See Notes 1 and 13 for further details.
Goodwill impairment reviews
Goodwill is required to be tested annually for impairment and
the determination of recoverable amounts for this
impairment assessment is a key area of estimation. The
impairment assessment is performed by comparing the
carrying amount of each cash-generating unit (CGU) with its
recoverable amount, being the higher of its value in use (VIU)
and fair value less costs of disposal (FVLCD). In 2022
impairments of goodwill were recognised in relation to the
asset management group of CGUs in the Investments
segment (impairment of £299m) and in relation to the
Finimize CGU in the Investments segment (impairment of
£41m) and therefore the determination of the recoverable
amount for these CGUs was a key judgement which directly
impacted the amount of the impairment. The impairments
reflect lower projected revenues as a result of the lower
markets, macroeconomic conditions and 2022 results being
below previous expectations. For Investments, the key
impairment drivers also include the expected reduction in
Phoenix revenue from asset strategy and related pricing
changes, and further work being required to reduce costs
given the level of revenue and to grow to a net inflow position.
The recoverable amount for the asset management group
of CGUs was determined based on FVLCD, with the primary
approach being a discounted cash flow approach. The
recoverable amount for Finimize was also determined based
on FVLCD, with the primary approach being a revenue
multiple valuation approach.
Goodwill relating to the interactive investor CGU was also
required to be tested for impairment following the acquisition
during 2022 and the recoverable amount, based on FVLCD,
indicated that no impairment was required. Goodwill relating
to the abrdn financial planning business CGU was also tested
with no impairment arising, but with no headroom in relation
to future downside sensitivities.
The Committee spent time reviewing and challenging
recoverable amount assumptions at three meetings. For asset
management the Committee considered a number of different
valuation approaches and discussed that the key assumptions
related to the FVLCD discounted cash flow approach were
future earnings forecasts and the discount rate. The Committee
considered that these assumptions and the resulting goodwill
impairment were within the range of reasonable outcomes. The
Committee noted that the asset management VIU was
significantly reduced by the IFRS requirement to exclude cost
savings related to future restructuring, and therefore that the VIU
was less than the FVLCD.
For Finimize the Committee noted that the business is inherently
difficult to value as there are few directly comparable
companies and therefore there are a range of reasonable
valuations. The Committee discussed the valuation assessment
with management and agreed that recoverable amount was
within the reasonable range.
The Committee agreed with management’s view that the
goodwill for interactive investor and the abrdn financial planning
CGUs was not impaired. The Committee noted the inherent
sensitivity of the recoverable amounts and supported the
disclosure of appropriate sensitivities.
Further details on goodwill impairment reviews are disclosed in
Note 13 of the Group financial statements.
89abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Significant accounting estimates, judgements and assumptions for the year ended 31
December 2022
How the Audit Committee addressed
these significant accounting estimates and assumptions
Investments in subsidiaries
In relation to the abrdn plc Company only accounts, an
assessment is made at each reporting date as to whether
there are any indicators of impairment in relation to
investments in subsidiaries. At year end 2022 management
noted that the Company’s net assets attributable to
shareholders of £4.9bn (post impairments) were higher than
the Company’s market capitalisation of £3.8bn. This, together
with lower projected future asset management earnings,
was considered to be an indicator of impairment of the
Company’s investment in its asset management subsidiaries,
abrdn Holdings Limited (formerly named Aberdeen Asset
Management PLC ) and abrdn Investment Holdings Limited
(aIHL). All other material investment in subsidiaries (with the
exception of abrdn Financial Planning Limited) were
supported by financial assets or other relevant analysis.
Impairments were recognised in 2022 in relation to the
Company’s investment in its subsidiaries abrdn Holdings
Limited (impairment of £847m), aIHL (impairment of £51m)
and abrdn Financial Planning Limited (impairment of £25m).
The Committee discussed the investment in subsidiaries
impairment assessment with management and noted that the
j
udgements in relation to these assessments were materially the
same as the judgements relating to the goodwill impairment
reviews. The Committee supported that relevant disclosures
were made in the Company only accounts including disclosure
that appropriate consideration had been given to the Company
net assets being higher than the abrdn market capitalisation.
The Committee noted that the Company’s distributable profits
were £3.2bn following the 2022 impairments which continued to
provide support for the dividend policy.
Further details on the impairment assessment of investments in
subsidiaries are set out in Note A of the Company financial
statements in Section 8.
UK defined benefit pension plan
In compiling a set of financial statements, it is necessary to
make some judgements and estimates about outcomes that
are dependent on future events. This is particularly relevant to
the defined benefit pension plan surplus which is inherently
dependent on how long people live and future economic
outcomes.
For the principal UK defined benefit pension plan, the
Committee reviewed the assumptions for mortality, discount
rate and inflation.
The Committee considered the proposed assumptions taking
into account market data and information from pension
scheme advisors. The Committee concurred with management
and their actuarial advisors that mortality assumptions should
not be updated for COVID-19 at this point as the impact on long-
term mortality rates for pension scheme members was not
clear.
Note 31 of the Group financial statements provides further
details on the actuarial assumptions used, and sets out the
impact of mortality, discount rate and inflation sensitivities. Note
31 also provides details on the accounting policy applied and
accounting policy judgements relating to the Group’s
assessment that it has an unconditional right to a refund of a
surplus, and the treatment of tax relating to this surplus.
Tritax contingent consideration fair value
In 2021, the abrdn group purchased 60% of the membership
interests in Tritax Management LLP. Subject to certain
conditions, an additional contingent deferred earn-out is
expected to be payable to acquire the remaining 40% of
membership interests in Tritax should the selling partners
choose to exercise put options in respect of each of the years
ended 31 March 2024, 31 March 2025 and 31 March 2026.
The amount payable is linked to the EBITDA of the Tritax
business in the relevant period. abrdn has the right to
purchase any outstanding interests at the end of 2026
through exercising a call option.
The contingent consideration liability is required to be
recognised at fair value, which is primarily dependant on
future earnings projections.
The Committee analysed and discussed management’s
assumptions underlying the fair value of the contingent
consideration at 31 December 2022 and agreed that the fair
value was within the reasonable range. The Committee
reviewed and supported that disclosure of sensitivities to key
assumptions should be provided given the inherent uncertainties
in the valuation. See Note 37 for further details.
Principal risks are disclosed in the Strategic report and recommended to the Board by the Risk and Capital Committee. The
Committee was satisfied that the estimates and quantified risk disclosures in the financial statements were consistent with
the Strategic report. The Committee concluded that appropriate judgements had been applied in determining the
estimates and that sufficient disclosure had been made to allow readers to understand the uncertainties surrounding
outcomes.
90 abrdn.com Annual report 2022
Fair, balanced and understandable
The Committee supported management’s continued aim
to compile the Annual report and accounts to be ‘fair,
balanced and understandable’.
abrdn’s principles
To create clarity on fair, balanced and understandable for
abrdn a set of principles is applied, as set out below:
Fair
‘We are being open
and honest in the
way we present our
discussions and
analysis, and are
providing what we
believe to be an
accurate
assessment of
business and
economic realities.’
–
The narrative contained in the
Annual report and accounts is
honest, accurate and
comprehensive.
–
The key messages in the
narrative in the Strategic report
and Governance sections of the
Annual report and accounts
reflect the financial reporting
contained in the financial
statements.
–
The Key Performance Indicators
(KPIs) for the period are
consistent with the key messages
outlined in the Strategic report.
Balanced
‘We are fully
disclosing our
successes, the
challenges we have
faced in the period,
and the challenges
and opportunities
we anticipate in the
future; all with equal
importance and at a
level of detail that is
appropriate for our
stakeholders.’
–
The Annual report and accounts
presents both successes and
challenges experienced during
the year and, as appropriate,
reflects those expected in the
future.
–
The level of prominence we give
to successes in the year versus
challenges faced is appropriate.
–
The narrative and analysis
contained in the Annual report
and accounts effectively
balances the information needs
and interests of each of our key
stakeholder groups.
Understandable
‘The language we
use and the way we
structure our report
is helping us present
our business and its
performance
clearly; in a way that
someone with a
reasonably
informed
knowledge of
financial statements
and our industry
would understand.’
–
The layout is clear and consistent
and the language used is simple
and easy to understand (industry
specific terms are defined where
appropriate).
–
There is a consistent tone across
and good linkage between all
sections in a manner that reflects
a complete story and clear
signposting to where additional
information can be found.
Activities
An Internal Review Group (IRG) is in place which reviews
the Annual report and accounts specifically from a fair,
balanced and understandable perspective and provides
feedback to our financial reporting team on whether it
conforms to our standards. The members of the IRG are
independent of the financial reporting team and include
colleagues from Investor Relations, ESG reporting,
Risk, Internal Audit, Communications and Strategy.
The key points discussed by the IRG covered:
– The impact of markets on profitability, particularly in
relation to the Investments vector.
– The balance of reporting relating to financial and
strategic performance across the group.
– How previously reported matters had been updated.
Fair, balanced and understandable guidance was
provided to relevant stakeholders involved in the Annual
report and accounts production process.
The Audit Committee, reviewed the messaging in the
Annual report and accounts, taking into account material
received and Board discussions during the year.
Three drafts of the Annual report and accounts 2022 were
reviewed by the Audit Committee at three meetings. The
Committee complemented its knowledge with that of
executive management and internal audit. An interactive
process allowed each draft to embrace contributions.
The Annual report and accounts goes through an
extensive internal verification process of all content to
verify accuracy.
The Committee also reviewed the use and presentation of
APMs which complement the statutory IFRS results. This
review considered guidelines issued by the European
Securities and Markets Authority in 2016 and the thematic
reviews by the Financial Reporting Council (FRC). A
Supplementary information section is included in the
Annual report and accounts to explain the rationale for
using these metrics and to provide reconciliations of these
metrics to IFRS measures where relevant. This section also
provides increased transparency over the calculation of
reported financial ratios.
Adjusted operating profit and adjusted profit before tax
are key profit APMs. The Committee considered whether
the allocation of items to adjusted operating profit was in
line with the defined accounting policies, consistent with
previous practice and appropriately disclosed. Where
there were judgemental areas, such as in relation to
certain interactive investor related costs, the Committee
specifically reviewed the proposed treatments and
ensured that the Annual report and accounts provided
appropriate disclosures.
The Audit Committee agreed to recommend to the Board
that the Annual report and accounts 2022, taken as a
whole, is fair, balanced and can be understood by
someone with a reasonably informed knowledge of
financial statements and our industry.
Prudential reporting
In H1 2022 abrdn published 2021 Pillar 3 reporting under
CRD IV. The Committee reviewed the Pillar 3 report and
papers which set out the control and verification processes
followed in the compilation of the report.
The Committee also considered disclosures relating to
IFPR (Investment Firm Prudential Regime) results included
in the Strategic report and notes sections of the Annual
report and accounts and half year reporting, together with
related assurance over these disclosures.
91abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Internal controls
As noted earlier, the Directors have overall responsibility for
abrdn’s internal controls and for ensuring their ongoing
effectiveness. This does not extend to associates and joint
ventures. Together with the Risk and Capital Committee,
the Committee provides comfort to the Board of their
ongoing effectiveness.
Internal audit regularly reviews the effectiveness of internal
controls and reports to the Committee and the Risk and
Capital Committee.
The Finance function sets formal requirements for
financial reporting which apply to the Group as a whole,
defines the processes and detailed controls for the
consolidation process and reviews and challenges
reporting submissions. Further, the Finance function runs a
Technical Review Committee and is responsible for
monitoring external technical developments. The
Committee focuses on ensuring appropriate sign-offs on
financial results are provided, and a mechanism for the
escalation of issues from major regulated subsidiary
Boards is in place.
The control environment around financial reporting will
continue to be monitored closely.
In early 2023, the Committee discussed the implications of
a significant process execution event. The Committee
were satisfied that this was appropriately reflected in 2022
financial reporting. See Note 34 of the financial statements
for further details.
Financial crime and whistleblowing
After May 2022, oversight of anti-Financial Crime
compliance moved to the Risk and Capital Committee.
Until this point the Committee received regular updates
from the Head of Anti-Financial Crime who reports on
compliance with the Group’s Anti-Financial Crime and
Anti-Bribery policy, and any other activities associated with
financial crime, including fraud risk.
Our people are trained via mandatory training modules to
detect the signs of possible fraudulent or improper activity
and how to report concerns either directly or via our
independent whistleblowing hotline. The Committee Chair
is the designated whistleblower’s champion and the
Committee receives regular updates on the operation of
the whistleblowing procedures (Speak Up) from the
Conduct and Conflicts Oversight Manager. The
anonymised reports include a summary of the incidents
raised as whistleblowing, and information on
developments of the arrangements in place, to ensure
concerns can be raised in confidence about possible
malpractice, wrongdoing and other matters.
The Committee oversees the findings of investigations and
required follow-up action. If there is any allegation against
the Risk or internal audit functions, the Committee directs
the investigation. The Committee is satisfied that the
Group’s procedures are currently operating effectively.
The Committee Chair reports to the Board on the updates
the Committee receives.
3.1.3 Internal audit
The role and mandate of the internal audit function is set
out in its Charter, which is reviewed and approved by the
Committee annually. Whilst internal audit maintains a
relationship with the external auditors, in accordance with
relevant independence standards, the external auditors
do not place reliance on the work of internal audit.
The internal audit plan is reviewed and approved by the
Committee annually, but is flexed during the year to
respond to internal and external developments. The
function’s coverage aligns to the Group’s activities and
footprint, taking account of local internal audit
requirements.
The Committee assesses the independence and quality
assurance practices of the Internal Audit function and
agrees the effectiveness of the function, aligned to the
Group’s objectives. Independent external reviews are also
undertaken at regular intervals. The most recent one was
completed in H2 2021 by Deloitte who assessed the abrdn
internal audit function as having the highest overall rating
with conformance against all aspects of the Institute of
Internal Auditors’ International Professional Practices
Framework (IPPF) and the Internal Audit Financial Services
Code of Practice (the Standards).
Two areas for
improvement were identified against the Standards
(skillset and resourcing and scope of quality assurance)
and actions are underway to address them. The
Committee met specifically to review the results of the
external report and to agree the proposed actions of the
internal audit team to take forward the recommendations.
Regular reporting is provided to the Committee to illustrate
plan progress, and the status of implementation of
recommendations. The Committee’s own review of the
function in 2022 was positive and supports the continuous
evolution and enhancement of the function.
The Committee Chair meets the Chief Internal Audit
Officer periodically, without management being present.
92 abrdn.com Annual report 2022
3.1.4 External auditors
The appointment
The Committee has responsibility for making
recommendations to the Board on the reappointment of
the external auditors, determining their independence
from the Group and its management and agreeing the
scope and fee for the audit. Following its review of KPMG’s
performance, the Committee concluded that there should
be a resolution to shareholders to recommend the
reappointment of KPMG at the 2023 AGM.
The Committee complies with the UK Corporate
Governance Code, the FRC Guidance on Audit
Committees with regard to the external audit tendering
timetable, the provisions of the EU Regulation on Audit
Reform, and the Competition and Markets Authority
Statutory Audit Services Order with regard to mandatory
auditor rotation and tendering. The Committee will
continue to follow the annual appointment process but
does not currently anticipate re-tendering the audit before
2026. This is currently considered to be in the best interests
of the Company taking into account the results of the
formal review of the effectiveness of the KPMG audit
discussed in this section. The audit was last subject to a
tender for the financial year ended 31 December 2017.
The audit for the year ended 31 December 2022 is
therefore KPMG’s 6th year as auditor. The Senior Statutory
Auditor is Richard Faulkner who succeeded Jonathan Mills,
as the lead audit partner for the year ended 31 December
2022.
Auditor independence
The Board has an established policy (the Policy) setting out
which non-audit services can be purchased from the firm
appointed as external auditors. The Committee monitors
the implementation of the Policy on behalf of the Board.
The aim of the Policy, which is reviewed annually, is to
support and safeguard the objectivity and independence
of the external auditors and to comply with the revised FRC
Ethical standards for auditors (Ethical Standards). It does
this by prohibiting the auditors from carrying out certain
types of non-audit services, and by setting out which non-
audit services are permitted. It also ensures that where
fees for approved non-audit services are significant, they
are subject to the Committee Chair’s prior approval. KPMG
has implemented its own policy preventing the provision
by KPMG of most non-audit services to FTSE 350
companies which are audit clients. A 70% fee cap on non-
audit services to audit clients is in place.
The services prohibited by the Policy are as set out in the
FRC Revised Ethical Standard 2019.
The Policy permits non-audit services to be purchased,
following approval, when they are closely aligned to the
external audit service and when the external audit firm’s
skills and experience make it the most suitable supplier.
These include:
– Audit related services, such as regulatory reporting.
– Investment circular reporting accountant
engagements.
– Attesting to services not required by statute or
regulation (e.g. controls reports).
– Other reports required by a regulator or assurance
services relating to regulatory returns.
– Sustainability and TCFD report audits/reviews.
– Fund merger assurance engagements, where the
engagement is with the manager and the external
auditor is also the auditor of the fund.
KPMG has reviewed its own independence in line with
these criteria and its own ethical guideline standards.
KPMG has confirmed to the Committee that following its
review it is satisfied that it has acted in accordance with
relevant regulatory and professional requirements and
that its objectivity is not impaired.
Having considered compliance with our Policy and the
fees paid to KPMG, the Committee is satisfied that KPMG
has remained independent.
Audit and non-audit fees
The Group audit fee payable to KPMG in respect of 2022
was £6.2m (2021: KPMG £5.1m). In addition, £2.3m (2021:
£2.0m) was incurred on audit related assurance services.
Fees for audit related assurance services are primarily in
respect of client money reporting and the half year review.
The Committee is satisfied that the audit fee is
commensurate with permitting KPMG to provide a quality
audit and monitors regularly the level of audit and non-
audit fees. Non-audit work can only be undertaken if the
fees have been approved in advance in accordance with
the Policy for non-audit fees. Unless fees are small (which
we have defined as less than £75,000), the approval of the
Committee Chair is required.
Non-audit fees amounted to £1.3m (2021: £2.1m), of
which £1.0m (2021: £1.2m) related to other assurance
services and £0.3m (2021: £0.9m) related to other non-
audit fee services. Other assurance services in 2022
primarily related to control assurance reports, which are
closely associated with audit work. The external auditors
were considered the most suitable supplier for these
services taking into account the alignment of these
services to the work undertaken by external audit and the
firm’s skill sets. Other non-audit fee services fees in 2022 all
related to residual Reporting Accountant work on the
interactive investor Class 1 Circular as discussed in the
prior year report. The Committee also monitors audit and
non-audit services provided to non-consolidated funds
and were satisfied fees for those services did not impact
auditor independence.
Further details of the fees paid to the external auditors for
audit and non-audit work carried out during the year are
set out in Note 7 of the Group financial statements.
The ratio of non-audit fees to audit and audit related
assurance fees is 15% (2021: 30%). The total of audit
related assurance fees (£2.3m) and non-audit fees
(£1.3m) is £3.6m, and the ratio of these audit related
assurance fees and non-audit fees to audit fees is 58%
93abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
(2021: 80%). As noted above the audit related assurance
fees are primarily fees in relation to required regulatory
reporting, where it is normal practice for the work to be
performed by the external auditor.
The Committee is satisfied that the non-audit fees do not
impair KPMG’s independence.
Audit quality and materiality
The Committee places great importance on the quality of
the external audit and carries out a formal annual review
of its effectiveness.
The Committee looks to the audit team’s objectivity,
professional scepticism, continuing professional education
and its relationship with management, all in the context of
regulatory requirements and professional standards.
Specifically:
– The Committee discussed the scope of the audit prior
to its commencement.
– The Committee reviewed the annual findings of the
Audit Quality Review team of the FRC in respect of
KPMG’s audits and requested a formal report from
KPMG of the applicability of the findings to abrdn both in
respect of generally identified failings and failings
specific to individual audits. The Committee was
satisfied insofar as the issues might be applicable to
abrdn’s audit, that KPMG had proper and adequate
procedures in place for our audit.
– The Committee approved a formal engagement with
the auditor and agreed its audit fee.
– The Committee Chair had regular meetings with the
lead audit partner to discuss Group developments.
– The Committee receives updates on KPMG’s work and
its findings and compliance with auditor independence
requirements.
– The Committee reviewed and discussed the audit
findings including audit differences prior to the approval
of the financial statements. See the discussion on
materiality in the following paragraphs for more detail.
– The Committee also continued to monitor and discuss
relevant external matters in relation to KPMG as a firm.
The Committee discussed the accuracy of financial
reporting with KPMG both as regards accounting errors
that would be brought to the Committee’s attention and as
regards amounts that would need to be adjusted so that
the financial statements give a true and fair view.
Differences can arise for many reasons ranging from
deliberate errors (fraud etc.) to good estimates that were
made at a point in time that, with the benefit of more time,
could have been more accurately measured. KPMG have
set overall audit materiality at £14m (2021: £19m) based
on revenue (as set out in the KPMG independent auditors’
report). This is within the range in which audit opinions are
conventionally thought to be reliable. To manage the risk
that aggregate uncorrected differences become
material, the Committee supported that audit testing
would be performed to a lower materiality threshold for
individual reporting units. Furthermore, KPMG agreed to
draw the Committee’s attention to all identified
uncorrected misstatements greater than £0.7m (2021:
£0.95m). The aggregated net difference between the
reported pre-tax profit and the auditor’s judgement of
pre-tax profit was less than £9m which was less than audit
materiality. The gross differences were attributable to
various individual components of the consolidated income
statement and balance sheet. No audit difference was
material to any line item in either the income statement or
the balance sheet. Accordingly, the Committee did not
require any adjustment to be made to the financial
statements as a result of the audit differences reported by
the external auditors.
KPMG has confirmed to the Committee that the audit
complies with their independent review procedures.
Audit reform
The Committee reviewed the Government’s response to
the consultation on strengthening the UK’s audit, corporate
reporting and corporate governance systems, published in
May 2022, and the intended establishment of the Audit,
Reporting and Governance Authority (ARGA) and
associated frameworks. The Committee will remain
engaged in the audit reform discussion during 2023.
94 abrdn.com Annual report 2022
3.2 Risk and Capital Committee report
I am pleased to present my report as Chair of the Risk and
Capital Committee (the “Committee”).
The Risk and Capital Committee supports the Board in
providing effective oversight and challenge of risk
management and the use of capital across the Group so
as to ensure that we meet the expectations of our clients,
shareholders and regulators.
During 2022 the Committee placed particular focus on
two areas: (i) the financial and strategic implications of the
challenging market and economic environment, amplified
by the impact of the Russia-Ukraine war; and (ii) prudential
matters, with the first year of operation of the UK’s
Investment Firms Prudential Regime (IFPR).
Throughout 2022 the Committee continued to review and
challenge key activities undertaken by the business and
advise the Board on these, including:
– Evolution of the Enterprise Risk Management (ERM)
framework.
– Key components of the Group’s ICARA and the Group’s
capital and liquidity.
– Conduct risks across our three vectors and
implementation of the FCA’s new Consumer Duty.
– Key project updates from the transformation activity
across the Group.
– The framework for anti-financial crime and anti-money
laundering activity across the Group.
– Work to develop our approach to managing cyber
resilience in line with the US National Institute of
Standards and Technology (NIST) framework.
– The expansion of the direct to customer proposition
through the acquisition of interactive investor (ii).
– The Group’s exposure to emerging risks, including
climate change.
Furthermore, the Committee has closely monitored
developments from our regulators across the world as
they have progressed their regulatory agendas, including
the areas of ESG, operational resilience and liquidity.
Further details on these and other activities carried out by
the Committee during the year can be found in the report
that follows.
On behalf of the Board I wish to record our gratitude to
Martin Pike, my predecessor as Chair of the Risk and
Capital Committee, who stood down in May 2022.
John Devine
Chair, Risk and Capital Committee
Membership
All members of the Risk and Capital Committee are
independent non-executive Directors. For their names, the
number of meetings and Committee member
attendance during 2022, please see the table on page 84.
The Committee meetings are attended by the Chief Risk
Officer. Others invited to attend on a regular basis include
the Chief Executive Officer, the Chief Financial Officer, the
Group General Counsel and the Chief Internal Auditor, as
well as the External auditors.
Regular private meetings of the Committee’s members
were held during the year, providing an opportunity to
raise any issues or concerns with the Chair of the
Committee. The Committee’s members also held regular
private meetings with the Chief Risk Officer and were given
additional access to management and subject matter
experts outside of the Committee meetings in order to
support them in gaining an in-depth understanding of
specific topics.
Key responsibilities
The Company’s purpose results in opportunities and
exposures to a range of risks and uncertainties.
Understanding and actively managing the sources and
scale of these opportunities and risks are key to fulfilling this
purpose.
The role of the Committee is to provide oversight and
advice to the Board, and where appropriate, the Board of
each relevant Group company on the following:
– The Group’s current risk strategy, material risk
exposures and their impacts on the levels and
allocations of capital.
– The structure and implementation of the Group’s ERM
framework and its ability to react to forward-looking
issues and the changing nature of risks.
– Changes to the risk appetite framework and
quantitative risk limits.
– Risk aspects of major investments and product
developments, as well as other corporate transactions.
– Regulatory compliance across the Group.
Further detail on the work performed in each of these
areas is set out in the report below.
In addition, in January 2022 the Committee also took on
responsibility to act as the board risk committee for the
Group’s two main UK investment companies, abrdn
95abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Investment Management Limited (aIML) and abrdn
Investments Limited (aIL).
In carrying out its duties, the Committee is authorised by
the Board to obtain any information it requires from any
Director or employee of the Group. It is also authorised to
seek, at the expense of the Group, appropriate external
professional advice whenever it considers this necessary.
The Committee did not need to take any independent
advice during the year.
The Committee’s work in 2022
Overview
The Committee operates a dynamic agenda and uses
each meeting to consider a range of recurring items as
well as other items that are more ad hoc and/or forward-
looking in nature. An indicative breakdown as to how the
Committee spent its time is shown below:
The key recurring items which were considered by the
Committee are:
– The ‘Views on Risk’ report - this provides a holistic
assessment from the Chief Risk Officer of the key risks
and uncertainties faced by the Group’s businesses and
the actions being taken to manage them.
– Ongoing activity to enhance and develop abrdn’s ERM
framework, for example the Risk Appetite and Policy
frameworks.
– Performance of the Group’s ICARA processes in
accordance with IFPR, including the firm’s stress and
scenario testing programme. The ICARA supports the
Committee in understanding changes to both the risk
profile of the Group and the capital position over time.
Through these recurring activities the Committee was
able to challenge management’s assessment of risks and
oversee the key actions being taken to manage these
risks.
In addition to reviewing these recurring items the
Committee provided oversight of a broad range of topics
in 2022. This included consideration of:
–
Advice provided to the Remuneration Committee
regarding the delivery of performance in 2021
relative to risk appetites
–
2021 findings from the abrdn Investment
Management vector Internal Controls Report
–
2022 deliverables from the ICARA process
–
Emerging risks to the Group
–
Operational resilience programme activity
–
Review of abrdn’s principal risks and risk
disclosures for the annual report and accounts
–
Conduct risks for the Personal vector
–
Conduct risks for the Adviser vector
–
Corporate and reputational risks for the Group
–
Anti-financial crime-related activity
–
Contingency planning process in the event of the
failure of a critical third-party supplier
–
Investment risk and related reporting
–
Proposed changes to the risk appetite
framework
–
Finance strategy for the Group
–
Cyber risks, including the Group’s resilience
maturity against the NIST framework
–
The Group ICARA documents
–
Management of IT obsolescence
–
The remit of the Risk & Compliance function
–
Implementation of the new Consumer Duty
–
The Senior Managers and Certification Regime
–
abrdn wind-down plan and triggers
–
Data privacy management
–
2023 combined second- and third-line
Assurance Plan
After each meeting, the Committee Chair reports to the
Board, summarising the key points from the Committee’s
discussions and any specific recommendations.
Capital adequacy
Other
ERM framework including risk policies and appetites
Risks including operational and investment risk
Conduct including client and customer outcomes
Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
96 abrdn.com Annual report 2022
Risk exposures and risk strategy
abrdn’s risk appetite framework enables the
communication, understanding and control of the types
and levels of risk that the Board is willing to accept in its
pursuit of the strategy of the Group. This includes the
business plan objectives and the capital and liquidity it
requires.
The Committee has received regular reporting through
the ‘Views on Risk’ report on each of the Group’s 12
principal risks, including risk dashboards, commentary and
management information.
The Committee reviewed and proposed updates to the
risk appetite framework to ensure that the risk appetites
and limits reflected changes to the risk profile in view of the
external environment and ongoing transformation of the
business. Notable changes to the risk appetite framework
in 2022 include new appetites on operational resilience;
and revised appetites relating to anti-financial crime risks.
Through reviewing the ‘Views on Risk’ reporting the
Committee supports the Board by monitoring risks relative
to applicable risk appetites and the resilience of the capital
position under current and stressed conditions. Key items
that the Committee discussed during the year in this
context included:
– The risks associated with the delivery of the business
plan.
– Enhancements to components of the Group’s risk
appetite framework.
– The delivery of the abrdn ICARA document.
– Improvements to anti-financial crime processes.
– The strengthening of the conduct risk framework.
– The management of cyber risk and operational
resilience across the Group.
Stress testing and scenario analysis has also supported the
Committee in understanding, monitoring and managing
the capital and liquidity risk profile of the business under
stressed conditions. This has provided the Committee with
a forward-looking assessment of the Group’s financial
resilience in response to potentially significant adverse
events affecting key risk exposures. The information
presented to the Committee included combined stress
scenarios which looked at simultaneous stresses
impacting on economic conditions, flows and idiosyncratic
factors specific to the Group.
Reverse stress testing analysis – i.e. considering extreme
but plausible events that have the potential to cause the
business to become unviable – has also been provided to
the Committee to allow it to consider the ability of the
Group to prevent and mitigate the risk of business failure.
This year’s reverse stress testing explored the possible
economic conditions that could lead to non-viability,
augmenting previous reverse stress testing which
explored operational, conduct and reputational risks.
The Committee reviewed the results of the stress testing
exercise and noted that the possible economic conditions
that could lead to non-viability were extremely remote.
Based on the stress testing and scenario analysis results
and the reverse stress testing exercise, the Committee
concluded there was no requirement for the business to
reduce its risk exposures. The business was resilient to
extreme events given the robust controls, monitoring and
triggers in place to identify events quickly and the range of
management actions available to help mitigate their
effects.
Enterprise Risk Management (ERM) framework
To ensure the consistent focus on the delivery of client
outcomes, during 2022, the business continued to evolve
the ERM framework used to identify, assess, control and
monitor the Group’s risks.
The Committee has obtained assurance regarding the
operation of the ERM framework through its review of
regular content within the ‘Views on Risk’ report. In
particular we have used our review of the various risk and
capital dashboards, including the consolidated dashboard
on key conduct risk indicators and Board risk appetite
metrics, to understand the Group’s risk profile and the
effectiveness of the framework in supporting the
management of these risks.
The Committee receives reporting from the Risk and
Compliance function on the results of the quarterly risk
management survey of regional and functional executives
which is used to support the identification of key risks
facing the business. The completion of this survey, along
with subsequent discussion of the results by the Executive
Leadership Team, helps to drive greater risk awareness
and accountability. Furthermore, through reviewing the
results of the survey, the Committee has been able to
ensure there is appropriate focus on the key risks facing
the business.
Exceptions-based reporting is provided to the Committee
through the ‘Views on Risk’ report. This sets out any matters
of significance in respect of the results of Policy
compliance reporting and actions being taken in response
to risk events. These two items also support the Committee
in performing its oversight of the ERM framework.
In relation to the significant process execution event
mentioned earlier, the RCC has thoroughly considered
how the ERMF operated and what remedial actions need
to be taken.
Regulatory developments and compliance
The Committee reviews and assesses regulatory
compliance plans which detail the planned schedule of
monitoring activities to be performed by the Risk and
Compliance function to ensure there is appropriate
coverage. Regular updates on key findings from
regulatory compliance activity and progress against the
plans were reported to the Committee through the ‘Views
on Risk’ report.
As a Committee we have closely monitored global
regulatory developments to understand and anticipate
potential implications for the Group and the wider financial
services sector. In particular the Committee paid close
attention to geopolitical risks and their operational
implications, notably in relation to sanctions and anti-
97abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
financial crime. The Committee has also closely followed
regulatory developments and implementation activity in
relation to the new Consumer Duty, operational resilience
and new sustainability regulations globally.
Governance arrangements
The Committee has continued to refer to the work of those
non-executive risk committees operating in subsidiary
companies to provide oversight and challenge of risks
within those subsidiaries. This has included the risk
committees in place for abrdn Life and Pensions Limited,
Standard Life Savings Limited and Elevate Portfolio
Services Limited.
The Committee receives updates from, and reviews the
minutes of, these committees in order to maintain
awareness and oversight of risks across the Group. In
addition to the Committee reviewing reporting from the
subsidiary risk committees, arrangements also exist for the
Committee’s Chair to attend these subsidiary risk
committees on request.
In its capacity since January 2022 as the board risk
committee to the Group’s two main UK investment firms,
the Committee routinely considered the implications of
Group risk management activities for these two firms and
identified any significant risk concerns to be brought to the
attention of the respective Boards, The Chair of the two
investment firm Boards has a standing invitation to attend
the Risk and Capital Committee.
During the year the Committee provided advice to the
Remuneration Committee regarding the delivery of
performance in the context of incentive packages. In
particular, the Committee considered whether
performance had been delivered in a manner that was
consistent with the Group’s strategy, risk appetite and
tolerances, and capital position. The provision of this advice
helps to ensure that the Group’s overall remuneration
practices are aligned to the business strategy, objectives,
culture and long-term interests of the Group and that
individual remuneration is consistent with, and promotes,
effective risk management.
Committee effectiveness
The effectiveness review was conducted externally by IBE.
The review included observation of a meeting, access to
papers and interviews with Committee members. A
representative of IBE provided feedback on the
performance of the Committee directly to the Chair and
the report and recommendations were discussed by the
Committee. Details of the 2022 review are on page 81 and
reflect the themes raised across the Board and its
Committees.
98 abrdn.com Annual report 2022
3.3 Nomination and Governance Committee
report
I am pleased to present the Nomination and Governance
Committee (the Committee) report for the year ended 31
December 2022.
The Committee’s key priorities this year were to support
the succession planning for the Board and the executive,
maintain effective board governance processes and
continue to oversee initiatives supporting the development
of talent, leadership and diversity, equity and inclusion. Also,
during the year, the remit of the Committee was
expanded to include oversight of culture, recognising this
as an important enabler of the Company's transformation.
The Committee and the Board held deep-dives on
engagement survey results, action plans and the
development of the Company's cultural commitments.
Further detail on this can be found on pages 41 to 42.
Governance Framework
We have continued to review our governance framework
against the Code principles and provisions. The framework
in place effectively supported the review, completion and
integration of the ii acquisition and no material changes
were proposed to its operation during 2022.
Board evaluation
Having conducted internally-facilitated reviews in 2020
and 2021 our 2022 Board review was facilitated externally
and more information about what the process involved
and its outcomes can be found on page 81.
Culture, Diversity, Equity and Inclusion
Continuing to build on transformation activity across our
businesses, the Committee has received regular updates
on the work being done to implement the Group’s culture,
diversity, equity and inclusion programmes and
considered theELT’s initiatives to implement these
throughout the organisation. Diversity, Equity and Inclusion
remains a key focus and commitment of the Board,
especially in areas such as fund management, which, as
an industry, is typically underrepresented. There is more
detail about this below and on pages 41 and 42. The
Committee wants to use this opportunity to pay tribute to
Lynne Connolly who headed our Diversity, Equity and
Inclusion (DEI) programmes for six years and sadly passed
away in early 2023 after living with incurable cancer for
many years. The Group plans to establish an award
scheme in Lynne Connolly’s name to recognise the
foundations for DEI that Lynne created and the inspiration
she represented to all of our colleagues.
Talent and Leadership
The Committee received regular reports from teams
involved with Talent and Organisation Effectiveness,
oversighting their plans to deliver effective leadership,
talent and performance management across the Group.
During the year we have spent particular time on the talent
pipeline. It is particularly pleasing that following the launch
of a new future leaders programme this has already led to
the role expansion/promotion of 20% of the introductory
cohort. Enterprise-wide, significant improvements in the
diversity of early talent, senior leaders and in our talent
pipelines as well as reduction in our UK gender pay and
bonus gaps for the fifth consecutive year continue to
demonstrate the success of our programmes.
Board composition
The Committee, on behalf of the Board, assesses the
balance of executive and non-executive Directors, and the
composition of the Board in terms of skills, experience,
diversity and capacity. These factors are important to the
Board in reviewing overall composition and during the year
were reviewed by the Committee, covered in my 1:1
discussions with Directors, and considered by the external
Board effectiveness review.
As I have covered already in my Chairman’s statement, I
was pleased to welcome Catherine Bradley, Pam Kaur
and Mike O’Brien to the Board during 2022. We said
farewell to Cecilia Reyes during 2022 and I want to record
here our gratitude for her strong contribution during her
three years on the Board. The Board’s practice of
succession planning over time was reflected in Committee
appointments and movements during the year, with
Catherine Bradley assuming the Chair of the Audit
Committee on appointment and John Devine, moving
from Audit to take on the Chair of the Risk and Capital
Committee.
Brian McBride has advised that he will not seek re-election
at the Company’s Annual General Meeting on 10 May
2023 and will stand down from that date. I and all my
colleagues will miss Brian’s insights and guidance and I
would like to thank Brian for his contribution to the Board
and to the subsidiary boards he served on.
The Board believes strongly in the importance of strong
governance to successful value creation and I look
forward to demonstrating this in future reports.
Sir Douglas Flint
Chairman and Chair of the Nomination and Governance
Committee
99abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Membership
The members of the Committee are the Chairman, the
Chairs of Board Committees and the NED responsible for
Employee Engagement. For their names, the number of
meetings and committee member attendance during
2022, please see the table on page 84.
Stephen Bird, in his CEO role, is invited to Committee
meetings to discuss relevant topics, such as the roles within
and membership of the ELT, talent development and
management succession.
Key responsibilities
The Committee’s primary role is to support the
composition and effectiveness of the Board, and to
oversee the Group’s activities to strengthen its talent
pipeline. It also oversees ongoing development and
implementation of the Group’s governance framework
and its work to embed appropriate diversity and inclusion
policies.
The Committee’s key responsibilities are:
– Identifying and recommending Directors to be
appointed to the Board and the Board Committees and
ensuring relevant training is provided on appointment
and throughout their tenure.
– Reviewing and assisting in the development and
implementation of initiatives to embed the Board’s
desired outcomes for diversity, equity and inclusion
within the Group and to define, monitor and
performance manage the behaviours expected of all
employees that will be seen to represent the Group’s
culture.
– Reviewing Board diversity, skills and experience.
– Supporting the process and output of the Board’s
effectiveness review.
– Overseeing succession planning, and leadership and
talent management development throughout the
Group.
– Considering how the Group should comply with current
and upcoming corporate governance requirements,
guidance and best practice and relevant directors’
duties.
The Committee reports regularly to the Board so that all
Directors can be involved in discussing these topics as
appropriate.
The Committee’s work in 2022
An indicative breakdown as to how the Committee spent
its time is shown below:
–
Reviewed compliance with the UK Corporate
Governance Code for the 2021 ARA.
–
Reviewed the results of the Committee
Effectiveness Review and reviewed the Board
Charter and Committees’ terms of reference.
–
Reviewed progress on Talent and Leadership
development activities.
–
Recommended the appointments of Mike O’Brien
and Pam Kaur.
–
Reviewed approach to ESG external reporting,
and reviewed TCFD report and Sustainability
report.
–
Reviewed the recommendations to shareholders
to re/elect Directors at the AGM.
–
Reviewed and recommended the continued
appointment of
John Devine and Jonathan Asquith
at the end of their three-year terms.
–
Reviewed the group’s Culture and Talent Strategy
plan.
–
Received an update on Diversity, Equity and
Inclusion progress and action plans.
–
Reviewed ELT succession planning.
–
Reviewed the Group’s annual Stewardship Code
Report.
–
Reviewed executive succession plan and talent
pipeline.
–
Approved proposed executive leadership
changes.
–
Received an update on abrdn’s cultural
commitments.
–
Received an update on Diversity, Equity and
Inclusion progress and action plans.
–
Reviewed the process to oversee Board skills
analysis and considered Board succession
planning.
–
Received an update on 2023 plans to further
embed cultural commitments.
–
Received an update on Diversity, Equity and
Inclusion progress and 2023-24 priorities.
–
Reviewed progress on Talent and Leadership
development activities.
–
Received the regular update on the activities of the
abrdn Financial Fairness Trust.
Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
100 abrdn.com Annual report 2022
An indicative breakdown as to how the Committee spent
its time is shown below:
Board and committee appointments and
composition
The Committee keeps under constant review the skills,
experience and capabilities needed for particular Board
roles. This recognises the need to secure a pipeline of
potential successors to be able to chair the Board
Committees, and also the need to plan ahead to take
account of the length of time served on the Board by the
current independent non-executive Directors. In addition, it
also recognises the skills which the Board will need as it
moves forward to oversee the implementation of the
Group’s approved strategy and takes account of the
Group’s commitments to achieve and maintain its
published Board diversity targets.
Where Board augmentation is needed, an external search
consultant is then requested to prepare a list of suitable
candidates. From that, the Committee agrees a shortlist.
Following interviews with potential candidates, the
Committee makes recommendations to the Board on any
proposed appointment, subject always to the satisfactory
completion of all background checks and regulatory
notifications or approvals. Part of this includes considering
existing or planned external commitments of candidates
to assess their ability to meet the necessary time
commitment and whether there are any conflicts of
interest to address.
In light of the Committee’s review of the Board
composition and skills analysis carried out in 2021, and
following the process as outlined above to identify and
consider potential candidates, the Committee was
pleased to recommend Mike O’Brien and Pam Kaur be
appointed to the Board, each as a member of the Audit
and Risk and Capital Committees. Both Mike and Pam
were appointed as Non-executive Directors and
members of the Audit and Risk and Capital Committees
with effect from June 2022.
The Committee also recommended the appointments of
John Devine as Chair of the Risk and Capital Committee
and Catherine Bradley as Chair of the Audit Committee,
which took effect, following Board approval, from
conclusion of the AGM on 18 May 2022.
The Committee believes that, as well as strengthening the
collective skills and experience of the Board, these
appointments build resilience into the membership of the
Board Committees, aid succession planning for
Committee Chair roles, and support our commitment to
Board diversity.
The Committee also oversees the process that
recommends continuation of appointments; members of
the Committee do not, however, take part in discussions
when their own performance – or continued appointment
– is being considered. John Devine and Jonathan Asquith’s
continued appointments were reviewed during the year
and the Committee agreed that they continued to meet
all independence and time commitment expectations and
recommended to the Board that they should continue
their appointments for further terms.
Succession planning and talent management
activities
The Committee regularly reviews succession planning
activities, including identifying key person and retention
risk, and talent development programmes across the
Group.
During 2022, in particular, the Committee discussed the
future leadership and talent needs of the Group and how
the current programmes could be revised to take account
of the skills and expertise required by both the Board and
the ELT. These programmes are designed to recognise the
changing shape of the Group, and also to identify both the
talent available within the Group and the need/benefits of
external recruitment. Diversity was considered as a core
part of these discussions, and progress was reviewed
against our diversity goal to achieve minimum 40%
women on ELT succession plans.
The Talent and Change agenda is led by the CPO, in
conjunction with the CEO.
The Committee spent time during 2022 looking at the
strategic priorities of the talent team to:
– Bring the best possible people into the organisation.
– Enable people to be the best they can.
– Create the best possible environment for our people to
thrive.
The Committee discussed the team’s progress to deliver
initiatives to support early careers, talent acquisition, future
talent, core capabilities and behaviours and effective
performance management. The Committee discussed
the inclusive design of the initiatives such as early careers,
talent acquisition and future talent and considered the
diversity of talent this achieved.
The Committee reviewed the effectiveness of its NED
mentoring programme which allows each NED to get to
know members of the next generation of talent through
individual meetings which take place over the course of
the year and evolve based on the needs of each individual
being mentored. Having received positive feedback from
both mentors and mentees, this will continue in 2023.
During the year, the Committee reviewed and approved a
number of proposed changes to the Group’s ELT.
Following the acquisition of ii, the Group took the
opportunity to consolidate its personal wealth propositions
Corporate governance
Succession planning and talent development
Board and committee appointments and composition
Culture, diveristy and inclusion
101abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
under a single vector and leadership team. Given the scale
and importance of ii to the Group strategy, the Committee
approved the appointment of Richard Wilson to the
position of CEO, Personal from August 2022. Following an
assessment of the Group’s strategic requirements, the role
of Chief Enterprise Technology Officer was created. David
Scott (formerly Chief Security and Resilience Officer) was
promoted to the role, effective from August 2022, and took
on responsibility for building and maintaining a technology
infrastructure which is commensurate to the Group’s
growth plans. The Committee also approved the
appointment of Sarah Moody to Chief Corporate Affairs
and Investor Relations Director, effective January 2023.
Board evaluation
The Committee has a key role in supporting the Board
evaluation process. Details of the 2022 review are on page
81.
Culture, Diversity, Equity and inclusion
In recognition of the oversight activities already
undertaken by the Committee relating to the Group’s
culture, in January 2022 the Committee determined that it
should have oversight of the metrics in place to help to
assess and monitor culture across the Group.
The Committee and the Board spent time with both the
CEO and the Chief People Officer understanding their
plans to strengthen meaningful measurement and
reporting of culture across the Group. The Board and the
ELT have defined a set of commitments which define the
Group’s culture – Client First, Empowered, Ambitious and
Transparent. Details of the cultural commitments and the
behaviours that underpin them can be found on page 42.
We have a comprehensive plan in place to embed our
commitments across the colleague experience and track
progress in 2023. We measure overall progress against our
cultural ambitions through our listening strategy and our
employee engagement online platform.
The Committee also received the annual update from the
Chairman and the CEO of the abrdn Financial Fairness
Trust and discussed how grants were made and how
these were contributing to informing public policy choices.
The Board’s diversity statement is on page 80. The
Committee has a key role in supporting publication of this
statement through its oversight of DEI activities. The DEI
Team attends the Committee at least twice a year to
report on progress to deliver against Committee-
approved framework, action plans and initiatives. The
Committee reviewed progress against the Group’s DEI
framework priorities, being:
– Making diversity and inclusion part of our purpose.
– Maintaining inclusive ways of working.
– Attracting and developing diverse talent.
– Ensuring colleagues feel included and valued every day.
ESG reporting
During the year, the Committee supported the Group’s
ESG external reporting by reviewing the various reports in
advance of their publication. The ESG reports issued were:
– UK Stewardship report – this shows how the Group has
applied the UK Stewardship Code as an investor. The
Group is a signatory to the Stewardship Code.
– TCFD report – this includes a summary of the Group’s
approach to climate change, including our approach to
scenario analysis, refreshed net zero goals and case
studies.
– Sustainability report - this is an annual report with ESG
data, activity and achievements across the Group’s
operations and vectors, to bring to life our brand values
and our ESG priorities.
The Committee members considered these reports in
terms of their quality, consistency and alignment with
other relevant information.
Committee effectiveness
The effectiveness review was conducted externally by IBE.
The review included observation of a meeting, access to
papers and interviews with Committee members. A
representative of IBE provided feedback on the
performance of the Committee directly to the Chair and
the report and recommendations were discussed by the
Committee. Details of the 2022 review are on page 81 and
reflect the themes raised across the Board and its
Committees.
102 abrdn.com Annual report 2022
3.4 Directors’ remuneration report
Remuneration Committee Chair’s statement
This report sets out what the Directors of abrdn were paid in
2022 together with an explanation of how the Remuneration
Committee reached its recommendations.
Also set out are the proposed updates to our Directors’
Remuneration Policy (‘Policy’) and its implementation from
2023. Where tables and charts in this report have been
audited by KPMG LLP we have marked them as ‘audited’ for
clarity.
The report is structured in the following sections and
corresponding page numbers:
Page
At a glance – 2022 remuneration outcomes 106
At a glance – 2023 proposed Policy summary and
implementation in 2023
107
2022 annual remuneration report 108
Shareholdings and outstanding share awards 110
Executive Directors’ remuneration in context 113
Remuneration for non-executives 116
The Remuneration Committee
The proposed Directors’ Remuneration Policy
118
120
Approval
The Directors’ Remuneration Report was approved by the
Board and signed on its behalf by:
Jonathan Asquith
Chair of the Remuneration Committee
28 February 2023
Dear shareholder
On behalf of the Board I am pleased to present the Directors’
Remuneration Report for the year ended 31 December 2022
and the proposed updated Policy to commence in 2023.
Introduction
Our Directors’ Remuneration Report for 2021 received a 96%
vote in favour at the 2022 AGM. I would like to thank our
shareholders for their continued strong support of our
approach to remuneration matters and their ongoing
dialogue on these issues. I would also like to thank Cecilia
Reyes for her contributions to the Committee’s work over the
last three years and welcome Hannah Grove whojoined in
October.
As you will no doubt be aware, our Policy is due for renewal at
the 2023 AGM. This has given the Committee a chance to
reflect on the current Policy and how it has been operating.
We concluded collectively that the Policy has worked well
and continues to support an appropriate level of alignment
between the interests of shareholders, executive
management and other stakeholders in the Group.
In this context, wedo not propose any material changes to
the structure or the quantum of incentives. Within that
unchanged envelope we are, however, proposing a limited
change of emphasis in our annual bonus measures. This
change comprises an increase in the maximum weighting
allocated to non-financial measures from 25% to 35%to
allow the Board greater flexibility to target the delivery of
strategic change in the business, the results of which may not
be immediately reflected in its financial results. The majority,
at least 65%, will remain weighted towards financial
measures. More detail can be found in the section titled Key
features of our new Policy on page 105.
In what has been one the toughest investment markets for
many years, we have continued to drive our Remuneration
Philosophy. Our end-of-year processes incorporated careful
consideration of financial and non-financial performance,
reflecting the growing resilience of our diversified model, the
strides achieved in addressing sustainability issues and our
continued focus on our people, culture and customers in a
challenging market environment.
How our Policy was applied in 2022
Significant advances at a strategic level in the year, including
the acquisition of ii, were balanced by shortfalls in the Group’s
financial performance in a hostile market environment. With
40% of the annual bonus and 100% of the LTIP driven directly
by profit and total shareholder return measures, the reduction
in executive Director rewards mirrored subdued returns for
shareholders and other stakeholders.
Annual bonus (detail on pages 108 to 109)
Financial performance (75%)
Financial targets were set with reference to the Board-
approved plan including measures on net flows, Investment
performance and adjusted operating profit before tax.
Against the backdrop of weak investment markets and
significant macro and geopolitical headwinds, financial
performance was necessarily held back.
Investment performance: Our longer term equities
performance remains robust, while over a three-year time
103abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
period we have consistently delivered strong performance in
alternatives as well as fixed income. Real asset valuations
have weakened, given the higher interest rate backdrop,
although long-term sector conviction remains strong. The
overall outcome was between threshold and target.
Net flows: Negative market sentiment had an adverse impact
on flows, with significant number of withdrawals experienced
from equity funds across the industry. The impacts were
largely felt across public markets in the Investments vector,
with real assets and our other two vectors Personal and
Adviser proving to be much more resilient. Aggregate
performance on net flows nonetheless fell below the
threshold required to qualify for payouts under the annual
bonus plan.
Adjusted operating profit before tax: This was 19% lower than
the prior year, at £263m (£196m excluding ii). Performance in
the Personal and Adviser vectors was strong, contributing
over 50% of adjusted operating profit in the year, with the
aggregate decline concentrated in the Investments vector.
Overall, performance did not meet the threshold required.
The outcomes for the financial element of the 2022 annual
bonus are summarised below.
Financial performance measure
Weighting
(% of total scorecard)
2022 outcome
(% of total scorecard)
Investment performance
20% 8.25%
Net flows
15% 0%
Adjusted operating profit
before tax
40% 0%
This resulted in an overall assessment of 8.25% out of a
maximum of 75% on financial measures.
Non-financial performance (25%)
In 2022 we assessed non-financial performance against two
baskets of measures, ESG (comprising Environment and
Social categories) and Customer.
Environment: There have been material advances in the
delivery of our global climate solutions, where we have
identified our clients with net zero goals and have a Climate
product strategy group shaping our net zero offering. We are
building the tools to track carbon intensity and we have a
clear stance on our climate priorities as investors. For our own
operational net zero, we are firmly on track to meet our long
term net zero carbon emission target of 50% less than our
2018 baseline by 2025. Full details of our progress on these
matters are disclosed in our Sustainability and TCFD report,
available on our website. The Committee took into account
more than 10 qualitative and quantitative performance
indicators in assessing that performance in this area was
strong with the outcome being agreed as 5% out of 5%.
Social: Despite the challenges posed by enacting a major
change agenda against the backdrop of difficult markets,
engagement levels at the end of 2022 held up at 50% (2021:
51%). Whilst we are not where we need to be, we have clear
plans in place and are committed to continued efforts to build
engagement through 2023. 2022 has been a year of
transformation on culture coupled with meaningful
achievement across our DEI levers of change. Our culture
change programme has been designed and rolled out,
engaging over 600 of our global leaders. There has been an
increase in female representation in senior leadership roles
and succession plans as well as an increase in ethnic
minorities in early career roles. Taking into account more than
20 qualitative and quantitative performance indicators, the
Committee determined the final outcome of 6% out of 8%.
Customer: In the Investments vector, independent client
survey feedback covering global clients across all asset
classes rated abrdn favourably on a number of areas across
the various client experience steps. Overall client service and
trust were amongst the areas of noteworthy recognition. The
Committee also noted improved RFP hit rate conversions and,
more importantly, no increase in redemptions. In the Adviser
vector, the Net Promoter Score was particularly high relative
to other leading technology household names and came with
improved Customer Satisfaction scores over the year. The
Committee also noted the external accolades received by
the abrdn Wrap platform. For the Personal vector, the
Committee reviewed the total customer numbers, noting an
increase in the active and engaged customer segment.
There were also positive customer survey outcomes on
satisfaction with relationship managers and the wider team.
The Committee concluded the appropriate outcome for the
Customer category was 11% out of 12%.
Considering all components together, this resulted in an
overall assessment of 22% out of a maximum of 25% on non-
financial measures.
Remuneration Committee assessment
To assess whether the awards generated by the scorecard
were fair in the broader performance and risk context, the
Committee reviewed the individual components which
contributed to the delivery of this performance and the
alignment of scorecard outcomes with the experience of a
range of stakeholders. Details on the Committee’s
considerations are set out on page 109. The Committee
concluded that the outcomes of the scorecard were fair and
balanced and no adjustment to them was needed or made.
The overall outcome recognises the hard work to deliver the
critical milestones that were achieved in 2022 against the
backdrop of a challenging external environment. This was
evidenced in our assessment of performance against non-
financial measures including the recognition of progress in
delivering a more diversified, more resilient, organisation that
should be equipped to weather challenging conditions and
rebound when cycles turn.
Summarising these results, the Remuneration Committee
approved the following outcomes based on performance
against targets:
Executive Director
Final outcome
(% of max)
2022 total bonus
(£000s)
Stephen Bird
30.25% 662
Stephanie Bruce
30.25% 244
Long-term incentives (detail on pages 109 to 112)
Vesting of the 2020 LTIP granted to the current executive
Directors is based on performance over the three-year
period ending on 31 December 2022. After reviewing the
relevant metrics the Committee concluded that the
104 abrdn.com Annual report 2022
performance had not met the stretching targets set and
therefore the award will not vest.
As already disclosed in an RNS announcement on 11 August
2022, following an assessment of performance against its
specific performance conditions relating to efficiency targets,
the final tranche of the one-off deferred award made to
Stephanie Bruce was determined to vest at 100% of
maximum.
Finally, the 2019 EIP award was granted to Stephanie Bruce
and certain former executive Directors. Performance was
measured against the underpin hurdles for the period ending
31 December 2022. Final vesting was assessed at 25% of the
maximum award. Full details of the vesting outcome can be
found on page 111.
Forward looking LTIP awards were made to Stephen Bird and
Stephanie Bruce in April 2021 and 2022, as disclosed in the
2020 and 2021 Annual reports and accounts. The
performance conditions attached to these awards will be
measured over three-year periods finishing on 31 December
2023 and 2024 respectively.
Key features of our new Policy
The Committee is comfortable that the current Policy
supports the strategic direction of the Company, and the
Policy therefore remains fit for purpose. However the
Committee proposes to make a limited change in emphasis
in the annual bonus plan, adjusting the minimum weighting of
financial components to 65% (from 75%). This ensures that
financial elements still maintain an overall majority but gives
scope to increase non-financial metrics to 35% of the overall
award.
The Committee acknowledges the view of some
shareholders that non-financial metrics can prove harder to
quantify for performance assessment purposes. However,
there are a wide range of strategic actions in progress which
are crucial to the long-term success of the Group and the
Committee strongly believes that it is in shareholders’ interests
for management to be held accountable for delivery of these
actions. Accordingly, the Committee intends that the
additional 10% weighting in the non-financial segment should
be targeted against specific strategic Group and vector
priorities which have quantifiable and reportable success
metrics.
No change is proposed to the design of the LTIP or the
structure of performance metrics for the 2023 award.
Performance metrics for awards under future LTIP awards
will continue to be reviewed on an annual basis and set within
the parameters of the Policy.
Policy implementation in 2023
Following a review no change has been made to salaries for
the executive Directors or fees for the non-executives for
2023.
In line with previous practice, we will continue to set stretch
targets for the annual bonus and the LTIP to ensure that the
maximum opportunity will only be earned for exceptional
performance.
The scorecard for the 2023 annual bonus is detailed on page
107 and the targets, which are commercially sensitive, will be
disclosed at the end of this performance year in the 2023
Annual report and accounts. The scorecard retains the
structure of focusing a majority of the opportunity on the
achievement of financial targets as set out in our Policy (65%)
with the balance measured against non-financial
performance including ESG and Customer objectives and
progress on strategic initiatives. The Committee has agreed a
basket of key indicators in each of these areas which will allow
a rounded assessment of performance to be made. Details
on these metrics, including how the Committee assessed
performance against them, will be disclosed retrospectively.
The 2023 LTIP will again consist of two equally weighted
targets, Adjusted Diluted Capital Generation per share CAGR
and Relative TSR. The three-year Adjusted Diluted Capital
Generation per share target range has been maintained at
5%-15% Compound Annual Growth Rate (CAGR), which
remains aligned with the business plan agreed with the Board.
The Committee also reviewed the TSR peer group for the
Relative TSR metric. In line with its policy of adjusting the peer
group to match the changing composition of the Group’s
business, the peer group will be adjusted for the 2023 grant to
exclude M&G, Franklin Resources, Affiliated Managers,
Invesco and SEI Investments. AJ Bell, IntegraFin Holdings,
Rathbones Group and Liontrust Asset Management will be
added to the peer group. Details of the 2023 LTIP grant can
be found on page 107.
Wider workforce
The effective date of the salary review was brought forward
to October 2022 (compared to April 2023) for around 40% of
our global population. To support the colleagues who are
most at risk during the cost of living challenges, this review
focused on those who earned less than £75k (or local country
equivalent). The review resulted in an average increase of 6%
for those individuals. In addition to this, annual reviews have
been completed in early 2023 as part of the normal
remuneration review cadence.
To help you navigate the report effectively, I would like to
draw your attention to the sections on pages 106 to 107
which summarise both the outcomes for 2022 and also how
the remuneration policy will be implemented in 2023. Further
detailed information is then set out in the rear section of the
report for your reference as required. The Policy report, which
will be subject to a binding shareholder vote at the 2023 AGM
is set out on pages 120 to 130.
On behalf of the Board, I invite you to read our remuneration
report. As always, the Committee and I are open to hearing
your views on this year’s report and our remuneration policy in
general.
105abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
At a glance – 2022 remuneration outcomes
Outcome of performance measures ending in the financial year
The following charts show performance against the target range for the annual bonus and commentary on the 2020-
2022 Long-Term Incentive Plan (LTIP). Further detail on the assessment of the performance conditions can be found on
pages 108 to 109.
1. % AUM above benchmark average of three-year and five-year for all asset classes.
2. Excl. LBG tranche withdrawals, cash/liquidity and ii.
2022 annual bonus scorecard outcome
The following table sets out the final outcome for the 2022 annual bonus. A detailed breakdown of performance can be
found on pages 108 to 109.
Bonus Scorecard Outcome Total Bonus Outcome
Financial
metrics
(maximum
75%)
Non-financial
metrics (maximum
25%)
Board approved
outcome
(% of maximum)
Annual salary
(£000s)
Maximum
oppor tuni ty
(% of salary)
Total award
(% of salary)
Total award
(£000s)
Stephen Bird
8.25% 22 % 30.25%
875 250% 75.6% 662
Stephanie Bruce 538 150% 45.4% 244
2020-2022 LTIP outcome
The performance period for the 2020-2022 LTIP concluded on 31 December 2022. Performance was assessed against
two measures: Capital Generation per share (CAGR) and Relative TSR performance. Performance against both measures
was assessed to be below the threshold required and therefore the award will not vest. Detail of the performance
assessment for the 2020-2022 LTIP can be found on page 109.
Total remuneration outcomes in 2022
The chart below shows the remuneration outcomes for each executive Director in 2022 based on performance
compared to the maximum opportunity.
Investment performance (20%)
1
Net flows (15%)
2
Adjusted operating profit
before tax (40%)
0%
0%
Performance vs Maximum (%) – Financial measures
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
41%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100
%
Environment (5%)
Social/people (8%)
Customer (12%)
100%
Performance vs Maximum (%) – Non-financial measures
75%
92%
Salary, pension and benefits
Stephen
Bird
Stephanie
Bruce
Max
Actual
2022
Max
Actual
2022
All figures in £000s
Annual bonus - cash
1,034
1,034
636 652
636
1,728
1,094 1,094
£6,285
£1,696
£3,171
£1,532
3,063
122
331
331
404
404
122
Annual bonus - deferred
LTIP
106 abrdn.com Annual report 2022
At a glance – 2023 remuneration policy implementation
This section sets out how we propose to implement our remuneration policy in 2023. The full remuneration policy can be
found on pages 120 to 130.
Element of remuneration Key features of operation 2023 implementation
Salary
Core reward for
undertaking the role
Normally reviewed annually, taking into account a range of
internal and external factors.
No change to quantum
Stephen Bird: £875,000
Stephanie Bruce: £538,125
Pension
Competitive
retirement benefit
Aligned to the current maximum employer contribution
available to the UK wider workforce (18% of salary).
No change to quantum
Stephen Bird: 18% of salary
Stephanie Bruce: 18% of salary
Benefits
Competitive benefits
Includes (i) private healthcare; (ii) death in service protection (iii)
income protection (iv) reimbursement of membership fees of
professional bodies; and (v) eligibility for the all employee share
plan.
No change to quantum
Annual bonus
To reward the delivery
of the Company’s
business plan
Annual performance assessed against a range of key financial
and non-financial measures. At least 65% will be based on
financial measures. At least 50% deferred into shares vesting in
equal tranches over a three-year period.
Awards are subject to malus and clawback terms.
No change to quantum
Stephen Bird: 250% of salary
Stephanie Bruce: 150% of salary
See below for 2023 performance
conditions
Long-term incentive
plan
To align with our
shareholders and
reward the delivery of
long-term growth
Awards are subject to a three-year performance period, with a
subsequent two-year holding period. Dividend equivalents
accrue over the performance and holding period.
Awards are subject to two equally weighted performance
metrics linked to long-term strategic priorities and the creation
of long-term shareholder value.
Awards are subject to malus and clawback terms.
No change to quantum
Stephen Bird: 350% of salary
Stephanie Bruce: 200% of salary
2023 performance metrics are
set out below
Shareholding
requirements
Executive Directors are required to build up a substantial interest
in Company shares. The share ownership policy for executive
Directors requires shares up to the value of the shareholding
requirement to be held for a period of two years following
departure from the Board.
No change to quantum
Stephen Bird: 350% of salary
Stephanie Bruce: 300% of salary
Performance conditions for 2023 annual bonus
Financial (65% weighting) Investment performance (15%), Adjusted operating profit (35%), Net flows
excluding liquidity (15%)
Non-financial (35% weighting) Performance against Customer (10%) and ESG objectives (incorporating people
engagement and diversity metrics, and environmental measures) (15%) and
progress on key strategic initiatives (10%)
Due to commercial sensitivity, actual targets and ranges will be disclosed at the end of the performance period. The
Remuneration Committee retains an appropriate level of flexibility to apply discretion to ensure that remuneration
outcomes reflect a holistic view of overall performance, including conduct and culture.
Performance conditions for 2023 Long-term incentive plan
Target range
1
Adjusted Diluted Capital Generation per share (50% weighting) 5% - 15% CAGR
Relative TSR
2
(50% weighting) Equal to median – equal to upper quartile
1. Straight line vesting occurs between threshold and maximum. 25% vesting for threshold performance.
2. The peer group is made up of the following global asset management peers: AJ Bell, Alliance Bernstein, Amundi, Ashmore Group, DWS Group, Hargreaves
Lansdown, IntegraFin Holdings, Janus Henderson Group, Jupiter Fund Management, Liontrust Asset Management, Man Group, Ninety One, Quilter,
Rathbones Group, St James’s Place, Schroders.
107abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Directors’ remuneration in 2022
This section reports remuneration awarded and paid at the end of 2022 in further detail, including payments to past
Directors.
Single total figure of remuneration – executive Directors (audited)
The following table sets out the single total figure of remuneration for each of the individuals who served as an executive
Director at any time during the financial year ending 31 December 2022:
Executive
Directors
Basic
salary for
year
£000s
Taxable
benefits in
year
£000s
1
Pension
allowance paid
in year
£000s
Bonus paid in
cash
£000s
Bonus
deferred
£000s
2
LTIP with
period ending
in the year
£000s
2019
EIP
£000s
Total
for the year
£000s
Total
fixed
£000s
Total
variable
£000s
Stephen
Bird
2022 875 1 158 331 331 - - 1,696 1,034 662
2021 875 1 158 880.5 880.5 - - 2,795 1,034 1,761
Stephanie
Bruce
3
2022 538 1 97 122 122 791 (139) 1,532 636 896
2021 538 1 97 321 321 – - 1,278 636 642
1. This includes the taxable value of all benefits paid in respect of the relevant year. Included for 2022 are medical premiums at a cost to the group of £606 for
executive Directors.
2. This represents 50% of the total bonus award and is delivered in shares which will vest in equal tranches over a three-year period.
3. The final outcome of Stephanie Bruce’s one off award is included in the column titled ‘LTIP with period ending in the year’, for the three tranches which vested
in 2020, 2021 and 2022. This figure includes dividends awarded over the performance period and is calculated on the basis of the share price on date of
exercise as previously disclosed in RNS announcements. Stephanie Bruce is the only current Director who participated in the 2019 Executive Incentive Plan
(EIP). The vesting outcome was determined to be 25% (details can be found on page 111). The final outcome was therefore calculated as £46k (and so
£139k lower than stated in the 2019 Annual report and accounts). This adjustment is reflected in the table above.
Base Salary (audited)
There was no change to the base salaries of executive Directors in 2022.
Pension (audited)
Under the Directors’ Remuneration Policy approved at the 2020 AGM, and consistent with the proposed policy for 2023, the
executive Directors received a cash allowance in lieu of pension contributions of 18% of base salary.
Annual Bonus Plan
The following section contains details on the targets and the Remuneration Committee’s assessment of outcomes for the
period 1 January 2022 to 31 December 2022 against each of the elements of the executive Director bonus scorecard.
Financial performance metrics – 75% of total scorecard outcome
Weighti ng
(% of overall
scorecard)
Threshold
(25% of
maximum)
Target
(50% of
maximum)
Stretch
(100% of
maximum)
Actual Result
(% of overall
outcome)
Investment performance – % AUM above
benchmark average of three-year and five-
year for all asset classes
20% 55% 65% 70% 61.5% 8.25%
Net flows
1, 2
(£bn) 15% (3.2) 7.2 28 (12) 0%
Adjusted operating profit before tax
2
(£m) 40% 323 336 363 196 0%
1. Excluding LBG tranche exits and cash/liquidity.
2. Excludes ii as financial targets were set prior to acquisition.
Non-financial performance metrics – 25% of total scorecard outcome
Category Highlights from assessment
Result
(% of overall
outcome )
Environment
(5%):
Improvement on
decarbonisation
and progress on
Operational Net
Zero
The environmental measures we selected focused on the important contribution our
Company has to make as a global institutional investor and a responsible company. The
Committee considered more than ten quantitative and qualitative measures. Our
Sustainability and TCFD report, available on our website, contains detail on our
performance in this area. Key factors in the determination were:
– The range of climate solutions developed across the asset classes globally, noting the
Climate product strategy group which shapes our climate and net zero offering.
– We are building the tools to track carbon intensity and we have a clear stance on our
climate priorities as investors. There has been proactive engagement with clients and
companies we invest in, including a stated policy on voting action.
– Reduction in the carbon footprint for 2022, significantly less than the 2018 baseline. The
Committee noted the ongoing trends that point to abrdn meeting our published target of
50% less than the 2018 baseline by 2025.
5%
108 abrdn.com Annual report 2022
Category Highlights from assessment
Result
(% of overall
outcome)
Social/people
(8%):
Improvements
from baseline on
People
engagement,
sustained
progress on
gender
representation
and ethnicity
diversity targets
abrdn is a people business and we believe that in order to succeed it needs to embed
diversity, equity and inclusion within a strong and shared cultural framework, enabling us
to continue to attract and maintain an engaged and diverse talent base.
The Committee
considered 10 quantitative and additional qualitative measures, including data points relating
to gender representation across the workforce, employee engagement, ethnicity data and
new hire statistics.
– Increased female representation in senior leadership roles (to 39% from 36% in 2021) and
ELT succession plans (up 50% on 2021).
– Our Gender Pay Gap has been reduced for the fifth consecutive year.
– 35% of early career roles were filled by ethnic minorities (which is above the 2025 target),
helping to improve the diversity of our talent pipeline.
– Improved CEO and ELT visibility across the organisation, with clarity on strategy and
improved two-way communication via new channels.
– 30 Culture Champions across the business and over 600 leaders have been engaged with
the local roll out of our Commitments, helping to embed this culture throughout the
organisation and the colleague lifecycle.
–
Despite the challenges posed by enacting a major change agenda, engagement
levels at the end of 2022 held up at 50% (2021: 51%). Whilst we are not where we need
to be, we have clear plans in place to build engagement through 2023.
76% of
employees rated abrdn as an Inclusive organisation (up from 70% in 2021).
6%
Customer
(12%):
Measured
across the
Adviser,
Personal and
Investments
vectors
Our three vector model gives us an extremely diverse customer base, from institutional to
adviser to retail. We therefore measure our success in delivering for our customers with
reference to vector specific quantitative and qualitative metrics that holistically capture
the experience of our different client groups.
The Committee considered more than 25
quantitative and qualitative measures from internal and external sources. Key factors in the
determination were:
– For the Investments vector positive feedback was noted via the Voice of the Client
survey, covering global clients across all asset classes, rating abrdn favourably on a
number of areas across the various client experience steps. Overall client service and
trust where amongst the areas of noteworthy recognition. There was also a strong RFP
hit rate relative to prior year and no increase in redemptions in spite of the toughest
investment year in half a century.
– Net promoter score (NPS) for the Adviser vector of 57% (which compared favourably
relative to other leading companies) and was significantly up on the baseline from
2021. Significant improvement in customer satisfaction scores for the Adviser vector as
well as improved survey responses to the question indicating intent for “more business”
and external accolades received by the abrdn Wrap platform.
– Within the Personal vector, ii reported a 4% increase from the prior year in their Active
and Engaged customer segment as well as attracting numerous market awards
including Which? Recommended SIPP Provider 2022 and a Trust Pilot score of 4.7.
11%
In considering whether the bonus outcomes derived from the scorecards were fair in the context of the overall results, the
Remuneration Committee took into account the feedback received from the Audit Committee and the Risk and Capital
Committee on material accounting, reporting and disclosure matters and the management of risk within the business.
They also considered factors including the shareholder experience and pay for the wider workforce. In light of these, and
noting the maintenance of our dividend pay out policy, a final determination was made that no adjustment should be
made to the bonus outcomes set out above.
2020-2022 Long-term Incentive Plan (LTIP) outcome
The following table details the targets and assessment of outcomes for the 2020-2022 LTIP award. The performance
period for this award concluded on 31 December 2022. The Committee concluded that the award had not met the
required threshold performance and the shares will therefore lapse.
Threshold Maximum Actual outcome % vesting
Capital Generation per share (CAGR) 11% 23 % (4%) 0%
Relative TSR Median Upper quartile Below median 0%
Payments to past Directors and payments for loss of office (audited)
Payments made to former executive Directors that have not been previously reported elsewhere are reported if they are
in excess of £20,000. No payments to past directors or payments for loss of office were made during the year.
109abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Shareholdings and outstanding share awards
This section reports our executive Directors’ interests in shares.
Directors’ interests in shares (audited)
Our shareholding requirements for executive Directors are detailed on page 107. The Directors’ Remuneration Policy
requires executive Directors to accumulate and maintain a material long-term investment in abrdn plc shares. The
Remuneration Committee reviews progress against the requirements annually. Personal investment strategies (such as
hedging arrangements) are not permitted for the purposes of reducing the economic exposure arising from the
shareholding requirements.
The following table shows the total number of abrdn plc shares held by the executive Directors and their connected
persons:
Unvested shares
Total number of
shares owned at 1
January 2022
Shares acquired
during the period 1
January 2022 and
31 December
2022
Total shares
owned as at 31
December 2022
1
Options exercised
during the period 1
January 2022 and
31 December
2022
Vested but
unexercised share
options
Subject to
performance
conditions
2
Not subject to
performance
conditions
3
Shares lapsed
Stephen
Bird
4
700,000 82,355 782,355 32,355 - 3,426,584 475,399 -
Stephanie
Bruce
5
360,000 246,633 606,633 139,924 - 1,462,891 194,265 -
1. There were no changes to the number of shares held by executive Directors between 31 December 2022 and 27 February 2023.
2. Includes: the 2020 LTIP and 2021 LTIP awards and the 2022 LTIP awards granted in 2022 disclosed below (awards subject to performance targets over the
three-year period ending 31 December 2024), excluding, in each case, shares to be awarded in lieu of dividend equivalents.
3. This comprises deferred bonus awards. It does not include shares to be awarded in lieu of dividend equivalents.
4. On 11 April Stephen Bird exercised the first tranche of the deferred portion of his 2020 annual bonus award. The share price used for exercise was 205.70
pence. This resulted in a gain of £66,554.
5. On 9 August Stephanie Bruce exercised the final tranche of her one-off award and the first tranche of the deferred portion of her 2020 annual bonus award.
The share price used for exercise was 161.15 pence. This resulted in a gain of £225,488.
The following table shows the number of qualifying awards included in assessing achievement towards the shareholding
requirement, as at 31 December 2022. The total Qualifying holding includes shares held outright (which derive from vested
and exercised awards plus any purchased shares) as well as Qualifying unvested awards. Purchased shares are valued at
the higher of the cost of the purchase as disclosed in RNS announcements or the closing market price on 30 December
2022. Qualifying unvested awards include 50% of the value (as a proxy for the payment of tax due on the exercise of the
awards) of awards not subject to performance conditions and which have not yet vested.
Qualifying unvested awards
Number of shares
under the
deferred share
plan which are
not subject to
performance
conditions
Number of shares
under option under
long-term incentive
plans which are no
longer subject to
performance
conditions
Total Qualifying
holding (shares held
from table above
and 50% of
Qualifying unvested
awards)
1
Value of
holding
2
Shareholding
requirement
(as % salary)
Basic
salary
Total of the value of
shares owned and
50% of the value of
qualifying awards
at 31 December
2022 as a % of
salary
Shareholding
requirement
met?
Stephen Bird
475,399 350%
£875,000 253% In progress
Stephanie
Bruce
194,265
– 1,020,055 £2,216,023
– 703,766 £1,9,485
300% £538,125 259% In progress
1. Of the total number of shares shown, Stephen Bird purchased 750,000 shares at a total cost of £1,705k and Stephanie Bruce purchased 238,571 shares at a
total cost of £515k.
2. The closing market price at 30 December 2022 used to determine the value of non-purchased shares was 189.25 pence.
Executive Directors who have not yet satisfied the shareholding requirement are expected to accumulate shares until they
have fully met their shareholding requirement. They are required to hold 100% of vested shares (post-tax) granted under
the Company’s share plans (including any dividend equivalents) until they have met their shareholding requirement. All
other shares acquired and held by the executive Director or owned indirectly by a partner or family trust also count
towards the shareholding requirement.
Stephen Bird and Stephanie Bruce, who were appointed during 2020 and 2019 respectively, have not yet met the
shareholding requirement, however the Committee is satisfied with the progress they have made towards their respective
requirements given their tenure.
Vesting of the CFO Deferred Award
The third anniversary of the award was 3 June 2022 and vesting of the final tranche was determined based on
performance up to that date. The award had a maximum value at grant of £750,000, and tranches one and two of the
award vested at 100% in 2020 and 2021 respectively.
110 abrdn.com Annual report 2022
As previously disclosed, the vesting level of the third tranche was considered based on the final achievement against the
efficiency targets. The outcome would be adjusted by the Remuneration Committee to ensure that the overall vesting of
the award is commensurate with the final achievement against the efficiency targets.
The Remuneration Committee reviewed the outcome against the £175m (baseline target) and £230m (maximum target)
in June 2022. As at 31 December 2021, actions had been taken which delivered £400m of annualised synergies, benefiting
2021 operating expenses by £320m (2020: £287m) (as published on page 50 of our 2021 ARA). Group Internal Audit
reviewed and verified the data in relation to these efficiency targets for the period of the CFO’s tenure, and the
Remuneration Committee concluded that the final outcome was in excess of the stretch target of £230m required for
maximum vesting. Performance was further assessed by the Committee taking into account the CFO’s personal
performance and conduct. Following checks with the Audit Committee and the Risk and Capital Committee to ensure
there were no other matters which the Committee should take into account when determining this outcome, the
Remuneration Committee approved the vesting level of the final tranche of the Award at 100% and the award vested on 3
June 2022. Ms Bruce exercised these shares on 9 August 2022 and they remain subject to Clawback terms for a period of
up to five years from the date of award, as set out in the Remuneration Policy.
Executive Incentive Plan (EIP) outcome (audited)
Awards granted under the 2019 EIP to Stephanie Bruce and former executive Directors, set out in full on page 87 of the
Annual report and accounts 2019, and summarised below, completed their performance period on 31 December 2022.
The Remuneration Committee reviewed the outcomes and concluded that three of the four elements had failed the
performance hurdle and therefore lapsed.
Measure Performance underpin hurdle Actual performance
Outcome (as % of maximum
opportunity)
Investment performance
At least 55% AUM by value to be
outperforming the benchmark
65% 25%
Flows
Gross new business flows underpin of £235bn
1
Net new business flows underpin of £30bn
2
£175bn
(£8bn)
0%
Return on adjusted equity At least 17% 12% 0%
Cost/Income ratio 73%
3
82% 0%
1. Flows exclude investment in cash & liquidity funds and total Lloyds.
2. Flows exclude investment in cash & liquidity funds and strategic insurance partners.
3. The Cost/Income ratio was restated from 65% to 73% to remove the impact of JVs & Associates from the 2022 target and outcome following the change to
how these are accounted for in 2021.
The following amounts had been previously disclosed in respect of each Director and an adjustment is set out below for
each in light of the performance assessment. Note the figure for Stephanie Bruce is disclosed as part of the single total
figure of remuneration on page 108.
Participant
Total EIP value deferred
(£000s)
EIP value following
performance outcome
(£000s)
Original single total
figure disclosure for 2019 (£000s)
Adjusted single total
figure disclosure for 2019 (£000s)
Martin Gilbert 374 93.5 1,219 938.5
Keith Skeoch 563 141 1,472 1,050
Rod Paris 462 115.5 1,158 811.5
Bill Rattray 97 24 352 279
Awards granted in 2022 (audited)
The table below shows the key details of the LTIP and deferred awards granted in 2022:
Participant
Type of
award
Basis of
award
% of
salary
Face value
at grant
1
Number of
shares
awarded
% payable
for threshold
performance Details on performance conditions
Stephen Bird
Nil-cost
option
LTIP 350% £3,062,500 1,447,169
25%
Awards are subject to
performance against targets
measured over three years as
set out on page 104 of the Annual
report and accounts 2021
Stephanie Bruce
Nil-cost
option
LTIP 200% £1,076,250 508,576
Stephen Bird
Nil-cost
option
Deferred
Bonus
Not
applicable
£880,466 416,060
Not
applicable
Not applicable
Stephanie Bruce
Nil-cost
option
£320,856 151,619
1. The share price used to calculate the number of shares for the awards was 211.62 pence (the five day average price from 31 March 2022).
111abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Share dilution limits
All share plans operated by the Company which permit awards to be satisfied by issuing new shares contain dilution limits
that comply with the guidelines produced by The Investment Association (IA). On 31 December 2022, the Company’s
standing against these dilution limits was 0.22% where the guideline is no more than 5% in any 10 years under all
discretionary share plans in which the executive Directors participate and 0.71% where the guideline is no more than 10%
in any 10 years under all share plans.
As is normal practice, there are employee trusts that operate in conjunction with the Executive LTIP, the abrdn
Discretionary Plan, the deferred elements of the abrdn plc annual bonus plan, the Aberdeen Asset Management deferred
plans and the abrdn all-employee plans. On 31 December 2022 the trusts held 65,858,129 shares acquired to satisfy these
awards. Of these shares, 10,716,059 are committed to satisfying vested but unexercised awards. The percentage of share
capital held by the employee trusts is 3.29% of the issued share capital of the Company – within the 5% best practice limit
endorsed by the IA.
Promoting all-employee share ownership
The Company promotes employee share ownership with a range of initiatives, including:
– The abrdn plc (Employee) Share Plan which allows UK employees (our largest jurisdiction) to buy abrdn plc shares
directly from earnings.
A similar tax-approved plan is used in Ireland. At 31 December 2022, 1,552 individuals in the UK and Ireland were actively
making monthly contributions averaging £72. At 31 December 2022, 1,694 individuals were abrdn plc shareholders
through participation in the Plan.
– The Sharesave Plan which was offered in 2022 to eligible employees in the UK. This plan allows UK tax resident
employees to save towards the exercise of options over abrdn plc shares with the option price set at the beginning of
the savings period at a discount of up to 20% of the market price. At 31 December 2022, 1,861 individuals were saving
towards one or more of the Sharesave offers.
Executive Directors’ external appointments
Subject to the Board’s approval, executive Directors are able to accept a limited number of external appointments to the
boards of other organisations and can retain any fees paid for these services. Both Stephen Bird and Stephanie Bruce held
representative directorships on behalf of the Group during the year for which they received no fees. Significant external
positions held during the year are set out below.
Executive Director Role and Organisation 2022 Fees
Stephen Bird Member of the Financial Services Growth & Development Board
1
Board member at the Investment Association
2
£nil
£nil
1. Appointed on 11 May 2022.
2. Appointed on 27 April 2022.
112 abrdn.com Annual report 2022
Executive Directors’ remuneration in context
Pay compared to
performance
The graph shows the
difference in the total
shareholder return at
31 December 2022 if, on
1 January 2013, £100 had
been invested in abrdn plc
and in the FTSE 100
respectively. It is assumed
dividends are reinvested in
both. The FTSE 100 has been
chosen as abrdn plc is a
member of this FTSE index.
Total shareholder return of abrdn plc compared to the FTSE 100 index
The following table shows the single figure of total remuneration for the Director in the role of Chief Executive Officer for the
same 10 financial years as shown in the graph above. Also shown are the annual incentive awards and LTIP awards which
vested based on performance in those years.
Ye ar e nde d
31 December
Chief Executive
Officer
Chief Executive Officer single total
figure of remuneration (£000s)
Bonus outcome/ annual incentive rates
against maximum opportunity (%)
Long-term incentive plan vesting rates
against maximum opportunity (%)
2022 Stephen Bird 1,696 30 0
2021 Stephen Bird 2,795 80.5 -
2020
Stephen Bird 1,044 48 –
Keith Skeoch 1,075 48 –
2019
1
Keith Skeoch 1,050 9 –
2018
1,2
Keith Skeoch 814 10 –
Martin Gilbert 814 10 –
2017
2
Keith Skeoch 3,028 82 70
Martin Gilbert 1,317 56 –
2016 Keith Skeoch 2,746 81 31.02
2015 Keith Skeoch 1,411 87 40.77
2015 David Nish 2,143 90 40.77
2014 David Nish 6,083 95 100
2013 David Nish 4,206 75 64
1. The outcome has been updated to reflect the EIP vesting.
2. Co-CEOs.
Relative importance of spend on pay
The following table compares what the Company spent on employee remuneration to what is paid in the form of
dividends to the Company’s shareholders. Also shown is the Company’s adjusted profit before tax which is provided for
context as it is one of our key performance measures:
2022 % change 2021
Remuneration payable to all Group employees (£m)
1
549 -9% 604
Dividends paid in respect of financial year (£m) 295 -4% 308
Share buybacks and return of capital (£m) 302 637% 41
Adjusted profit before tax (£m) 253 -22% 323
1. In addition, staff costs and other employee related costs of £88m (2021: £97m) and £11m (2021: £53m) are included in restructuring and corporate
transaction expenses and in cost of sales respectively. See Note 6 of the Group financial statements for further information.
FTSE 100 abrdn
Source: Datastream
Value
(£)
50
100
150
200
250
300
Dec-22Dec-21Dec-20Dec-19Dec-18Dec-17Dec-16Dec-15Dec-14Dec-13Dec-12
113abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Annual percentage change in remuneration of Directors compared to UK based employees
The table below shows the percentage year-on-year change in salary, benefits and annual bonus in the relevant year for
the executive Directors, along with any percentage change in fees for the non-executive Directors, compared to the
average UK-based Group employee. The Remuneration Committee considers this the most appropriate comparison
given the location of the executive Directors and that the Group does not operate a harmonised salary and benefits
structure across its global operations. Year on year movement on base salaries or Director fees is primarily attributable to
part-year appointment changes.
% Base salary/fee Annual bonus outcome % Benefits
1
2022 2021 2020 2022 2021 2020 2022 2021 2020
Executive
Directors
Stephen Bird
2
- 100% – -62% 234% – - - –
Stephanie Bruce - - 74% -62% 69% 54% - - 100%
Non-
executive
Directors
3,4
Sir Douglas Flint
- - - - – – - - -
Jonathan Asquith - - 202% - – – - – –
Catherine Bradley
- - - - - - - - -
John Devine
6% -3% -2% - – – -100% – -100%
Hannah Grove
334% - - - - - - - -
Pam Kaur
- - - - - - - - -
Brian McBride
-13% 59% – - – – - – –
Michael O’Brien
- - - - - - - - -
Martin Pike
-60% - -3% - – – - – -100%
Cathleen Raffaeli
10% - - - – – - – -100%
Jutta af Rosenborg
-55% - – - – – - – –
Cecilia Reyes
-14% - 292% - – – -100% – –
UK-based
employees
5
- - 2.5% -47% 50% -52.5% - - 17%
1. The change in benefits figures for employees (including executive Directors) are based on the change in medical premium paid by the Group on their behalf.
Benefits do not include pension contributions for these purposes.
2. Stephen Bird was appointed 1 July 2020.
3. Remuneration for non-executive Directors and the Chairman is disclosed on page 116.
4. Martin Pike and Jutta af Rosenborg stepped down from the Board with effect 18 May 2022. Cecilia Reyes stepped down from the Board with effect 30
September. Catherine Bradley, Pam Kaur and Michael O’Brien were all appointed to the Board in 2022 and therefore no year on year comparison can be
made on their fees.
5. Disclosure is made on the basis of a 1 April 2021 to 1 April 2022 comparison and so does not include the increases made in 2022 with effect from 1 October
2022 (as referred to in the section below).
How pay was set across the wider workforce in 2022
Our principles for setting pay across the wider workforce are consistent with those for our executive Directors, in that the
proportion of the remuneration package which is linked to performance increases for more senior roles within the
Company as responsibility and accountability increase.
Base salaries are targeted at an appropriate level in the relevant markets in which the Group competes for talent. The
Remuneration Committee considers the base salary percentage increases for the Group’s broader UK and international
employee populations when determining any annual salary increases for the executive Directors. In 2022, a Group-wide
decision was made not to carry out a salary review and, as disclosed in the Annual report and accounts 2021, the same
approach was applied to executive Directors for 2022 where no increases were applied.
Over the course of 2022 global inflationary pressures impacted our colleagues and in response the Company decided to
bring forward the 2023 salary review to have an effective date of 1 October 2022 (rather than 1 April 2023) for individuals
who earned less than £75,000 per annum (or local country equivalent) on a full time equivalent basis and who had not had
a material increase in the previous 18 months. This captured approximately 40% of our population. The average increase
for those eligible employees was 6%, with the highest percentage increases typically at the most junior job levels.
The eligibility criteria for participation in variable pay plans is set so that more senior individuals have a greater proportion of
their pay linked to performance. Some colleagues at more junior levels are not eligible to participate in the bonus plan, with
their package instead consisting of only fixed pay, including a higher salary and therefore higher salary linked benefits
(such as pension), ensuring certainty of outcome for these individuals compared to peers who are eligible to participate in
the bonus plan.
For roles where variable remuneration eligibility is retained, our clear approach is designed to support and reward
performance at a company, team and individual level. Performance related variable remuneration includes deferred
variable compensation at a suitable level for the employee’s role, ensuring a performance link over a longer time horizon
114 abrdn.com Annual report 2022
than a single year. Variable remuneration for employees, including executive Directors, is determined as a total pool which
is distributed across the business based on the performance of each vector and function. Individuals are then considered
for a bonus payment on the basis of their individual performance objectives and goals, taking into account conduct.
The Group engaged with its employees in 2022 through the annual Viewpoints full company survey. The survey included
an opportunity for employees to provide feedback to the Board on pay and benefit matters. Additionally, the Board
Employee Engagement (BEE) programme continued with a variety of ways to connect with and gather feedback from
employees globally including listening sessions, network engagement and ‘meet the NEDs’ sessions. These provide
opportunities to have direct communication between employees and NEDs on a wide range of topics, including
remuneration. The representative NED is able to provide updates and insights at each Board meeting ensuring that
employee views are understood and can be taken into account. The representative NED also shares updates with
employees via the BEE programme sessions.
The Group operates a Compensation Committee comprising the Chief People Officer (Chair), Chief Financial Officer and
Chief Risk Officer, the role of which is to consider the implementation of the remuneration policy across the Group. The
terms of reference of the Compensation Committee are set by the Remuneration Committee and the Chair of the
Compensation Committee formally reports to the Remuneration Committee on all matters which fall within the
Compensation Committee’s remit.
Pay ratio
The table below sets out the ratio of CEO pay to the median, 25
th
and 75
th
percentile total remuneration of full-time
equivalent UK employees. We have identified the relevant employees for comparison using our gender pay gap data set
(snapshot data from 5 April 2022), referred to as Methodology B in the legislation. This was chosen by the Remuneration
Committee as it utilised a data set which had already been processed and thoroughly reviewed, and this enabled timely
reporting for disclosure purposes. Some employing entities are excluded from the gender pay gap calculation in line with
the regulations due to the number of individuals employed by these entities being less than 250. The Committee
considered this would not have a material impact on the outcome of the pay ratio calculation given the limited number of
individuals this excludes, relative to the total population being captured, and the range of the remuneration for those
excluded individuals, which was spread across quartiles.
The remuneration paid to each of the individuals identified under methodology B was reviewed against other individuals
within the quartile both above and below. The individuals identified at the 25
th
percentile and the 50
th
percentile had since
left the business, therefore the next identified individuals were selected. The individual identified at the 75
th
percentile had
been promoted in the year, therefore the next identified individual was selected. Benefits figures were based on the
medical premium paid by the Company on behalf of employees.
The ratio has decreased from 2021, which reflects the fact that the CEO has a greater level of remuneration at risk which is
dependent on Company performance; based on performance in 2022, the bonus for the CEO paid out at 30.25% of
maximum, compared to 80.5% of maximum in 2021. Consistent with that, the trend for bonus payments across all
employees has also reduced, but not as materially as is the case for the CEO. The Committee is comfortable that the pay
ratio reflects the pay and progression policies and Remuneration Philosophy across the Company as set out above. Further
detail on the make up of workforce pay is set out below.
Year Method 25
th
percentile 50
th
percentile 75
th
percentile
Stephen Bird 2022 Option B 35 25 16
Stephen Bird 2021 Option B 62 45 25
Stephen Bird/Keith Skeoch 2020 Option B 49 30 18
Keith Skeoch 2019 Option B 34 23 13
Keith Skeoch 2018 Option B 30 19 12
Base salary
(£000s)
Total pay
(£000s)
CEO remuneration 875 1,696
25
th
percentile employee 40 48
50
th
percentile employee 55 69
75
th
percentile employee 82 107
115abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Remuneration for non-executive Directors and the Chairman
Single total figure of remuneration – non-executive Directors (audited)
The following table sets out the single total figure of remuneration for each of the non-executive Directors who served as a
Director at any time during the financial year ending 31 December 2022. Non-executive Directors do not participate in
bonus or long-term incentive plans and do not receive pension funding:
Non-executive Directors
Fees for year ended
31 December
£000s
Taxable benefits in
year ended
31 December
£000s
Total remuneration
for the year ended
31 December
£000s
Sir Douglas Flint
1
2022 475 - 475
2021 475 - 475
Jonathan Asquith
2022 139 - 139
2021 139 – 139
Catherine Bradley
2
2022 109 - 109
John Devine
2022 131 - 131
2021 124 2 126
Hannah Grove
2
2022 126 - 126
2021 29 - 29
Pam Kaur
3
2022 63 - 63
Brian McBride
4
2022 105 - 105
2021 121 - 121
Michael O’Brien
3
2022 63 - 63
Martin Pike
5
2022 50 - 50
2021 124 – 124
Cathleen Raffaeli
6
2022 164 - 164
2021 149 – 149
Jutta af Rosenborg
5
2022 42 - 42
2021 94 – 94
Cecilia Reyes
7
2022 81 - 81
2021 94 9 103
1. Sir Douglas Flint is eligible for life assurance of 4x his annual fee. This is a non-taxable benefit.
2. Appointed to the Board with effect from 4 January 2022.
3. Appointed to the Board with effect from 1 June 2022.
4. Total fees include subsidiary Board fees of £30,000 p.a. as a member of the Standard Life Savings Limited and Elevate Portfolio Services Limited Boards.
5. Stepped down from the Board with effect from 18 May 2022.
6. Total fees include subsidiary Board fees of £55,000 p.a. as Chair of the Standard Life Savings Limited and Elevate Portfolio Services Limited Boards.
7. Stepped down from the Board with effect from 30 September 2022.
The non-executive Directors, including the Chairman, have letters of appointment that set out their duties and
responsibilities. The key terms are set out in the remuneration policy, and can be found on page 130. The service
agreements/letters of appointment for Directors are available to shareholders to view on request from the Company
Secretary at the Company’s registered address (details of which can be found on page 296) and at the 2023 AGM. Details
of the date of appointment to the Board and date of election by shareholders are set out below:
Chairman/ non-executive Director Initial appointment to the Board Initial election by shareholders
Chairman
Sir Douglas Flint 1 November 2018 AGM 2019
Senior Independent Director
Jonathan Asquith 1 September 2019 AGM 2020
Non-executive Directors
Catherine Bradley 4 January 2022 AGM 2022
John Devine 4 July 2016 AGM 2017
Hannah Grove 1 September 2021 AGM 2022
Brian McBride 1 May 2020 AGM 2020
Cathleen Raffaeli 1 August 2018 AGM 2019
Pam Kaur 1 June 2022 AGM 2022
Michael O’Brien 1 June 2022 AGM 2022
116 abrdn.com Annual report 2022
Implementation of policy for non-executive Directors in 2023
The following table sets out abrdn non-executive Director fees to be paid in 2023. Fees for 2023 remain at the current level.
Role 2023 fees
1
2022 fees
Chairman’s fees
2
£475,000 £475,000
Non-executive Director fee
3
£73,500 £73,500
Additional fees:
Senior Independent Director
£25,000 £25,000
Chairman of the Audit Committee
£30,000 £30,000
Chairman of the Risk and Capital Committee
£30,000 £30,000
Chairman of the Remuneration Committee
£30,000 £30,000
Committee membership (Audit, Risk and Capital and Remuneration Committees)
£17,500 £17,500
Committee membership (Nomination Committee) £10,000 £10,000
Employee engagement
£15,000 £15,000
1. The core fee of £73,500 paid to each non-executive Director (including the Chairman) is expected to total £662k for 2023 (2022: £735k). This is within the
maximum £1,500,000 permitted under Article 87 of abrdn’s articles of association. Total fees including additional duties are expected to amount to £1,408k for
2023 (2022: £1,407k).
2. The Chairman’s fees are inclusive of the non-executive Directors’ core fees and no additional fees are paid to the Chairman where he chairs, or is a member
of, other committees/boards. The Chairman is eligible to receive life assurance, which is a non-taxable benefit.
3. For non-executive Directors, individual fees are constructed by taking the core fee and adding extra fees for being the Senior Independent Director, chairman
or member of committees and/or subsidiary boards where a greater responsibility and time commitment is required.
Non-executive Directors’ interests in shares (audited)
The following table shows the total number of abrdn plc shares held by each of the non-executive Directors and their
connected persons:
Total number of shares owned
at 1 January 2022 or date of
appointment if later
Shares acquired during the period
1 January 2022 to
31 December 2022
Total number of shares owned at
31 December 2022 or date of
cessation if earlier
5
Sir Douglas Flint 179,617 20,383 200,000
Jonathan Asquith 102,849 50,865 153,714
Catherine Bradley
1
10,000 2,181 12,181
John Devine 28,399 - 28,399
Hannah Grove
33,000 - 33,000
Pam Kaur
2
- - -
Brian McBride
- - -
Michael O’Brien
2
- - -
Martin Pike
3
69,476 - 69,476
Cathleen Raffaeli
9,315 - 9,315
Jutta af Rosenborg
3
8,981 - 8,981
Cecilia Reyes
4
- - -
1. Appointed to the Board with effect from 4 January 2022.
2. Appointed to the Board with effect 1 June 2022.
3. Stepped down from the Board with effect 18 May 2022.
4. Stepped down from the Board with effect 30 September 2022.
5. There were no changes to the number of shares held by the reportable Directors noted above between 31 December 2022 and 27 February 2023.
Sir Douglas Flint, as Chairman, is subject to a shareholding guideline of 100% of the value of his annual fee in abrdn plc
shares to be reached within four years of appointment. As set out in the above table, during 2022 he purchased 20,383
abrdn plc shares. The total investment cost of Sir Douglas Flint’s shareholding was £495k, equivalent to 104% of his annual
fee. Based on the share price at 31 December 2022 (189.85 pence), his shareholding is valued at 80% of his annual fee.
117abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
The Remuneration Committee
Membership
During 2022 the Remuneration Committee was made up of independent non-executive Directors. For their names, the
number of meetings and committee member attendance during 2022, please see the table on page 84.
The role of the Remuneration Committee
To consider and make recommendations to the Board in respect of the total remuneration policy across the Company,
including:
– Rewards for the executive Directors, senior employees and the Chairman.
– The design and targets for any employee share plan.
– The design and targets for annual cash bonus plans throughout the Company.
– Changes to employee benefit structures (including pensions) throughout the Company.
The Remuneration Committee’s work in 2022
– 2021 Directors’ remuneration report.
– Approve performance for the 2021 bonus targets, 2019 LTIP targets and 2018 EIP underpins.
– Set 2022 annual bonus scorecard targets and 2022 LTIP targets.
– Updates from the Risk and Audit Committees on relevant matters for the Committee’s consideration
when determining pay outcomes.
– Review remuneration outcomes for executive Directors and the Material Risk Taker population.
– Conduct retender process for external advisors to the Remuneration Committee.
– Review Remuneration disclosures required by regulations.
– Review Material Risk Taker identification principles with regard to the relevant regulations.
– Review and approve changes to the Share Plan rules to ensure all plans meet best practice.
– Agree outcome of the final tranche of the CFO’s one-off award.
– Review and update the Group Remuneration Policy to reflect regulatory changes.
– Review the Directors Remuneration Policy in light of the Company’s strategy and market best practice.
– Mid-year review of performance against target for annual bonus for the executive Directors.
– Review gender pay gap data.
– Update the Remuneration Committee and Compensation Committee’s Terms of Reference.
– Refine the Directors Remuneration Policy, including consultation with largest shareholders.
– Finalise bonus pool allocation principles.
– Review 2023 remuneration proposals relating to all-employee remuneration.
At various points throughout the year the Committee also:
– Made remuneration decisions for the executive leadership team and other senior employees within the Remuneration
Committee’s remit, including approving the design of one-off incentive plans linked to specific projects.
– Received updates relating to regulatory changes and market best practice.
– Reviewed minutes of subsidiary Committee meetings and their governance documents.
External advisers
During the year, the Remuneration Committee took advice from Deloitte LLP (a member of the Remuneration Consultants
Group (RCG)) who were appointed by the Remuneration Committee in 2017. Given the length of their tenure, and to
ensure the Committee is receiving the best quality advice and value for money, a retender process was conducted at the
start of the year. Following this review, PwC were appointed as external advisers to the Remuneration Committee, effective
June 2022. PwC, who are also a member of the RCG, demonstrated detailed knowledge of our sector throughout the
process and set out a competitive fee structure which ensures value for money. The Remuneration Committee is satisfied
that the advice given from both advisers during the year was objective and independent.
A representative from our external adviser attends, by invitation, all Remuneration Committee meetings to provide
information and updates on external developments affecting remuneration as well as specific matters raised by the
Remuneration Committee. Outside the meetings, the Remuneration Committee’s Chairman seeks advice on
remuneration matters on an ongoing basis. As well as advising the Remuneration Committee, Deloitte LLP also provided
tax, accounting support, risk management and consultancy services to the Company during the year. Deloitte Total
Rewards and Benefits is an investment adviser to the trustees of the abrdn (SLSPS) Pension Scheme. Fees paid to Deloitte
LLP during 2022 for professional advice to the Remuneration Committee were £89,850.
As well as advising the Remuneration Committee, PwC also provided tax, risk management and consultancy services to
the Company during the year. Fees paid to PwC during 2022 for professional advice to the Remuneration Committee were
£100,000.
Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
118 abrdn.com Annual report 2022
Where appropriate, the Remuneration Committee receives input from the Chairman, Chief Executive Officer, Chief
Financial Officer, Chief People Officer, Global Head of Reward and the Chief Risk Officer. This input never relates to their
own remuneration. The Remuneration Committee also receives input from the Risk and Capital Committee and the Audit
Committee.
Remuneration Committee effectiveness
The Committee reviews its remit and effectiveness each year. The effectiveness review was conducted externally by IBE.
The review included observation of a meeting, access to papers and interviews with Committee members. A
representative of IBE provided feedback on the performance of the Committee directly to the Chair and the report and
recommendations were discussed by the Committee. Details of the 2022 review are on page 81 and reflect the themes
raised across the Board and its Committees.
Shareholder voting
We remain committed to ongoing shareholder dialogue and take an active interest in voting outcomes.
The remuneration policy was last subject to a vote at the 2020 AGM on 12 May 2020 and the following table sets out the
outcome.
Policy 2020 AGM For Against Withheld
% of total votes 91.66% 8.34%
No. of votes cast 1,003,905,073 91,323,405 10,346,991
The Directors’ remuneration report was subject to a vote at the 2022 AGM on 18 May 2022 and the following table sets out
the outcome.
2021 Directors’ remuneration report For Against Withheld
% of total votes 96.23% 3.77%
No. of votes cast 1,009,839,204 39,512,722 8,058,523
119abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Future remuneration policy
This section sets out the remuneration policy for executive Directors and non-executive Directors, which is subject to a
binding vote of shareholders and will, if approved, take effect from the date of the 2023 AGM.
The Remuneration Committee agreed the following core principles designed to support our strategy, culture and values
which guided the design of the remuneration framework going forward:
– Simple and easy to understand for participants and wider stakeholders alike.
– Aligns executive remuneration with the overall performance of the Company.
– Rewards executives for the delivery of both short-term plans and long-term returns to shareholders.
– Takes into consideration the external landscape relating to executive reward.
– Is market competitive to ensure that the Company is able to attract and retain the right talent to deliver the Company’s
strategic ambitions.
In determining the new remuneration policy, the Committee followed a robust process which included detailed discussions
on the content of the policy at multiple Committee meetings. The Committee considered input from management
(although decisions were taken by the Committee alone to avoid conflicts of interest), shareholders and its independent
advisers.
Remuneration policy for executive Directors
Base salary – there is no change in the operation of this element of pay compared to the previous policy
Purpose and link to strategy
To provide a core reward for undertaking the role,
commensurate with the individual’s role, responsibilities and
experience.
Maximum opportunity
Salaries for executive Directors are set at an appropriate
level to attract and retain individuals of the right calibre and
with the experience required.
Whilst no maximum is set, when considering annual
incremental increases the Remuneration Committee is
guided by the general increase for the broader employee
population.
The Remuneration Committee may determine larger
increases in certain circumstances, such as: development
in role; change in responsibility; where a new or promoted
employee's salary has been set lower than the market
level for such a role and larger increases are justified as the
individual becomes established in the role.
Operation
Normally reviewed annually, taking into account a range of
factors including: (i) the individual’s skills, performance and
experience; (ii) increases for the broader employee
population; (iii) external market data and other relevant
external factors; (iv) the size and responsibility of the role;
and (v) the complexity of the business and geographical
scope.
Performance metrics
Not applicable.
Pension – there is no change in the operation of this element of pay compared to the previous policy
Purpose and link to strategy
To provide a competitive, flexible retirement benefit in a
way that does not create an unacceptable level of
financial risk or cost to the Company.
Maximum opportunity
Maximum employer contribution aligned to the
maximum employer contribution available to the wider
workforce in the relevant jurisdiction.
The current maximum employer contribution available
to the UK wider workforce is 18% of salary.
Operation
Employee contributions are made to the Company’s
defined contribution pension arrangement, or equivalent
cash allowances are paid.
The level of contribution/cash equivalent is reviewed
periodically taking into account the pension opportunity
offered to other employees within the Company.
Performance metrics
Not applicable.
120 abrdn.com Annual report 2022
Benefits – there is no change to the operation of this element of pay compared to our previous policy
Purpose and link to strategy
To provide market competitive and cost effective benefits.
Maximum opportunity
There is no maximum value of the core benefit package.
The costs associated with benefits provision are monitored
and controlled by the Remuneration Committee.
Maximum contributions under ‘all-employee’ share plans
will be set in line with other employees and within the limits
set by the relevant tax authority.
Operation
In line with other employees, executive Directors are
provided with a package of core benefits, which include (i)
private healthcare; (ii) death in service protection; (iii)
income protection (iv) reimbursement of membership fees
of professional bodies; and (v) eligibility for the ‘all-
employee’ share plan. Executive Directors are also eligible
to participate in the Company’s flexible benefits
programme.
Executive Directors are provided with a health screening
assessment.
Specific benefit provision may be subject to change from
time to time. Additional benefits may be provided on
recruitment or to support relocation with the Remuneration
Committee’s agreement.
Performance metrics
Not applicable.
Annual Bonus – financial performance measures account for a minimum of 65% of the maximum opportunity (previously 75%). The optionality to include personal performance measures
has been removed.
Purpose and link to strategy
To reward the delivery of the Company’s business plan in a
range of financial and non-financial areas and to align
executives’ interests to those of shareholders and our
customers and clients.
Maximum opportunity
The maximum award opportunity in respect of any
financial year is based on role and is up to 300% of salary.
Operation
An annual incentive programme in respect of which the
performance measures, and their respective weightings
and targets, are normally set annually by the Remuneration
Committee.
Normally 50% of the award will be paid in cash. No less than
50% will be deferred into shares vesting in equal tranches
over a three-year period. A retention period may be
applied, as required by relevant regulations.
Where required for regulatory purposes, deferred awards
may be made in a combination of share awards and
notional fund awards (which are conditional rights to
receive a cash sum based on the value of a notional
investment in a range of abrdn funds).
Deferred awards may include the right to receive (in cash
or shares) the value of the dividends that would have
accrued during the vesting period.
Awards are subject to malus and clawback.
The Remuneration Committee may adjust and amend
awards in accordance with the rules.
Performance metrics
Performance is assessed against a range of key financial
and non-financial measures.
At least 65% will be based on financial performance
measures.
For threshold performance, the award opportunity is 25%,
with 100% of the award payable for maximum
performance. Payouts between threshold and maximum
(100%) are determined on an annual basis. Details of the
payout schedule will be disclosed in the relevant DRR.
The Remuneration Committee exercises its judgement to
determine awards at the end of the performance period,
which in normal circumstances will be one financial year,
and will use its discretion to amend them if material
change is required to ensure that the outcome is fair in the
context of overall Company and individual performance
and conduct. The Risk and Capital Committee and the
Audit Committee advise the Remuneration Committee as
part of this process to ensure that the performance
outcomes have not been achieved by assuming
inappropriate levels of risk.
121abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Long-Term Incentive Plan – there is no change to the operation of this element of pay compared to our previous policy
Purpose and link to strategy
To align with our shareholders and promote sustainability of
our performance by rewarding the delivery of long-term
growth in shareholder value.
Maximum opportunity
The maximum award opportunity in respect of any
financial year is based on role and is up to 500% of salary.
However, when combined with the annual bonus, the total
incentive opportunity may not exceed 700% of salary. This
means that in financial years where the annual bonus
opportunity is set at the maximum (300% of salary), the
maximum LTIP award would be 400% of salary.
Up to 25% of the award vests for threshold performance.
Operation
An annual award of performance shares, normally subject
to a three-year performance period, with a subsequent
two-year holding period.
Performance targets are normally set annually for each
three-year cycle by the Remuneration Committee.
Awards are subject to review by the Remuneration
Committee at the end of the three-year performance
period to confirm that vesting of the award is appropriate in
the context of overall performance of the Company and
the individual. The Committee may take advice from the
Risk and Capital Committee and the Audit Committee to
determine appropriate vesting.
Awards may include the right to receive (in cash or shares)
the value of the dividends that would have accrued over
the performance and holding period.
The Remuneration Committee may adjust and amend
awards in accordance with the LTIP rules.
Awards are subject to malus and clawback.
Performance metrics
Performance metrics are set by the Remuneration
Committee and are linked to the achievement of the
Company’s long-term strategic priorities and the creation
of long-term shareholder value.
LTIP awards are subject to at least two performance
metrics, with at least one being absolute in nature (e.g. an
earnings based metric) and one being a relative metric
(e.g. a shareholder return based metric, relative to the
market or competitors).
Subject to these restrictions, the Committee retains the
discretion to introduce other or additional performance
metrics for future awards. Were the Committee to intend
to introduce any such alternative or additional metric(s) for
future awards, it would expect to consult with the
Company’s largest institutional shareholders in advance.
For 2023, the LTIP award will be based on the following
metrics:
– Growth in Adjusted Diluted Capital Generation per
share (50%).
– Relative total shareholder return measured against a
bespoke competitor peer group (50%) (the peer group
to be used for the 2023 LTIP is set out on page 107).
The Remuneration Committee retains the discretion to
amend the final vesting level of awards if material change
is required to ensure that they reflect fairly the
performance of individuals or the Company.
122 abrdn.com Annual report 2022
Other features
Malus and clawback
Malus and clawback provisions apply to annual bonus and
LTIP awards.
Under the malus and clawback provisions, the
Remuneration Committee has the ability to reduce awards
that have not yet vested (malus) and can require
repayment of an award (clawback) for a period of up to
five years from the date of award.
The circumstances in which malus or clawback would
apply include, but are not limited to:
– A material misstatement of the Group’s audited financial
statements prior to the end of the Recovery Period.
– Any failure of risk management, fraud or other material
financial irregularity.
– Material corporate failure.
– An error in the information or assumptions on which the
award was granted, vests or is released, as a result of
erroneous or misleading data or otherwise.
– Serious misconduct by a participant.
– Failure by a participant to meet or maintain appropriate
standards of fitness and propriety.
– Any deliberate or severely negligent act or omission by a
participant which has resulted in significant losses or
material reputational damage to the Company (or any
member of the Company’s group).
– A material downturn in the financial performance of the
Company, the Company’s group, or any member or
business unit of the Company for which the relevant
participant works or has responsibility or accountability.
– Misbehaviour or material error by a participant.
Share ownership
Executive Directors are required to build up a substantial
interest in Company shares.
The shareholding requirement for executive Directors
remains at 350% of salary for the CEO and 300% of salary
for other executive Directors. The Committee retains the
discretion to reduce this requirement for new joiners to
align it with the higher of their maximum LTIP opportunity
or 200% of salary.
The post cessation of employment share ownership policy
for executive Directors requires shares up to the value of
the shareholding requirement to be held for a period of
two years following departure from the Board.
Shares received as a result of employment must be
accumulated (including dividend shares) until the
shareholding requirements are met.
Vested and unvested shares which are not subject to
performance conditions will count towards the total at
50% (on a notional net of tax basis). Shares
received/exercised will count towards the total of
shareholding requirements at 100%.
Voluntary purchases of shares will count towards the
shareholding requirement and will be only released for sale
in exceptional circumstances at the discretion of the
Company Chairman and the Chair of the Remuneration
Committee.
Voluntary purchases of shares will count towards totals at
the higher of cost and market. However, voluntary
purchases of shares will not be subject to post-
employment retention rules.
123abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
How our proposed remuneration structure supports our long-term strategy and strategic drivers
Our remuneration policy is designed to support our long-term strategy of delivering shareholder value, by aligning the
interests of our executive Directors with our stakeholders – including our customers, our shareholders and our people. The
performance goals that are set for the short-term element of variable remuneration reward the delivery of the Company’s
business plan, while the long-term element promotes sustainability and alignment by rewarding the delivery of long-term
growth in shareholder value. A significant proportion of variable remuneration is delivered in the form of shares and
deferred over a period of time, ensuring our Directors are further aligned to the shareholder experience.
Our overall strategy is to deliver diversified client-led growth. Our remuneration policy supports this objective by including
investment performance as part of the financial measures, incentivising best in class impact and growth and incorporating
customer and client metrics for satisfaction as part of the annual bonus non-financial assessment. The four strategic
priorities are specifically supported by the remuneration policy as follows:
Our priorities How our remuneration structure supports our priorities
Asia
A key market for our Investments vector and
an area where we are well-positioned to drive
growth.
– By ensuring our performance metrics are focused on Company
performance and KPIs, individuals are incentivised to deliver strong
performance across all Company activity globally.
– Investment performance and net flows are measured as part of the
annual bonus assessment, incentivising best in class impact and
growth.
– The achievement of strategic milestones will be recognised within
the annual bonus assessment.
Sustainability
Consideration of ESG factors is essential to
more constructive engagement and better-
informed investment decisions.
– ESG factors are included as part of the annual bonus non-financial
assessment, incorporating objectives against Environmental (via
sustainability and decarbonisation metrics) and Social (via employee
engagement and diversity metrics).
– Our remuneration structure is weighted to long-term success,
ensuring that executive Directors are incentivised to focus on
sustainable outcomes.
Alternatives
The growing trends for urbanisation, digitisation
and decarbonisation create significant
investment opportunities in real assets. Our
Alternatives business also offers clients access
to major areas of European private credit, as
well as compelling opportunities in the hedge
fund sector.
– Investment performance and net flows are measured as part of the
annual bonus assessment, incentivising best in class impact and
growth.
– By ensuring our performance metrics are focused on Company
performance and KPIs, individuals are incentivised to deliver strong
performance across all Company activity globally.
– The achievement of strategic milestones will be recognised within
the annual bonus assessment.
– The focus on long-term outcomes via the LTIP incentivises and
rewards future sustainable success and the creation of shareholder
value.
UK savings and wealth
As financial responsibility continues to move
more towards individuals, we have successfully
re-positioned our business towards an
increasingly attractive and growing UK savings
and wealth market.
– By ensuring our performance metrics are focused on Company
performance and KPIs, individuals are incentivised to deliver strong
performance across all Company activity globally.
– The achievement of strategic milestones will be recognised within
the annual bonus assessment.
– The focus on long-term outcomes via the LTIP incentivises and
rewards future sustainable success and the creation of shareholder
value.
124 abrdn.com Annual report 2022
The remuneration framework appropriately addresses the following principles as set out in the 2018 Corporate
Governance Code.
Notes to the policy table
Performance measures and approach to target setting
Performance targets for the Company’s incentive arrangements are set on an annual basis by the Remuneration
Committee. The Committee takes into account a range of factors including business forecasts, prior year performance,
degree of stretch against the performance targets in the business plan, the economic environment, market conditions and
expectations.
The following table sets out details on why the performance measures for the purpose of the annual incentive plan were
chosen. These metrics and the balance between them may vary over time, but financial metrics will be weighted no less
than 65% of the total.
Code provision abrdn approach
Clarity
Incentive arrangements are based on clearly defined financial and non-financial metrics which are
aligned with the Company’s strategy for sustainable long-term growth. The Policy is materially
unchanged, providing further clarity to participants through using a consistent approach.
Simplicity
Remuneration arrangements are simple, while still complying with regulatory requirements. They
comprise the following key elements:
– Fixed element: comprises base salary, benefits and pension, which are aligned to those offered to
the majority of the workforce.
– Short-term incentive: annual bonus which incentivises the delivery of financial and non-financial
performance metrics aligned to the Plan for the year agreed with the Board. Half of the bonus is
paid in cash with the balance deferred over a period of three years.
– Long-term incentive: LTIP which incentivises financial performance over a three-year period,
promoting long-term sustainable value creation for shareholders tied to established and
transparent shareholder value metrics. Awards are subject to a two-year holding period post
vesting.
Risk
In line with regulatory requirements, remuneration arrangements across the Company are designed
to ensure that they do not encourage excessive risk taking. Performance targets for incentive
arrangements are set to reward delivery of the Company’s business plan which is set in line with the
Company’s risk appetite statement. Variable remuneration for the executive Directors is delivered
predominantly via shares. The executive Directors are subject to the shareholding requirements,
including a post-cessation requirement (as set out in the shareholding requirement section on page
123), ensuring they remain exposed to and aligned with the risk profile of the Company.
The Remuneration Committee retains the flexibility to review and amend formulaic outcomes to
ensure that they are appropriate in the context of overall performance of the Company, including
adherence to risk appetite limits. The Remuneration Committee takes advice from the Risk and
Capital Committee and Audit Committee as part of this review.
Predictability
The Remuneration scenario charts, set out on page 129, provide estimates on the potential future
reward opportunity in a range of scenarios, including below threshold, target and maximum
performance (including share price appreciation). Conditions around vesting are clear and
understandable.
Proportionality
Variable remuneration is directly aligned to the Company’s strategic priorities (through the selection
of key financial and non-financial performance metrics), with targets calibrated to ensure that
payments are only made where strong performance is delivered.
As noted above, the Remuneration Committee retains the flexibility to review formulaic outcomes to
ensure that they are appropriate in the context of overall performance of the Company.
Alignment with
culture
The remuneration policy at abrdn has been set to be appropriate for the nature, size and complexity
of the Company, recognising variances in markets and geographies. It has been designed to support
the delivery of the Company’s key strategic priorities and is in the best interests of the Company and
its stakeholders, as set out on page 124. A shared culture and values by employees of the Company is
critical to delivery of the Company’s strategic priorities. This is recognised through alignment of the
remuneration policy with the wider workforce whenever possible.
125abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Financial metrics (overall at least 65% of the maximum opportunity) Non-financial metrics (overall no more than 35% of the maximum opportunity)
Measures to support the delivery of performance in each
area are set as part of the Company’s annual business
plan. For reasons of commercial confidentiality detailed
measures will be disclosed annually in arrears as part of
the remuneration policy implementation report.
2023 measures and their weighting are set out below:
– Adjusted profit before tax (35%).
– Investment performance (15%).
– Net flows (15%).
These measures were chosen to ensure a strong alignment
with shareholders (via profitability measure) and a direct link
to future financial performance as set out in the business
plan (investment performance and net flows).
Non-financial metrics chosen to focus management on
the delivery of the business strategic priorities for the
financial year.
Metrics may be linked to factors including, but are not
limited to:
– ESG (15%) Performance against Environmental
objectives (including sustainability commitments and
carbon reduction programmes) and Social objectives
(including gender and ethnicity targets) may be used to
focus management on developing organisational
capability and meeting our publicly stated
commitments.
– Customer (10%) Customer objectives (including
customer feedback and satisfaction scores, NPS
rankings and net new business scores) may be used to
measure our success in ensuring that customers remain
at the forefront of our sustainable strategy.
– Strategic Initiatives (10%) Key strategic objectives will be
used to focus executives on specific strategic priorities
for the Company which they can deliver in order to drive
improved performance in future years.
The following table sets out details on why the performance measures for the purpose of the Long-term Incentive Plan
(LTIP) were chosen for the 2023 awards.
Growth in Adjusted diluted capital generation per share Relative total shareholder return
Captures a broad measure of the rate of increase in the
company’s ability to generate capital to sustain
investment and dividend flows. Adjusted Capital
Generation is closely aligned to the measurement of
management’s performance in generating sustainable
increases in shareholder value from its growth vectors
and strategic relationships, while excluding one-off items
and mark-to-market changes in the fair value of
significant listed investments, which are beyond
management’s direct control.
Aligns executive reward with the creation of shareholder
value and provides an external assessment of Company
performance against relevant peers which is less
influenced by market effects.
Remuneration Committee discretion in relation to existing commitments
The Remuneration Committee reserves the right to make any remuneration payments and payments for loss of office,
notwithstanding that they are not in line with the policy set out above where the terms of the payment were agreed: (i)
before the policy set out above, or (ii) at a time when a previous policy, approved by shareholders, was in place provided
the payment is in line with the terms of that policy, or (iii) at a time when the relevant individual was not a Director of the
Company and the payment was not in consideration for the individual becoming a Director of the Company. For these
purposes, payments include the Remuneration Committee satisfying awards of variable remuneration. This means
making payment in line with the terms that were agreed at the time the award was granted.
All awards are subject to malus and clawback provisions.
126 abrdn.com Annual report 2022
Remuneration Committee discretion in relation to future operation of the remuneration policy
The Committee will operate variable remuneration plans according to the respective rules of the plans. The Committee will
retain flexibility in a number of areas regarding the operation and administration of these plans, including (but not limited
to): change of control, changes in regulatory requirements, variation of share capital, demerger, special dividend, fund
merger, winding up or similar events.
The Committee also retains the discretion within the remuneration policy to adjust targets and/or set different measures
and weightings if events happen that cause it to determine that the original targets or conditions are no longer appropriate
and that amendment is required so that the targets or conditions achieve their original purpose. Revised targets/measures
will be, in the opinion of the Committee, no less difficult to satisfy than the original conditions.
Share awards, under the Company’s share plans, may be granted as conditional share awards, nil cost options or
forfeitable shares at the discretion of the Committee. Awards may at the Committee’s discretion be settled in cash (for
example, where required for local legal/regulatory purposes).
The Committee may accelerate the vesting and/or the release of awards if an executive Director moves jurisdictions
following grant and there would be greater tax or regulatory burdens on the award in the new jurisdiction.
Remuneration policy for new executive Director appointments
Area Policy
Principles
In determining remuneration arrangements for new executive appointments to the Board
(including internal promotions), the Committee applies the following principles:
– The Committee takes into consideration all relevant factors, including the calibre of the individual,
local market practice and existing arrangements for other executive Directors, adhering to the
underlying principle that any arrangements should reflect the best interests of the Company and
its shareholders.
– Remuneration arrangements for new appointments will typically align with the remuneration
policy.
– In the case of internal promotions, the Committee will honour existing commitments entered into
before promotion.
Components and
approach
The remuneration package offered to new appointments may include any element of
remuneration included in the remuneration policy set out in this report, or any other element which
the Committee considers is appropriate given the particular circumstances but not exceeding the
maximum level of variable remuneration set out below.
In considering which elements to include, and in determining the approach for all relevant
elements, the Committee will take into account a number of different factors, including (but not
limited to) typical market practice and existing arrangements for other executive Directors and
internal relativities.
The maximum level of variable remuneration which may be awarded to a new executive Director,
at or shortly following recruitment, shall be limited to 700% of salary. This limit excludes buyout
awards which are in line with the policy as set out below.
Buyouts
To facilitate recruitment, the Committee may make an award to buy out remuneration terms
forfeited on leaving a previous employer. In doing so, the Committee will adhere to regulatory
guidance in relation to the practice of buyout awards to new recruits.
In considering buyout levels and conditions, the Committee will take into account to the best of
their ability the type of award, performance measures and the likelihood of performance
conditions being met in setting the quantum of the buyout. The buyout award will reflect the
foregone award in amount and terms (including any deferral or retention period) as closely as
possible.
Where appropriate, the Committee retains the discretion to utilise Listing Rule 9.4.2 for the purpose
of making an award to buy out remuneration terms forfeited on leaving a previous employer or to
utilise any other incentive plan operated by the Company.
127abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Service Contracts and loss of office policy for executive Directors
Within executive service contracts, the Committee aims to strike the right balance between the Company’s interests and
those of the executive Directors, whilst ensuring that the contracts comply with best practice, legislation and the agreed
remuneration principles. Contracts are not for a fixed term, but set out notice periods in line with the executive Director’s
role.
Area Policy
Notice period
Our standard notice policy is:
– Six months by the executive Director to the employer.
– Up to 12 months by the employer to the executive Director.
Executive Directors may be required to work during the notice period or take a period of ‘garden leave’ or
may be provided with pay in lieu of notice if not required to work the full notice period.
Termination
payments
Any payment in lieu of notice will be made up of up to 12 months’ salary, pension contributions and the
value of other contractual benefits. The payment may be made in phased instalments (this will be
standard policy for notice periods of over six months). A duty to mitigate applies.
Non-compete
clauses
Apply during the contract and for up to 12 months after leaving, at the Company’s choice.
Treatment of
incentive
awards
For the purpose of awards under the annual bonus, long-term incentive plan and Executive Incentive
Plan, approved leavers are defined as those whose office or employment comes to an end because of
death, ill-health, injury or disability, redundancy, or retirement with the agreement of the employing
company; the sale of the individual’s employing company or business out of the Group or any other
reasons at the discretion of the Committee.
Annual bonus plan
Leavers during the award year
For approved leavers, rights to awards under the annual bonus will typically be pro-rated as a proportion
of the performance period, and will be paid at the normal time in the normal manner (i.e. in cash/
deferred awards as appropriate and subject to performance), unless the Committee determines that
payments should be accelerated (e.g. on death). For other leavers, rights to awards under the annual
bonus will be forfeit.
Leavers during the deferral period
For approved leavers, outstanding deferred awards under the annual bonus will typically vest and be
released at the scheduled vesting date. The Committee retains the discretion to apply time pro-rating
(over the deferral period) for approved leavers and to accelerate the vesting and/or release of awards if
it considers it appropriate. For other leavers, rights to deferred awards will be forfeited.
Awards under the Long-Term Incentive Plan
Leavers during the performance period
For approved leavers, outstanding awards under the LTIP will typically be pro-rated as a proportion of the
performance period and will be released at the scheduled vesting date subject to performance.
Subsequent holding periods will apply. The Committee retains the discretion to dis-apply time pro-rating
for approved leavers. For other leavers, rights to outstanding awards will be forfeited.
Leavers during the holding period
Vested awards subject only to a holding period will be retained and released at the scheduled date.
Legacy awards under the Executive Incentive Plan
Leavers during the deferral period
Outstanding deferred awards under the EIP will typically be paid at the normal time, subject to
performance against the Underpin performance conditions. The Committee retains the discretion to
apply time pro-rating (over the deferral period) for approved leavers and to accelerate the vesting
and/or release of awards if it considers it appropriate. For other leavers, rights to deferred awards will be
forfeited.
Other
payments
The Committee reserves the right to make any other payments (including appropriate legal fees) in
connection with an executive Director’s cessation of office or employment where the payments are
made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such
an obligation) or by way of settlement of any claim arising in connection with the cessation of that
executive Director’s office or employment.
Change of
control
Outstanding awards will be treated in line with the terms of the respective plans.
128 abrdn.com Annual report 2022
Scenario charts
The following chart illustrates how much the current executive Directors could receive under a range of different scenarios
along with a comparison to our current policy:
1. There is no change to the maximum opportunity available under the proposed policy compared to the current policy.
Outcomes for the 2023 scenario chart are based on the following:
– Minimum – fixed pay, consisting of salary and pension effective 1 April 2023 (18% of salary), and benefits (the value of
taxable benefits are as shown in the Single Total Figure of Remuneration table for 2022 on page 108).
– Target – fixed pay, 50% of the maximum bonus award, 50% of LTIP vesting.
– Maximum – fixed pay, 100% of maximum bonus award, 100% of LTIP vesting plus share price growth.
Maximum + share price growth assumes share price growth of 50% for the LTIP element (calculated by applying a 50%
uplift to the face value at grant of the LTIP shares).
Remuneration arrangements throughout the Company
When setting the policy for executive Directors’ remuneration, the Committee takes into account the pay and
employment conditions elsewhere in the Company, recognising international variance and jurisdictional differences,
where appropriate. The Committee is informed about the approach to salary increases, Company-wide benefits offerings
including pensions, the structure of incentive arrangements and distribution of outcomes throughout the wider
organisation, as well as the take-up of all-employee share plans, employee engagement survey results and employee
morale, although it does not directly consult employees in the Company on the remuneration policy for executive
Directors.
The Company applies a consistent remuneration philosophy for employees. In particular all employees receive a base
salary and are eligible to receive benefits and pensions. The annual bonus cascades throughout the organisation with
quantum and measures set appropriately for each individual's role. The LTIP, as set out above, is only received by the
executive Directors. However there are different long-term incentives in use throughout the business that are relevant and
in line with regulatory requirements for each business area. The remuneration philosophy is reviewed at least annually by
the Remuneration Committee and may be updated to ensure that this remains aligned to business strategy and
regulatory requirements as well as being appropriately structured to attract, retain and incentivise our employees.
Consideration of stakeholder views
The Remuneration Committee values the opportunity to engage in meaningful dialogue with its investors.
Prior to the 2023 AGM, as detailed in the Committee Chairman’s cover letter, the Committee consulted with key
institutional shareholders on the proposed policy and the changes that were being made. The proposed policy reflects the
discussions with shareholders during the consultation process.
The Company does not explicitly consult with employees when making decisions pertaining to executive remuneration
given the complex nature of these roles and the global nature of the business. However, via the Board Employee
Engagement programme, employees have the opportunity for direct communication with the NEDs on a wide range of
topics, including remuneration. The representative NED is able to provide updates and insights at each Board meeting
ensuring that employee views are understood and can be taken into account.
63%
Salary, benefits and pension
Bonus cash
Bonus deferred
LTIP
Assumed share price growth
Chief Executive Officer
Chief Financial Officer
All figures in £000s
Maximum
1
Target
Minimum
Maximum
1
Target
Minimum
13%
28%
100%
21% 13% 13% 35%
100%
40%
13%
13%
34%
18%
15% 15% 42%
14% 14% 39% 20%
Total: £7,816
Total: £3,659
Total: £1,034
Total: £3,058
Total: £1,578
Total: £636
129abrdn.comAnnual report 2022
GOVERNANCE
3. Corporate governance statement continued
Remuneration policy for non-executive Directors
No changes are being proposed to the remuneration policy for the Chairman and non-executive Directors. The policy
remains as follows:
Area Policy
Approach to fees
– Fees for the Chairman and non-executive Directors are set at an appropriate level to reflect the
time commitment, responsibility and duties of the position and the contribution that is expected
from non-executive Directors.
– Board membership fees are subject to a maximum cap which is stated in the Company’s articles of
association. Any changes to the cap would be subject to shareholder approval.
Operation
– The remuneration policy for non-executive Directors is to pay: (i) Board membership fees; and (ii)
further fees for additional Board duties such as chairmanship or membership of a committee, the
Senior Independent Director, and service on subsidiary boards, in each case to take into account
the additional responsibilities and time commitments of the roles. Additional fees may be paid in the
exceptional event that non-executive Directors are required to commit substantial additional time
above that normally expected for the role.
– The Chairman receives an aggregate fee, which includes the chairmanship of any appropriate
Board committee(s).
– The Board annually sets the fees for the non-executive Directors, other than the fee for the
Chairman of the Company which is set by the Committee.
– Fees are set at a market rate with reference to the level of fees paid to other non-executive
Directors of FTSE100/FTSE250 financial services companies.
– The Board retains discretion to remunerate the non-executive Directors in shares rather than cash
where appropriate.
Other items
– The Chairman and non-executive Directors are not eligible to participate in any incentive
arrangements.
– Additional fees or benefits may be provided at the discretion of the Committee in the case of the
Chairman, and the Board in the case of the other non-executive Directors, to reflect, for example,
life assurance, housing, healthcare, office, transport and other business-related expenses incurred
in carrying out their role.
Non-executive Directors, including the Chairman, have letters of appointment that set out their responsibilities. The key
terms are:
– Period of appointment: a three-year term, which can be extended by mutual consent and is subject to re-election by
shareholders in line with the Company’s articles of association and the UK Corporate Governance Code.
– Notice periods: six months for the Chairman. No notice period for other non-executive Directors.
– Termination payment: there is no provision for compensation payments for loss of office for non-executive Directors.
If a new Chairman or non-executive Director is appointed, the remuneration arrangements will normally be in line with
those detailed in the remuneration policy for non-executive Directors above.
130 abrdn.com Annual report 2022
4. Directors’ report
The Directors present their annual report on the affairs of
the abrdn group of companies (the Group), together with
the audited International Financial Reporting Standards
(IFRS) consolidated financial statements for the Group,
financial information for the Group and financial
statements for abrdn plc (the Company) for the year
ended 31 December 2022.
For clarity, some of the matters that would otherwise have
been included in the Directors’ report have been included
in the Strategic report on pages 2 to 67, as the Board
considers they fit better within that report. Specifically,
these are:
– Future business developments.
– Risk management.
– Our approach to managing, and reporting, on our
global greenhouse gas emission impact(s).
– Information on how the Directors have had regard for
the Company’s stakeholders (also covered in the
Corporate governance statement on pages 76 and 77).
– Information on our people including employee
engagement, diversity and inclusion, and talent and
reward (details of the Board’s diversity statement can
be found in the Corporate governance statement on
page 80).
Reporting for the year ended 31 December 2022
During 2022, the Group operated primarily in the UK, rest of
Europe, Asia and the Americas. More information about
the relevant activities of the Company’s principal
subsidiary undertakings are in the Strategic report on
pages 2 to 67.
In his overview section of the Strategic report, Stephen Bird
our Chief Executive Officer outlines the main trends and
factors likely to affect the future development,
performance and position of the Group. Reviews of the
operating and financial performance of the Group for the
year ended 31 December 2022 are also given in the
Strategic report.
The Chairman’s statement, the Directors’ responsibility
statement and the Corporate governance statement
form part of this Directors’ report. The Corporate
governance statement on pages 74 to 130 is submitted by
the Board.
The results of the Group are presented in the Group
financial statements on pages 156 to 264. A detailed
description of the basis of preparation of the IFRS results
(including adjusted profit) is set out in the Group financial
statements section. The Group uses derivative financial
instruments in the normal course of its business and
information covering these instruments and related
financial risk management matters can be found in Note
18 and Note 35 to the Group financial statements. These
notes are incorporated into this report by reference.
This report forms part of the management report for the
purposes of the Disclosure Guidance and Transparency
Rules (DTR 4.1.8R) of the Financial Conduct Authority
(FCA).
Dividends
The Board recommends paying a final dividend for 2022 of
7.30p per ordinary share. This will be paid on 16 May 2023
to shareholders whose names are on the register of
members at the close of business on 31 March 2023.
The total payment is estimated at £142m for the final
dividend and together with the interim dividend of 7.30p
per share totalling £153m paid on 27 September 2022, the
total dividend for 2022 will be 14.60p per share (2021:
14.60p) totalling £295m (2021: £308m).
Share capital
The Company’s issued share capital as at 31 December
2022 comprised a single class of ordinary share. Full details
of the Company’s share capital, including movements in
the Company’s issued ordinary share capital during the
year, are in Note 24 to the Group financial statements,
which is incorporated into this report by reference. An
analysis of registered shareholdings by size, as at 31
December 2022, can be found in the Shareholder
information section on page 296.
On 6 July 2022, the Company announced the
commencement of a share buyback programme of the
Company’s ordinary shares up to a maximum aggregate
consideration of £300m. The programme completed on 8
December 2022. The purpose of this programme was to
return value to shareholders, reduce the share capital of
the Company and increase the earnings per share as a
result. A share buyback was considered the most efficient
method to achieve this. All shares purchased have been
cancelled. In total 178,835,268 shares were cancelled
through this programme.
As at 31 December 2022, there were 2,001,891,899
ordinary shares in issue held by 89,155 r
egistered
members. The abrdn Share Account (the Company-
sponsored nominee) held 648,559,822 of those shares on
behalf of 914,644 participants. No person has any special
rights of control over the Company’s share capital and all
issued shares are fully paid.
131abrdn.comAnnual report 2022
GOVERNANCE
4. Directors’ report continued
Between 1 January 2022 and the date this report was
signed, the Company received the following notification in
respect of major shareholdings and major proportions of
voting rights in accordance with the Disclosure Guidance
and Transparency Rules of the FCA:
Shareholder
Date of
transaction
Type of
transaction
Number of
voting rights
following the
transaction
Percentage of
voting rights
following the
transaction
Silchester
International
Investors
LLP
19 January
2022
Acquisition
of voting
rights
109,500,722 5.02%
M&G Plc 17 March
2022
Acquisition
of voting
rights
110,293,454 5.06%
M&G Plc 21 April
2022
Disposal of
voting
rights
104,256,375 4.78%
M&G Plc
14
September
2022
Acquisition
of voting
rights
109,161,748 5.08%
Blackrock
Inc
30
November
2022
Acquisition
of voting
rights
203,451,402 10.03%
In accordance with the terms of the Standard Life
Employee Trust Deed, the trustees waived all entitlements
to current or future dividend payments for shares they
hold.
Similarly, in accordance with the terms of The Aberdeen
Asset Management Employee Benefit Trust 2003 and The
abrdn Employee Benefit Trust 2019 (formerly named the
Standard Life Aberdeen Employee Benefit Trust 2019), the
trustees waived all entitlements to current or future
dividend payments for shares they hold other than
dividends payable on any shares held by the trustee as
nominee for any other person.
The trustees of the abrdn plc (Employee) Share Plan voted
the appropriate shares in accordance with any
instructions received from participants in the plan.
Restrictions on the transfer of shares and
securities
Except as listed below, there are no specific restrictions on
the size of a holding or on the transfer of shares. Both are
governed by the general provisions of the Company’s
articles of association (the Articles) and current legislation
and regulation.
A copy of the Articles can be obtained from Companies
House or by writing to the Company Secretary at our
registered address (details of which can be found in the
Contact us section). The Articles may only be amended by
a special resolution passed by the shareholders.
The Articles are on our website at
www.abrdn.com/annualreport
The Board may decline to register the transfer of:
– A share that is not fully paid.
– A certificated share, unless the instrument of transfer is
duly stamped or duly certified and accompanied by the
relevant share certificate or other evidence of the right
to transfer, is in respect of only one class of share and is
in favour of a sole transferee or no more than four joint
transferees.
– An uncertificated share, in the circumstances set out in
the uncertificated securities rules (as defined in the
Articles) and, in the case of a transfer to joint holders,
where the number of joint holders to whom the share is
to be transferred does not exceed four.
– A certificated share by a person with a 0.25 per cent
interest (as defined in the Articles) in the Company, if
that person has been served with a restriction notice
under the Articles, after failing to provide the Company
with information about interests in those shares as set
out in the Companies Act 2006 (unless the transfer is
shown to the Board to be pursuant to an arm’s length
sale under the Articles).
These restrictions are in line with the standards set out in
the FCA’s Listing Rules and are considered to be standard
for a listed company.
The Directors are not aware of any other agreements
between holders of the Company’s shares that may
result in restrictions on the transfer of securities or
on voting rights.
Rights attached to shares
Subject to applicable statutes, any resolution passed by
the Company under the Companies Act 2006 and other
shareholders’ rights, shares may be issued with such rights
and restrictions as the Company may decide by ordinary
resolution, or (if there is no such resolution or if it does not
make specific provision) as the Board may decide. Subject
to the Articles, the Companies Act 2006 and other
shareholders’ rights, unissued shares are at the disposal of
the Board.
Every member and duly appointed proxy present at a
general meeting or class meeting has one vote on a show
of hands, provided that where a proxy is appointed by
more than one shareholder entitled to vote on a resolution
and is instructed by one shareholder to vote ‘for’ the
resolution and by another shareholder to vote ‘against’ the
resolution, then the proxy will be allowed two votes on a
show of hands – one vote ‘for’ and one vote ‘against’. On a
poll, every member present in person or by proxy has one
vote for every share they hold. For joint shareholders, the
vote of the senior joint shareholder who tenders a vote, in
person or by proxy, will be accepted and will exclude the
votes of the other joint shareholders. For this purpose,
seniority is determined by the order that the names
appear on the register of members for joint shareholders.
A member will not be entitled to vote at any general
meeting or class meeting in respect of any share they hold
if any call or other sum then payable by them for that
share remains unpaid or if they have been served with a
restriction notice (as defined in the Articles) after failing to
provide the Company with information about interests in
those shares required to be provided under the
Companies Act 2006.
The Company may, by ordinary resolution, declare
dividends up to the amount recommended by the Board.
Subject to the Companies Act 2006, the Board may also
132 abrdn.com Annual report 2022
pay an interim dividend, and any fixed rate dividend,
whenever the financial position of the Company, in the
opinion of the Board, justifies its payment. If the Board acts
in good faith, it is not liable to holders of shares with
preferred or pari passu rights for losses that arise from
paying interim or fixed dividends on other shares.
The Board may withhold payment of all or part of any
dividends or other monies payable in respect of the
Company’s shares from a person with a 0.25 per cent
interest (as defined in the Articles) if that person has been
served with a restriction notice (as defined in the Articles)
after failure to provide the Company with information
about interests in those shares, which is required under the
Companies Act 2006.
Subject to the Companies Act 2006, rights attached to any
class of shares may be varied with the written consent of
the holders of not less than three-quarters in nominal value
of the issued shares of that class (excluding any shares
held as treasury shares). These rights can also be varied
with the approval of a special resolution passed at a
separate general meeting of the holders of those shares.
At every separate general meeting (except an adjourned
meeting) the quorum shall be two persons holding, or
representing by proxy, not less than one-third in nominal
value of the issued shares of the class (calculated
excluding any shares held as treasury shares).
A shareholder’s rights will not change if additional shares
ranking pari passu with their shares are created or issued –
unless this is expressly provided in the rights attaching to
their shares.
Power to purchase the Company’s own shares
At the 2022 Annual General Meeting (AGM), shareholders
granted the Directors limited powers to:
– Allot ordinary shares in the Company up to a maximum
aggregate amount of £101,536,408.
– Disapply, up to a maximum total nominal amount of
£15,230,461 of its issued ordinary share capital,
shareholders’ pre-emption rights in respect of new
ordinary shares issued for cash.
– Make market purchases of the Company’s ordinary
shares up to a maximum of 218,072,513 of its issued
ordinary shares which represented 10% of the share
capital at the time.
During 2022, under the authority granted at the 2022 AGM,
the Company purchased 178,835,268 of its ordinary
shares of 13
61
/
63
pence each, paying an aggregate
amount of £299,584,946. As at 31 December 2022, the
percentage of share capital represented by these
purchased shares was approximately 9%.
Significant agreements
Certain significant agreements to which the Company, or
one of its subsidiaries, is party entitle the counterparties to
exercise termination or other rights in the event of a
change of control of the Company. These agreements are
noted in the paragraphs below.
Credit Facility
Under a £400m revolving credit facility between the
Company and the banks and financial institutions named
therein as lenders (Lender) dated 12 February 2021 (the
Facility), in the event that any persons or group of persons
acting in concert, gain control of the Company, then any
Lender may elect within a prescribed time frame to cancel
its outstanding commitment under the Facility and declare
its participation in all outstanding loans, together with
accrued interest and all amounts accrued, immediately
due and payable, whereupon the commitment of that
Lender under the Facility will be cancelled and all such
outstanding amounts will become immediately due and
payable.
China
Under a joint venture agreement dated 12 October 2009
(as amended) between the Company and Tianjin TEDA
International Holding (Group) Co. Limited (TEDA),
pursuant to which the Company holds its interest in Heng
An Standard Life Insurance Company Limited (Heng An
Standard Life), upon a change of control of the Company,
TEDA has the right to terminate the venture and to
purchase, or nominate a third party to purchase, the
Company’s shares in Heng An Standard Life for a price
determined in accordance with the agreement.
Other agreements
A number of other agreements contain provisions that
entitle the counterparties to exercise termination or other
rights in the event of a change of control of the Company.
However, these agreements are not considered to be
significant in terms of their likely impact on the business of
the Group as a whole.
The Directors are not aware of any agreements with any
employee that would provide compensation for loss of
office or employment resulting from a takeover. The
Company also has no agreement with any Director to
provide compensation for loss of office or employment
resulting from a takeover.
Appointment and retirement of Directors
The appointment and retirement of Directors is governed
by the Articles, the Companies Act 2006, the UK Corporate
Governance Code and related legislation.
Mike O’Brien and Pam Kaur were appointed as non-
executive Directors on 1 June 2022.
Cecilia Reyes stepped down from the Board on 30
September 2022.
As announced, Brian McBride will not stand for re-election
at the 2023 AGM on 10 May 2023 and will stand down from
the Board from that date.
All remaining Directors as at the date of the 2023 AGM, will
retire and stand for re-election.
The powers of the Directors can also be found in the
Articles.
133abrdn.comAnnual report 2022
GOVERNANCE
4. Directors’ report continued
Directors and their interests
The Directors who served during the year, and up to the
date the report was signed were:
Sir Douglas Flint
(Chairman)
Stephen Bird Hannah Grove
Stephanie Bruce
Martin Pike
1
Jonathan Asquith
Cathleen Raffaeli
Catherine Bradley
3
Brian McBride Cecilia Reyes
2
John Devine
Pam Kaur
4
Mike O’Brien
4
Jutta af Rosenborg
1
1. Retired 18 May 2022.
2. Retired 30 September 2022.
3. Appointed 4 January 2022.
4. Appointed 1 June 2022.
Biographies of the current Directors can be found on
pages 70 to 73.
Details of the Directors’ interests in the Company’s ordinary
shares, the abrdn plc (Employee) Share Plan, the abrdn
Sharesave Plan and the share-based discretionary plans
are set out in the Directors’ remuneration report together
with details of the executive Directors’ service contracts
and non-executive Directors’ appointment letters.
No Director has any interest in the Company’s listed debt
securities or in any shares, debentures or loan stock of the
Company’s subsidiaries. No Director has any material
interest in any contract with the Company or a subsidiary
undertaking which was significant in relation to the
Company’s business, except for the following:
– The benefit of a continuing third party indemnity
provided by the Company (in accordance with
company law and the Articles).
– Service contracts between each executive Director and
subsidiary undertakings (Aberdeen Corporate Services
Limited and Aberdeen Asset Management PLC).
Copies of the following documents can be viewed at the
Company’s registered office (details of which can be
found in the Contact us section) during normal business
hours (9am to 5pm Monday to Friday) and are available
for inspection at the Company’s AGM:
– The Directors’ service contracts or letters of
appointment.
– The Directors’ deeds of indemnity, entered into in
connection with the indemnification of Directors
provisions in the Articles.
– The rules of the abrdn plc Executive Long-Term
Incentive Plan.
– The rules of the abrdn plc Deferred Share Plan.
– The Company’s Articles.
Directors’ liability insurance
During 2022, the Company maintained directors’ and
officers’ liability insurance on behalf of its Directors and
officers to provide cover should any legal action be
brought against them. The Company also maintained
pension trustee liability indemnity policies (which includes
third party indemnity) for the boards of trustees of the UK
and Irish staff pension schemes where required to do so.
Our people
Our people are central to delivering our strategy, and we
are focused on helping them thrive.
More on our people strategy can be found in the
Strategic report section of this report.
Communicating with and engaging employees
We have an extensive programme of communication and
engagement activity that aims to inform and involve
colleagues, from our purpose-led strategy through to day-
to-day activity that supports our business and clients. We
have balanced the sharing of clear, transparent
messaging on key topics with listening closely to our
colleagues – via our regular Pulse surveys and anecdotal
feedback - continuously shaping our activity as we
progressed through 2022.
We have intentionally focused on building a tone of
openness and honesty where we talk to our people, hear
their questions and respond in real time. We continue to
engage with our Employee Forum in the UK, and networks
outside the UK, not only on matters of organisational
change, but also prior to introducing new channels or
initiatives.
Getting our colleagues closer to our leaders to build
mutual understanding, encourage two-way discussion
and focus on our goals was a key objective of this year. We
introduced CEO-channels such as team visits, coffee
sessions, our new ‘As It Is’ video channel and townhalls
across the world that together achieved high levels of
interaction and engagement throughout the company.
This was complemented by our ELT-led channels of local
townhalls and our new, company-wide ‘Let’s Hear It’ bi-
monthly events.
Colleague recognition is playing more and more of a role
in how it feels to work at abrdn. Mid-year we launched
thank you cards and our ‘Praise Board’ on abi (our intranet)
and thousands of colleagues have taken time out to shout
out their peers and teams for the great work they are
doing. Recently we also added the ability to recognise in
line with our culture Commitments, building greater
momentum and supporting positive change.
We continue to support our performance culture – by
giving leaders and colleagues new and simple tools to
support meaningful conversations, as well through our mid
and end of year reviews. We also simplified the review
process and introduced a new goal aligned to our culture
Commitments which will see every colleague globally set a
goal directly related to their role in making abrdn a great
place to work.
Diversity, equity and inclusion
Disability statement
We have specific policies to ensure that colleagues with
disabilities face no discrimination or obstacles in relation to
job applications, training, promotion and career
development. Reasonable adjustments are also made to
train and enable employees who become disabled to
allow them to continue and progress in their career. In
2022 we reviewed our recruitment process and realised
134 abrdn.com Annual report 2022
that although we had always offered candidates the
ability to make adjustments they needed to our
recruitment process for their disability, this wasn’t often
used or very obvious. We revised the diversity statement
on our interview letters and templates to include specific
wording and guidance for candidates with a disability or
who are neurodivergent. We also ran workshops in 2022 to
make clearer for colleagues how they can benefit from
assistance or an adjustment if they are neurodivergent, or
have any physical, sensory, cognitive, mental, visible or
invisible disability.
DEI policy, how it is implemented, progress made against it
To complement the Board’s formal diversity statement
www.abrdn.com/corporate/about-us/governance, the
executive leadership team put in place a Global Diversity,
Equity and Inclusion policy in 2019
www.abrdn.com/corporate/about-us/diversity-and-
inclusion It affirms that diversity, equity and inclusion remain
as fundamental pillars supporting all our decisions. We
have always considered diversity in the broadest sense – in
backgrounds, experience, strengths and thinking as well as
visible and not visible characteristics. By valuing diverse
talent, enabling them to thrive and aiming for inclusion, we
can empower our people to be innovative and passionate
about creating value for our clients and communities.
We are making good progress against our DEI objectives
and are focused on building on this because we know
there is more to do at abrdn and across our industry. Our
2022 Diversity, Equity and Inclusion report describes our
progress and how the objectives of our policy are
implemented. Our 2022 report can be found on our
website at www.abrdn.com/corporate/about-
us/diversity-and-inclusion Progress against our diversity,
equity and inclusion framework is reviewed twice a year
by the Nomination and Governance Committee.
Gender representation
Gender Diversity 31 December 2022 Target by 2025
Women at plc
Board
45%
(5 of 11)
40% women | 40%
men | 20% any
gender
Women in senior
leadership
1
39%
(52 of 132)
40% women | 40%
men | 20% any
gender
Women in global
workforce
4%
(2226 of 5147)
50% (+/- 3%
tolerance)
1. Relates to leaders one and two levels below CEO, minus administration
roles.
Parker recommendations
As evidence of our commitment to ethnic diversity, we
introduced an ethnicity target for the first time which took
effect on 1 January 2021, following the recommendations
of the Sir John Parker review. Since 2019 we have met the
Parker recommendation to have at least one Board
member who identifies as ethnic minority, and our target is
to have one additional qualifying Board member by 2025.
The Board Charter mandates appointments to be based
on merit, with due consideration given to the Board’s
gender and ethnicity balance.
Sustainability
The commercial aims of our business are linked to its
environmental, social and governance responsibilities.
More details about how the business is run sustainably can
be found throughout the Strategic report. The non-
financial information statement on page 46 summarises
where key information on the approach can be found. For
details of greenhouse gas emissions, please see page 39.
Political donations
The Company has a long-standing policy of not making
political donations. The Company has limited authorisation
from shareholders to make political donations and incur
political expenditure (Resolution 8, 2022 AGM). This is
requested as a precaution against any inadvertent breach
of political donations legislation. While abrdn has regular
interaction with government and elected politicians in the
UK and other jurisdictions in which we operate, we are
strictly apolitical.
Auditors
The Audit Committee is responsible for considering the
Group’s external audit arrangements. Resolutions
proposing the re-appointment of KPMG LLP as auditors of
the Company and giving authority to the Audit Committee
to determine their remuneration will be submitted at the
2023 AGM.
Disclosure of information to the auditors
The Directors who held office at the date of the approval of
this Directors’ report confirm that, so far as they are each
aware, there is no relevant audit information of which the
Company’s auditor is unaware; and each Director has
taken all the steps that he or she ought to have taken as a
Director to make himself or herself aware of any relevant
audit information and to establish that the Company’s
auditor is aware of that information.
Annual General Meeting
The 2023 AGM is scheduled to take place on 10 May 2023
in Edinburgh. Details of the meeting content can be found
in our AGM guide 2023. The AGM guide and other
materials will be published online at www.abrdn.com in
advance of this year’s AGM.
Post balance sheet events
In January 2023 the Group decided to exit a leased US
property and an impairment of £13m was recognised on
the right-of-use property asset.
On 26 February 2023, the Group agreed the sale of abrdn
Capital Limited (aCL), its discretionary fund management
business, to LGT. aCL is part of the Personal segment. The
sale is expected to complete in the second half of 2023,
following satisfaction of certain conditions including receipt
of customary regulatory approvals. The sale involves the
transfer of approximately £6.1bn in assets under
management (as at 31 December 2022) and
approximately 140 employees. The agreed purchase
price to be paid at completion is £140m, subject to certain
adjustments, principally reflecting activity in the period to
completion. The sale is expected to result in an IFRS profit
on disposal of subsidiaries of approximately £60m and an
IFPR regulatory capital benefit of approximately £120m.
135abrdn.comAnnual report 2022
GOVERNANCE
4. Directors’ report continued
Other information
Under Listing Rule 9.8.4.CR, a listed company must include all information required by LR 9.8.4R in a single identifiable
location or cross-reference table. For the purposes of LR 9.8.4CR, the information required to be disclosed can be found in
the following locations. All the relevant information cross-referenced below is hereby incorporated by reference into this
Directors’ report.
Location
Topic Directors’ report
Directors’
remuneration report
None/
Not applicable
Interest capitalised x
Publication of unaudited financial information in a class 1 circular or in a
prospectus, other than in accordance with Annexes 1 and 2 of the FCA’s
Prospectus Rules
x
Details of long-term incentive schemes x
Waiver of emoluments by a Director x
Waiver of future emoluments by a Director
x
Non pre-emptive issues of equity for cash x
Non pre-emptive issues of equity for cash in relation to major subsidiary
undertakings
x
Parent participation in a placing by a listed subsidiary
x
Contracts of significance x
Provision of services by a controlling shareholder x
Shareholder waivers of dividends
x
Shareholder waivers of future dividends x
Agreements with controlling shareholders x
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and financial
position, are set out in the Strategic report. This includes details on our liquidity and capital management and our viability
statement in the Chief Financial Officer’s overview section and our principal risks in the Risk management. The Group
financial statements include additional information relating to going concern in the basis of preparation section.
The Group continues to meet group and individual entity capital requirements and day-to-day liquidity needs. The
Company has a revolving credit facility of £400m as part of our contingency funding plans and this is due to mature in 2026.
The Group has considerable financial resources together with a diversified business model, with a spread of business and
geographical reach. As a consequence, the Directors believe that the Group is well placed to manage its business risks
successfully.
After making enquiries and having assessed the principal risks and all other available information, the Directors are satisfied
that the Group and Company have and will maintain sufficient resources to enable them to continue operating for at least
12 months from the date of approval of the financial statements and therefore consider it appropriate to adopt the going
concern basis of accounting in preparing the financial statements. There are no material uncertainties relating to this going
concern conclusion. In addition, the Directors have assessed the Group’s viability over a period of three years.
The Directors’ report was approved by the Board and signed on its behalf by:
Julian Baddeley
Company Secretary
28 February 2023
136 abrdn.com Annual report 2022
5. Statement of Directors’ responsibilities in respect of
the Annual report and the financial statements
The Directors are responsible for preparing the Annual
report and accounts and the Group and Company
financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Group
and Company financial statements for each financial
year. Under that law they are required to prepare the
Group financial statements in accordance with UK-
adopted international accounting standards and
applicable law and have elected to prepare the Company
financial statements in accordance with UK accounting
standards and applicable law, including FRS 101 Reduced
Disclosure Framework.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
Company and of the Group’s profit or loss for that period.
In preparing each of the Group and Company financial
statements, the Directors are required to:
– Select suitable accounting policies and then apply them
consistently.
– Make judgements and estimates that are reasonable,
relevant, reliable and prudent.
– For the Group financial statements, state whether they
have been prepared in accordance with UK-adopted
international accounting standards.
– For the Company financial statements, state whether
applicable UK accounting standards have been
followed, subject to any material departures disclosed
and explained in the Company financial statements.
– Assess the Group and Company’s ability to continue as
a going concern, disclosing, as applicable, matters
related to going concern.
– Use the going concern basis of accounting unless they
either intend to liquidate the Group or the Company or
to cease operations, or have no realistic alternative but
to do so.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the
Company and enable them to ensure that its financial
statements comply with the Companies Act 2006. They
are responsible for such internal control as they determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are
also responsible for preparing a Strategic report, Directors’
report, Directors’ remuneration report and Corporate
governance statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website. Legislation in the UK
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
In accordance with Disclosure Guidance and
Transparency Rule 4.1.14R, the financial statements will
form part of the annual financial report prepared using the
single electronic reporting format under the TD ESEF
Regulation. The auditor’s report on these financial
statements provides no assurance over the ESEF format.
Responsibility statement of the Directors in
respect of the annual financial report
We confirm that to the best of our knowledge:
– The financial statements, prepared in accordance with
the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position
and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole.
– The Strategic report and Directors’ report include a fair
review of the development and performance of the
business and the position of the Company and the
undertakings included in the consolidation taken as a
whole, together with a description of the principal risks
and uncertainties that they face.
We consider the Annual report and accounts, taken as a
whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Group’s position and performance, business model and
strategy.
By order of the Board
Sir Douglas Flint
Chairman
28 February 2023
Stephanie Bruce
Chief Financial Officer
28 February 2023
137abrdn.comAnnual report 2022
GOVERNANCE
Financial information
138 abrdn.com Annual report 2022
Contents
6 Independent auditor’s report 140
7 Group financial statements
156
8 Company financial statements
265
9 Supplementary information
279
Contents
Group primary statements 156
Presentation of consolidated financial statements 163
Note Page Note Page
1 Group structure
167
24 Issued share capital and share premium
212
2 Segmental analysis
171
25 Shares held by trusts
212
3 Net operating revenue
175
26 Retained earnings
213
4 Net gains or losses on financial instruments and
27 Movements in other reserves
213
other income
178
28 Other equity and non-controlling interests
216
5 Administrative and other expenses
179
29 Financial liabilities
216
6 Staff costs and other employee –related
30 Subordinated liabilities
217
costs
179
31 Pension and other post-retirement benefit
218
7 Auditors’ remuneration
180
provisions
8 Restructuring and corporate transaction
32 Deferred income
226
expenses
180
33 Other financial liabilities
226
9 Taxation
181
34 Provisions and other liabilities
227
10 Earnings per share
185
35 Financial instruments risk management
228
11 Adjusted profit and adjusting items
186
36 Structured entities
235
12 Dividends on ordinary shares
187
37 Fair value of assets and liabilities
236
13 Intangible assets
188
38 Statement of cash flows
240
14 Investments in associates and joint ventures
194
39 Contingent liabilities and contingent assets
243
15 Property, plant and equipment
198
40 Commitments
243
16 Leases
200
41 Employee share-based payments and
244
17 Financial assets
203
deferred fund awards
18 Derivative financial instruments
204
42 Related party transactions
248
19 Receivables and other financial assets
206
43 Capital management
249
20 Other assets
206
44 Events after the reporting date
250
21 Assets and liabilities held for sale
207
45 Related undertakings
251
22 Cash and cash equivalents
208
23 Unit linked liabilities and assets backing unit
linked liabilities
209
How to navigate our Group financial statements
The Group’s significant accounting policies are included at the beginning
of the relevant notes to the Group financial statements with this
background colour. Critical judgements in applying accounting policies
are summarised in the Presentation of consolidated financial
statements section which follows the primary financial statements.
Accounting policies that are relevant to the financial statements as a
whole are also set out in that section.
The Group’s critical accounting estimates and assumptions are
summarised in the Presentation of consolidated financial statements
section which follows the primary financial statements. Further detail on
these critical accounting estimates and assumptions is provided in the
relevant note with this background colour.
139abrdn.comAnnual report 2022
FINANCIAL INFORMATION
6. Independent auditor’s report to the members
of abrdn plc
1. Our opinion is unmodified
In our opinion:
– The financial statements of abrdn plc give a true and fair view of the state of the Group’s and of the parent company’s
affairs as of 31 December 2022, and of the Group’s loss for the year then ended.
– The Group financial statements have been properly prepared in accordance with UK-adopted international
accounting standards.
– The parent company financial statements have been properly prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework.
– The Group and parent company financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
What our opinion covers
We have audited the Group and parent company financial statements of abrdn plc (‘the parent company‘ or ‘the
Company’) for the year ended 31 December 2022 (FY22) included in the Annual report and accounts, which comprise:
Group Parent company (abrdn plc)
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes 1 to 45 to the Group financial statements, including the
accounting policies within those notes and in the
Presentation of consolidated financial statements section.
Company statement of financial position
Company statement of changes in equity
Notes A to R to the parent company financial statements,
including the accounting policies in the Company accounting
policies section.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion and matters included in this report are consistent with those discussed and included
in our reporting to the Audit Committee (AC).
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to listed public interest entities.
140 abrdn.com Annual report 2022
2. Overview of our audit
Factors
driving our
view of risks
Following our FY21 audit and considering developments affecting
the abrdn plc Group since then, we have updated our risk
assessment.
There has been increased uncertainty in the macro-economic
environment, including increased market turbulence which has
adversely impacted the Group’s fee-based revenue over the
financial year, in addition to the wider performance challenges
faced by the Group (in particular within the Investments vector).
The resultant impact on loss before tax has impacted our
determination of the appropriate materiality benchmark and wider
risk assessment. Our materiality levels are reduced from the prior
year and this has affected our Key Audit Matters identified which
are explained below.
– The significance of the acquisition of Interactive Investor in May
2022 has resulted in the recognition of a new Key Audit Matter
over the related accounting implications, specifically the
identification of intangible assets to be recognised with a
corresponding impact on the goodwill recognised and the
allocation of that goodwill to the relevant cash generating units.
This replaces the event driven Key Audit Matter relating to the
Tritax acquisition that was reported in the prior year.
– Given the challenging global economic environment as well as
the Group’s wider financial performance, we identified that the
risks around the recoverability of certain of the Group’s goodwill
balances and certain of the parent company’s investments in
subsidiaries have increased. As a result, the recoverability of
certain goodwill was added to the Key Audit Matter on the
recoverability of certain investments in subsidiaries that we had
identified as a Key Audit Matter in the prior year. We identified
the risks associated with the key assumptions used in
determining the estimated recoverable amount for the
applicable cash generating units supporting recognised
goodwill and the estimated recoverable amount of investments
in subsidiaries (including forecast cash flows, market multiples
(and applicable premiums/discounts) and discount rates (as
applicable)) as significant.
– As part of our risk assessment, we maintained our focus on
future economic and operational assumptions used by the
Group in estimates. The most significant area that these could
impact the financial statements (outside of goodwill and
investment in subsidiaries as noted above) is in the valuation of
the defined benefit pension obligation. As a result, this was
maintained as a Key Audit Matter.
– We identified a new Key Audit Matter in respect of recognition
of management fee revenue from contracts with customers.
Our assessment is that the risk is increased from 2021. In our
view, the nature and complexity of management fee
calculations has increased year on year, at the same time as
market volatility and uncertainty has driven increased revenue
focus.
While not reported as Key Audit Matters, we also identified that the
Group’s ongoing cost control transformation programme and
corporate transactions would have financial reporting implications
that would require consideration in the Group and parent company
financial statements, including judgments around the classification
of assets as held for sale and the presentation of expenses as
restructuring expenses.
Key audit matters vs FY21 Item
Accounting implications of
the acquisition of
Interactive Investor
®
4.1
Recoverability of certain
goodwill and of certain of
the parent company’s
investments in subsidiaries
Ï
4.2
Valuation of the
UK defined
benefit pension
scheme present
value of funded
obligation
Í
Í
Î
Î
4.3
Revenue recognition:
management fee revenue
from contracts with
customers
®
4.4
141abrdn.comAnnual report 2022
FINANCIAL INFORMATION
6. Independent auditor’s report to the members of abrdn plc continued
Audit
Committee
interaction
During the year, the AC met 7 times. KPMG are invited to attend all AC meetings and are provided with an
opportunity to meet with the AC in private sessions without the Executive Directors being present. The Group
engagement partner met with the Audit Committee Chair privately before each AC and also attended all Risk
and Capital Committee meetings held during the year. For each Key Audit Matter, we have set out
communications with the AC in Section 4 , including matters that required particular judgment for each.
The matters included in the Audit Committee Chair’s report on page 86 are materially consistent with our
observations of those meetings.
Our
Independence
We have fulfilled our ethical responsibilities under, and we
remain independent of the Group in accordance with, UK
ethical requirements including the FRC Ethical Standard as
applied to listed public interest entities.
We have not performed any non-audit services during FY22
or subsequently which are prohibited by the FRC Ethical
Standard.
We were first appointed as auditor by the shareholders for the
year ended 31 December 2017. The period of total
uninterrupted engagement is for the six financial years ended
31 December 2022.
The Group engagement partner is required to rotate every 5
years. As these are the first set of the Group’s financial
statements signed by Richard Faulkner, he will be required to
rotate off after the FY26 audit.
The average tenure of partners and directors responsible for
component audits as set out in Section 7 below is 3 years, with
the shortest being the first year of involvem
ent and the longest
being five years.
Total audit fee £6.2m
Audit related fees (including
interim review
)
£2.3m
Other services £1.3m
Non-audit fee as a % of total
audit and audit related fee %
15%
Date first appointed 16 May 2017
Uninterrupted audit tenure 6 years
Next financial period which
requires a tender
FY27
Tenure of Group engagement
partner
1 year
Average tenure of component
signing partners and directors
3 years
Materiality
(item 6 below)
The scope of our work is influenced by our view of
materiality and our assessed risk of material
misstatement.
We have determined overall materiality for the Group
financial statements as a whole at £14m (FY21: £19m)
and for the parent company financial statements as a
whole at £5.6m (FY21: £7.6m).
For FY22, we determined that total revenue is the
benchmark for Group. In previous years we have based
our materiality on a normalised profit benchmark,
however as the Group’s underlying performance is lower
year on year, we assessed that using a normalised profit
measure would indicate a materiality which is
inappropriate for the size and scale of the wider business.
As such, we based our Group materiality on total revenue
of which it represents 0.9% (FY21: 5% of normalised profit
before tax).
Materiality for the parent company financial statements
was set as the component materiality for the parent
company determined by the group audit engagement
team. This is lower than the materiality we would
otherwise have determined with reference to parent
company total assets, of which it represents 0.1% (FY21:
0.1%).
FY22 £m
FY21 £m
Group
Materiality
Group
Performance
Materiality
Highest
Component
Materiality
Parent
Company
Materiality
Lowest
Component
Materiality
Audit
Misstatement
Posting
Threshold
Materiality levels used in our audit
14
19
9.1
14.25
6.3
8.55
5.6
7.6
0.7
0.95
0.7
1
142 abrdn.com Annual report 2022
Group Scope
(Item 7
Below)
We have performed risk assessment and planning
procedures to determine which of the Group’s components
are likely to include risks of material misstatement to the
Group financial statements, the type of procedures to be
performed at these components and the extent of
involvement required from our component auditors around
the world.
Of the Group’s 311 (FY21: 301) reporting components, we
subjected 19 (FY21: 17) to full scope audits for Group
purposes, and 2 (FY21: 4) to specified risk focused audit
procedures. The latter were not financially significant enough
to require an audit for Group reporting purposes but did
present specific individual risks that needed to be addressed.
The components within the scope of our work accounted for
the percentages illustrated opposite.
In addition, we have performed Group level analysis on the
remaining components to determine whether further risks of
material misstatement exist in those components.
We consider the scope of our audit, as communicated to the
Audit Committee, to be an appropriate basis for our audit
opinion.
The impact of
climate change
on our audit
In planning our audit we have considered the potential impacts of climate change on the Group’s business and
its financial statements. Climate change impacts the Group in a number of ways: through its own operations
(including potential reputational risk associated with the Group’s delivery of its climate related initiatives), through
its portfolio of investments and its stewardship role, and the greater emphasis on climate related narrative and
disclosure in the Annual report and accounts.
As disclosed in Note 35, the Group’s direct exposure to climate change in the financial statements is primarily
through its investment holdings, as the key valuation assumptions and estimates may be impacted by climate
risks. As part of our audit, we have made enquiries of Directors and the Group’s Corporate Sustainability team to
understand the extent of the potential impact of climate change risk on the Group’s financial statements and
the Group’s preparedness for this.
We have performed a risk assessment of how the impact of climate change may affect the financial
statements and our audit, in particular with respect to investment holdings. We consider that the impact of
climate risk on level 1 and level 2 investments is already reflected in the market prices used to value these
holdings at year end. As such, the impact of climate change was limited to the valuation of level 3 investment
holdings; taking into account the relative size of the level 3 investments balance, we assessed that the impact of
climate change was not a significant risk for our audit nor does it constitute a key audit matter. We did not
consider the potential impact of climate change on the sustainability of earnings or cashflow forecasts to be
material.
We held discussions with our own climate change professionals to challenge our risk assessment. We have also
read the Group’s disclosure of climate related information in the front half of the Annual report and accounts as
set out on pages 28 to 47 and considered consistency with the financial statements and our audit knowledge.
We have not been engaged to provide assurance over the accuracy of these disclosures.
3. Going concern, viability and principal risks and uncertainties
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or
the parent company or to cease their operations, and as they have concluded that the Group’s and the parent company’s
financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast
significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial
statements (the going concern period).
Full scope audit
Specified risk-focused audit procedures
Remaining components
82%
2%
16%
Profit before tax
89%
4%
7%
Total assets
83%
3%
14%
Total revenue
Coverage of Group financial statements
143abrdn.comAnnual report 2022
FINANCIAL INFORMATION
6. Independent auditor’s report to the members of abrdn plc continued
Going Concern
We used our knowledge of the Group, its industry and operating
model, and the general economic environment to identify the inherent
risks to its business model and analysed how those risks might affect
the Group’s and the parent company’s financial resources or ability to
continue operations over the going concern period. The risk that we
considered most likely to adversely affect the Group’s and parent
company’s available financial resources over this period was
increased market volatility.
We considered whether these risks could plausibly affect the liquidity
in the going concern period by assessing the degree of downside
assumption that, individually and collectively, could result in a liquidity
issue, taking into account the Group’s and parent company’s current
and projected cash and facilities (a reverse stress test). We also
assessed the completeness of the going concern disclosure.
Accordingly, based on those procedures, we found the Directors’ use of
the going concern basis of accounting without any material uncertainty
for the Group and parent company to be acceptable. However, as we
cannot predict all future events or conditions and as subsequent events
may result in outcomes that are inconsistent with judgments that were
reasonable at the time they were made, the above conclusions are not a
guarantee that the Group or the parent company will continue in
operation.
Our conclusions
–
We consider that the Directors’ use of the going
concern basis of accounting in the preparation
of the financial statements is appropriate.
–
We have not identified and concur with the
Directors’ assessment that there is not, a
material uncertainty related to events or
conditions that, individually or collectively, may
cast significant doubt on the Group’s or parent
company's ability to continue as a going
concern for the going concern period.
–
We have nothing material to add or draw
attention to in relation to the Directors’
statement in Note (a)(v) to the financial
statements on the use of the going concern
basis of accounting with no material
uncertainties that may cast significant doubt
over the Group’s and the parent company’s use
of that basis for the going concern period, and
we found the going concern disclosure in Note
(a)(v) to be acceptable.
–
The related statement under the Listing Rules
set out on page 136 is materially consistent with
the financial statements and our audit
knowledge.
Disclosures of emerging and principal risks and longer-term viability
Our Responsibility
We are required to perform procedures to identify whether there is a material inconsistency between
the Directors’ disclosures in respect of emerging and principal risks and the viability statement, and the
financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw attention to in relation to:
–
The Directors’ confirmation within the Viability Statement on page 62 that they have carried out a
robust assessment of the emerging and principal risks facing the Group, including those that would
threaten its business model, future performance, solvency and liquidity.
–
The Evolving and emerging risks and Principal risks and uncertainties disclosures describing these
risks and how emerging risks are identified and explaining how they are being managed and
mitigated.
–
The Directors’ explanation in the Viability Statement of how they have assessed the prospects of the
Group, over what period they have done so and why they considered that period to be appropriate,
and their statement as to whether they have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to review the Viability Statement set out on page 62 under the Listing Rules.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our
financial statements audit. As we cannot predict all future events or conditions and as subsequent events
may result in outcomes that are inconsistent with judgments that were reasonable at the time they were
made, the absence of anything to report on these statements is not a guarantee as to the Group’s and
parent company’s longer-term viability.
Our Reporting
We have nothing
material to add or
draw attention to in
relation to these
disclosures.
We have concluded
that these
disclosures are
materially
consistent with the
financial
statements and our
audit knowledge.
4. Key audit matters
What we mean
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the
financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect on:
–
The overall audit strategy.
–
The allocation of resources in the audit.
–
Directing the efforts of the engagement team.
144 abrdn.com Annual report 2022
We include below the Key Audit Matters in decreasing order of audit significance, together with our key audit procedures
to address those matters and our findings from those procedures in order that the Company’s members, as a body, may
better understand the process by which we arrived at our audit opinion. These matters were addressed, and our findings
are based on procedures undertaken for the purpose of our audit of the financial statements as a whole. We do not
provide a separate opinion on these matters.
4.1 Accounting implications of the acquisition of Interactive Investor (group)
Financial Statement Elements Our assessment of risk vs FY21 Our findings
FY22
®
®
2022 event driven Key Audit Matter
FY22: Balanced
Goodwill: £993m
Intangible assets : £469m
Description of the Key Audit Matter Our response to the risk
Subjective judgment and estimate
In May 2022, abrdn completed the acquisition of
Interactive Investor (ii). There are a number of
accounting estimates and judgments
associated with the acquisition accounting for
this transaction.
On acquisition, separate intangible assets must
be identified and valued. Both the identification
of intangible assets to be recognised and the
valuation of these assets are subjective, and
involve judgment (e.g. determination of the
useful economic life of acquired intangible
assets) and estimation uncertainty (e.g. the
determination of the discount rate or cash flow
forecasts to be used in their valuation).
The recognition of intangible assets, and other
acquired assets/ liabilities, have a
corresponding impact on the goodwill
recognised on acquisition. In addition, the
allocation of total recognised goodwill to the
relevant cash generating units (CGUs) is also
subjective and involves judgement.
The effect of these matters is that, as part of our
risk assessment, we determined that the fair
value of the identified intangible assets and the
related goodwill recognised on acquisition have
a high degree of estimation uncertainty, with a
potential range of reasonable outcomes
greater than our materiality for the financial
statements as a whole and possibly many times
that amount.
We performed the procedures below rather than seeking to rely on any of
the Group's controls because the nature of the balance is such that we would
expect to obtain audit evidence primarily through the detailed procedures
described.
Our procedures to address the risk included:
Our business combination and sector expertise: We considered the rationale
for the acquisition, reviewed the terms of the acquisition, including Board
papers and other available information and challenged the Group, and their
third party experts, on the identification of intangible assets.
Our valuation expertise: Using our own valuation specialists, we challenged
the identification and valuation analysis prepared by the Group (and the third
party valuations experts who assisted the Group), including the assessment
of the useful economic life of identified intangibles and the allocation of the
purchase price between goodwill and separately identifiable intangible
assets. We assessed the appropriateness of input assumptions used in the
valuation analysis, including performing a critical assessment of the reliability
of the Group’s forecasts and comparing the discount rate assumption used
with our own expected range.
Our sector expertise: We critically assessed the methodology and input
assumptions (in respect of forecast earnings, including synergies) used by
the Group in determining the allocation of recognised goodwill to relevant
CGUs.
Sensitivity analysis: We performed our own sensitivity analysis, which included
assessing the effect of reasonably possible changes in input assumptions to
evaluate the impact on the valuation of the separately identifiable intangible
assets and corresponding allocation of the purchase price to goodwill.
Assessing transparency: We assessed the Group’s disclosures in respect of
the acquisition, including the determination of applicable input assumptions.
Communications with the abrdn plc Audit Committee
Our discussions with and reporting to the Audit Committee included:
–
Our definition of the key audit matter relating to the accounting implications of the acquisition of Interactive Investor.
–
Our audit response to the key audit matter which included the use of specialists to challenge key aspects of the Group’s
identification and valuation of intangible assets.
–
The findings of our procedures.
Areas of particular auditor judgment
We identified the following as the areas of particular auditor judgment:
–
Subjective and complex auditor judgment was required in evaluating the key assumptions used by the Group
(including the discount rate and cash flow forecasts) and in assessing the judgment in respect of separate intangibles
identified and the allocation of goodwill to the relevant CGUs.
Our findings
In determining the allocation of goodwill to the relevant CGUs and the useful economic life of identified intangibles there is room
for judgement and we found that within that, the Group's judgement was balanced(FY21: n/a). We also found the Group’s
valuation of the fair value of the intangible assets and goodwill recognised on the acquisition of ii to be balanced (FY21: n/a) with
proportionate (FY21: n/a) disclosures of the related assumptions.
145abrdn.comAnnual report 2022
FINANCIAL INFORMATION
6. Independent auditor’s report to the members of abrdn plc continued
Further information in the Annual report and accounts: See the Audit Committee Report on page 89 for details on
how the Audit Committee considered the accounting implications of the acquisition of ii as an area of significant
attention, page 167 for the accounting policy on the accounting implications of the acquisition of ii, and Note 1 for the
financial disclosures.
4.2 Recoverability of certain goodwill (group) and of certain of the parent company’s investments in
subsidiaries (parent)
Financial Statement Elements Our assessment of risk vs FY21 Our findings
FY22 FY21
Ï
Our assessment is that the risk has
increased compared to FY21. This
reflects the increased market volatility
and the resulting impact on the
performance of the Group, in addition
to the wider performance challenges
faced by the Group (in particular
within the Investments vector). The
recoverability of certain goodwill has
been added to the Key Audit Matter
as a result of this increase in the risk.
FY22: Balanced
FY21: Balanced
Included within Goodwill of:
£935m £331m
Impairment of goodwill:
(£340m) -
Investment in subsidiaries:
£3,843m £5,065m
Impairment of investments in
subsidiaries:
(£923m) (£45m)
Description of the Key Audit Matter Our response to the risk
As noted in the Strategic report, the results in the Investments vector
have been impacted by the external market environment in addition to
wider performance challenges and businesses and subsidiaries
aligned to that vector experienced indicators of impairment.
In addition to the Investments vector, there is focus on the following
businesses:
–
Interactive Investor, given the size of the acquisition which occurred in
the period prior to the largest market volatility.
–
Finimize, given the underperformance of 2022 revenue against
forecast.
–
The financial planning business, given its performance.
These factors increased the risk associated with the recoverability of the
goodwill allocated to these cash generating units (CGUs) or groups of
CGUs and the investments in the associated subsidiaries.
Investments in subsidiaries – subjective judgment
As a result of the factors identified above, and additionally as the net
assets attributable to equity holders of the parent company
exceeded the Group’s market capitalisation at the balance sheet
date, the parent company applied judgment to identify which
subsidiaries were at risk of impairment. As a result, it subjected the
investments in abrdn Holdings Limited, abrdn Investments (Holdings)
Limited and abrdn Financial Planning Limited to an impairment
review.
Goodwill and Investment in Subsidiaries - subjective estimate
Goodwill is tested for impairment at least annually whether or not
indicators of impairment exist.
For goodwill the impairment assessment is performed by comparing
the carrying amount of each CGU or group of CGUs to which goodwill
is allocated with its recoverable amount being the higher of its value in
use (VIU) or fair value less costs of disposal (FVLCD). Similarly for
investments in subsidiaries the carrying value of the investment in the
subsidiaries is compared with recoverable amount of that investment
being the higher of its VIU or FVLCD.
In determining the VIU, which is calculated using a discounted cash flow
method, the key assumptions are forecast cash flows and discount
rates. In determining the FVLCD the key assumptions are forecast cash
We performed the procedures below rather
than seeking to rely on any of the Group’s
controls because the nature of the balance is
such that we would expect to obtain audit
evidence primarily through the detailed
procedures described.
Our procedures included:
Our sector expertise: We critically assessed the
Group’s assessment of whether there were any
impairment indicators for the parent company’s
investment in subsidiaries, including comparing
the carrying value of parent company’s net
assets with the Group’s market capitalisation
and considering the subsidiaries’ business
performance.
Our sector expertise: We assessed the
appropriateness of the Group’s conclusion that
the recoverable amount of goodwill and
investment in subsidiaries should be based on
FVLCD.
Our valuation expertise: Using our own valuation
specialists, we assessed the appropriateness of
the Group’s FVLCD methodology and the
appropriateness of the input assumptions used
in calculating the FVLCD of the CGUs or groups
of CGUs to which certain goodwill is allocated
and of certain of the parent company’s
investment in subsidiaries.
Benchmarking assumptions: We compared the
Group’s assumptions to externally derived data
in relation to key inputs such market multiples
and discount rates.
Sensitivity analysis: We performed our own
sensitivity analysis which included assessing the
effect of reasonable alternative assumptions in
respect of forecast cash flows, market multiples
(
and applicable premiums/discounts
)
and
146 abrdn.com Annual report 2022
flows, market multiples (including applicable premiums/discounts) and
discount rates (as applicable).
The resulting recoverable amounts, in particular for the CGUs, groups
of CGUs and investments in subsidiaries set out above, are subjective
due to the inherent uncertainty in determining these assumptions and
are therefore also susceptible to management bias.
The effect of these matters is that, as part of our risk assessment, we
determined that the recoverable amount of certain goodwill and of
certain investments in subsidiaries have a high degree of estimation
uncertainty, with a potential range of reasonable outcomes greater
than our materiality for the financial statements as a whole and
possibly many times that amount. The financial statements (Note 13
and A) disclose the sensitivity estimated by the Group and parent
company.
discount rates (as applicable) to evaluate the
impact on the FVLCD of the CGUs or groups of
CGUs to which certain goodwill is allocated and
of certain of the parent company’s investment in
subsidiaries.
Assessing transparency: We assessed whether
the Group’s disclosures (in respect of goodwill)
and the parent company’s disclosures (in
respect of investment in subsidiaries) about the
sensitivity of the outcome of the impairment
assessment to changes in key assumptions
reflect the risks inherent in the recoverable
amount of goodwill and investment in
subsidiaries.
Communications with the abrdn plc Audit Committee
Our discussions with and reporting to the Audit Committee included:
–
Our definition of the key audit matter relating to the recoverability of certain goodwill and certain investments in
subsidiaries.
–
Our audit response to the key audit matter which included the use of specialists to challenge key aspects of the Group’s
and parent company’s determination of the recoverable amount and level of impairment.
–
The findings of our procedures.
Areas of particular auditor judgment
We identified the following as the areas of particular auditor judgment:
–
Subjective and complex auditor judgment was required in evaluating the key assumptions used by the Group and
parent company (including forecast cash flows, market multiples (and applicable premiums/discounts) and discount
rates (as applicable)).
Our findings
We found Group’s carrying value of goodwill and the related impairment charges to be balanced (FY21: balanced) with
proportionate (FY21: proportionate) disclosures of the related assumptions and sensitivities.
We found parent company’s carrying value of its investments in subsidiaries and the related impairment charges to be
balanced (FY21: balanced) with proportionate (FY21: proportionate) disclosures of the related assumptions and
sensitivities.
Further information in the Annual report and accounts: See the Audit Committee Report on pages 89 to 90 for details on
how the Audit Committee considered the Group’s goodwill and the parent company’s investments in subsidiaries as areas
of significant attention, pages 188 to 193 for the goodwill accounting policy and financial disclosures, page 268 for the
investment in subsidiaries accounting policy and pages 270 to 272 for the investment in subsidiaries financial disclosures.
4.3 Valuation of the UK defined benefit pension scheme present value of funded obligation (group)
Financial Statement Elements Our assessment of risk vs FY21 Our findings
FY22 FY21
Í
Í
Î
Î
Our assessment is that the risk is
similar to FY21. While there has been
increased market volatility
compared to the prior year, the risk
associated with the selection of
economic assumptions remains
similar to FY21.
FY22: Balanced
FY21: Balanced
Present value of funded
obligation:
£1,755m
£2,899m
Description of the Key Audit Matter Our response to the risk
Subjective valuation
The present value of the Group’s funded obligation for
the UK defined benefit pension scheme is an area that
involves significant judgment over the uncertain future
settlement value. The Group is required to use judgment
in the selection of key assumptions covering both
operating assumptions and economic assumptions.
The key operating assumptions are base mortality and
mortality improvement. The key economic assumptions
are the discount rate and inflation. The risk is that
We performed the procedures below rather than seeking to rely on
any of the Group's controls because the nature of the balance is
such that we would expect to obtain audit evidence primarily
through the procedures described below.
Our procedures to address the risk included:
Assessing actuaries’ credentials: We evaluated the competency and
objectivity of the Group’s experts who assisted them in determining
the actuarial assumptions used to calculate the defined benefit
obligation.
147abrdn.comAnnual report 2022
FINANCIAL INFORMATION
6. Independent auditor’s report to the members of abrdn plc continued
inappropriate assumptions are used in determining the
present value of the funded obligation.
The effect of these matters is that, as part of our risk
assessment, we determined that the valuation of the
pension scheme obligation has a high degree of
estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for
the financial statements as a whole and possibly many
times that amount. The financial statements (Note 31)
disclose the sensitivity estimated by the Group.
Benchmarking assumptions: We considered, with the support of our
own actuarial specialists, the appropriateness of the base mortality
assumption by reference to scheme and industry data on historical
mortality experience and the outcome of the latest triennial report.
We considered, with the support of our own actuarial specialists, the
appropriateness of the mortality improvement assumptions by
reference to industry-based expectations of future mortality
improvements and the appropriateness of the discount rate and
inflation assumptions by reference to industry practice.
Assessing transparency: In conjunction with our own actuarial
specialists, we considered whether the Group’s disclosures in relation
to the assumptions used in the calculation of the present value of the
funded obligation appropriately represent the sensitivities of the
obligation to the use of alternative assumptions.
Communications with the abrdn plc Audit Committee
Our discussions with and reporting to the Audit Committee included:
–
Our identification of the key audit matter relating to the valuation of the defined benefit pension obligation.
–
Our audit response to the key audit matter which included the use of specialists to challenge key aspects of the Group’s
actuarial valuation.
–
The findings of our procedures.
Areas of particular auditor judgment
We identified the following as the areas of particular auditor judgment:
–
Subjective and complex auditor judgment was required in evaluating the key assumptions used by the Group (including the
discount rate, inflation and mortality assumptions).
Our findings
We found the Group’s valuation of the UK defined benefit pension scheme obligation to be balanced (FY21: balanced) with
proportionate (FY21: proportionate) disclosures of the related assumptions and sensitivities.
Further information in the Annual report and accounts: See the Audit Committee Report on page 90 for details on how the
Audit Committee considered the valuation of the UK defined benefit pension scheme obligation as an area of significant
attention, page 218 for the accounting policy on the valuation of the UK defined benefit pension scheme obligation, and
Note 31 for the financial disclosures.
4.4 Revenue recognition: management fee revenue from contracts with customers (group)
Financial Statement Elements Our assessment of risk vs FY21 Our findings
Revenue
recognition:
management fee
revenue from
contracts with
customers:
FY22 FY21
®
Our assessment is that the risk is increased from
2021 and so this should be included as a new Key
Audit Matter. In our view, the nature and
complexity of management fee calculations has
increased year on year, at the same time as
market volatility and uncertainty has driven
increased revenue focus.
FY22 and FY21: We
found no significant
items, either unadjusted
or adjusted for.
£1,068m
£1,243m
Description of the Key Audit Matter Our response to the risk
Data capture and calculation error
Revenue from contracts with customers is the most
significant item in the consolidated statement of
comprehensive income and represents one of the
areas that had the greatest effect on the overall group
audit. In addition, market volatility and uncertainty has
driven increased revenue focus. The balance comprises
various different revenue streams as outlined in Note
3a.
As a result of the revenue diversification in the period,
notably the acquisition of ii, there are new revenue
streams in the period. However, the area of revenue
which had the greatest effect on our overall group
audit and audit effort in the current period is
management fee income (institutional, wholesale and
insurance) which is the most significant and, in certain
areas, for example for segregated account
Our procedures included:
Procedures in relation to fee rates
We performed the detailed procedures below in relation to fee rates
rather than seeking to rely on the Group’s controls as our knowledge
indicated that we would be unlikely to obtain the required evidence to
support reliance on the controls.
Test of details: We agreed a selection of fee rates used in the
calculation to the investment management agreements (IMAs), fee
letters or fund prospectuses outlining the effective fee rates.
Procedures in relation to AUM
Control design and operation: We tested the design and operating
effectiveness of controls at third party service providers over the
production of AUM data that is used in calculating management fees.
This included inspecting the internal controls reports prepared by
relevant outsourced service organisations covering the design and
148 abrdn.com Annual report 2022
management fee calculations, complex item. In our
view, the nature and complexity of management fee
calculations has increased year on year.
The two key components in calculating management
fee income are fee rates to be applied and the amount
of assets under management (AUM) resulting in the
following key risks:
–
Fee rates: There is a risk that fee rates have not
been entered appropriately into the fee calculation
and billing systems when clients are onboarded or
agreements are amended.
–
AUM: There is a risk that AUM data from third-party
service providers or client appointed administrators
and/or custodians does not exist and is not
accurate.
–
Calculation: There is a risk that management fee
income, including accrued income balances, is
incorrectly calculated.
operation of key controls over the production of AUM data used in the
calculation of management fees.
Enquiry of clients: Where AUM data is produced by a client appointed
administrator and/or custodian we obtained AUM data directly from
the client or custodian and used this in our management fee
recalculations and tests of detail below.
Calculation Procedures
Tests of details and substantive analytical procedures: Where AUM data
was obtained from third party service organisations (and where we
had tested the controls over the AUM data) we independently
recalculated in-scope management fees. Where AUM data was
obtained from a client appointed administrator and/or custodian
(and so we could not test controls over the AUM data) we
independently recalculated in-scope management fees and/or
agreed a selection of amounts billed and received to invoice and
bank statements.
Communications with the abrdn plc Audit Committee
Our discussions with and reporting to the Audit Committee included:
–
Our definition of the key audit matter relating to revenue recognition: management fee revenue from contracts with
customers.
–
Our audit response to the key audit matter which included use of data and analytics technology to complete certain of the
recalculations.
–
The findings of our procedures.
Areas of particular auditor judgment
We identified the following as the areas of particular auditor judgment:
–
We performed an assessment of whether the matters identified in respect of management fee revenue from contracts with
customers were material.
Our findings
–
We found no significant items, either unadjusted or adjusted for, in the Group’s management fee revenue from contracts with
customers (FY21: no significant items either unadjusted or adjusted for).
Further information in the Annual report and accounts: See the page 175 for the accounting policy on revenue from
contracts with customers, and Note 3 for the financial disclosures.
We continue to perform procedures over the fair value of the contingent consideration liability recognised on the
acquisition of Tritax Management LLP (Tritax). However, as the acquisition occurred in the prior year we do not need to
perform procedures over the fair value of intangible assets recognised on the acquisition of Tritax and taking into account
the relative size of the contingent consideration liability, we have not assessed this as one of the most significant risks in our
current year audit and, therefore, it is not separately identified in our report this year.
5. Our ability to detect irregularities, and our response
Fraud - identifying and responding to risks of material misstatement due to fraud
Fraud risk
assessment
To identify risks of material misstatement due to fraud (fraud risks) we assessed events or conditions that could
indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk
assessment procedures included:
–
Enquiring of the Directors, the Group Audit Committee, Group Internal Audit and the Group’s Legal team
and inspection of policy documentation as to the Group’s high-level policies and procedures to prevent and
detect fraud, including the internal audit function, and the Group’s channel for ‘whistleblowing’, as well as
whether they have knowledge of any actual, suspected or alleged fraud.
–
Reading Board minutes and attending Group Audit Committee and Risk and Capital Committee meetings.
–
Considering the findings of Group Internal Audit’s reviews in the period.
–
Considering remuneration incentive schemes and performance targets for management and the
Directors.
149abrdn.comAnnual report 2022
FINANCIAL INFORMATION
6. Independent auditor’s report to the members of abrdn plc continued
Risk
communications
We communicated identified fraud risks throughout the audit team and remained alert to any indications of
fraud throughout the audit. This included communication from the Group audit team to full scope component
audit teams of relevant fraud risks identified at the Group level and request to full scope component audit teams
to report to the Group audit team any instances of fraud that could give rise to a material misstatement at the
Group level.
Fraud risks
As required by auditing standards, and taking into account possible pressures to meet profit targets and our
overall knowledge of the control environment, we perform procedures to address the risk of management
override of controls, in particular the risk that Group and component management may be in a position to
make inappropriate accounting entries, and the risk of bias in accounting estimates and judgments such as
impairment and pension assumptions.
On this audit we do not believe there is a fraud risk related to revenue recognition, given the relative simplicity of
the most significant revenue streams and the separation of duties between management and third party
service providers.
We also identified fraud risks related to:
–
The recoverability of certain of the Group’s goodwill and certain of the parent company’s investment in
subsidiaries in response to the high degree of estimation uncertainty due to increased market volatility and
business performance in the year, and the impact of these on the profit of the Group, and the susceptibility
of these estimates to management bias.
–
The classification of expenses as restructuring, given the extent of restructuring in the Group’s cost base,
and the level of market interest in the delivery of both transformation programmes and cost savings, the
impact of these on both the incentive to classify items as restructuring expenses and the consequences of
an error in classification.
Link to KAMS
Further detail in respect of the risk of fraud over the recoverability of certain of the Group’s goodwill and certain
of the parent company’s investment in subsidiaries, including our procedure to compare certain key input
assumptions to external market data, is set out in the key audit matter disclosures in section 4.2 of this report.
Procedures to
address fraud
risks
Our audit procedures included evaluating the design, implementation, and where relevant operating
effectiveness of internal controls relevant to mitigate these risks.
To address the risk of fraud over the classification of restructuring expenses we tested a sample of expenses,
and challenged management in relation to the classification of those selected expenses against the Group’s
adjusted profit methodology. Based on the evidence obtained, we assessed whether each sampled expense
related to a transaction or event met the definition of restructuring or adjusting, to determine whether there
were indications of inconsistent classification or indicators of management bias. We also performed substantive
audit procedures including:
–
Identifying journal entries and other adjustments to test for all full scope components based on risk criteria
and comparing the identified entries to supporting documentation. These included those posted by senior
finance management and those posted to unusual accounts, as well as those which comprised
unexpected posting combinations.
–
Evaluating the business purpose of significant unusual transactions.
–
Assessing significant accounting estimates for bias, including whether the judgments made in making
accounting estimates are indicative of a potential bias.
Laws and regulations - identifying and responding to risks of material misstatement relating to compliance with laws and regulations
Laws and
regulations risk
assessment
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the
financial statements. For this risk assessment matters considered included the following:
–
Our general commercial and sector experience.
–
Discussion with the Directors and other management (as required by auditing standards).
–
Inspection of the Group’s regulatory and legal correspondence.
–
Inspection of the policies and procedures regarding compliance with laws and regulation.
–
Relevant discussions with the Directors and other management.
As the Group and many of its subsidiaries are regulated, our assessment of risks involved gaining an
understanding of the control environment including the entity’s procedures for complying with regulatory
requirements, how they analyse identified breaches and assessing whether there were any implications of
identified breaches on our audit. We communicated identified laws and regulations throughout our team and
remained alert to any indications of non-compliance throughout the audit.
Risk
communications
We communicated identified laws and regulations throughout the audit team and remained alert to any
indications of non-compliance throughout the audit. This included communication from the Group audit team
to full scope component audit teams of relevant laws and regulations identified at Group level, and a request for
full scope component auditors to report to the Group audit team any instances of non-compliance with laws
150 abrdn.com Annual report 2022
and regulations that could give rise to a material misstatement at Group level. The potential effect of these laws
and regulations on the financial statements varies considerably.
Direct laws
context and link to
audit
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including
financial reporting legislation (including related companies legislation), distributable profits legislation, taxation
legislation and pensions regulations and we assessed the extent of compliance with these laws and regulations
as part of our procedures on the related financial statement items.
Most significant
indirect law/
regulation areas
Secondly, the Group is subject to many other laws and regulations where the consequences of non-
compliance could have a material effect on amounts or disclosures in the financial statements, for instance
through the imposition of fines or litigation.
We identified the following areas as those most likely to have such an effect:
–
Specific areas of regulatory capital and liquidity.
–
Conduct, including Client Assets.
–
Anti-money laundering, and market abuse regulations.
–
Certain aspects of company legislation recognising the financial and regulated nature of the Group’s
activities and its legal form.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and
regulations to enquiry of the Directors and other management and inspection of regulatory and legal
correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Known actual or
suspected
matters
We assessed the disclosure of provisions in Note 34 and contingent liabilities in Note 39 in light of our
understanding gained through the procedures above.
Actual or
suspected
breaches
discussed with
AC
We discussed with the Audit Committee matters related to actual or suspected breaches of laws or
regulations, for which disclosure is not necessary, and considered any implications for our audit.
Context
Context of the
ability of the audit
to detect fraud or
breaches of law
or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some
material misstatements in the financial statements, even though we have properly planned and performed our
audit in accordance with auditing standards. For example, the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial statements, the less likely the inherently
limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained
a higher risk of non-detection of fraud, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material
misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to
detect non-compliance with all laws and regulations.
6. Our determination of materiality
The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay
qualitative considerations to help us determine the scope of our audit and the nature, timing and extent of our procedures,
and in evaluating the effect of misstatements, both individually and in the aggregate, on the financial statements as a
whole.
£14m
(FY21: £19m)
Materiality for the
group financial
statements as a
whole
What we mean
A quantitative reference for the purpose of planning and performing our audit.
Basis for determining materiality and judgments applied
Materiality for the Group financial statements as a whole was set at £14m (FY21: £19m). This was determined
with reference to a benchmark of revenue.
We determined that revenue is the appropriate benchmark for the Group given the performance of the entity,
the sector in which the entity operates, its ownership and financing structure, and the focus of users. In previous
years we have based our materiality on a normalised profit before tax benchmark, however, as the Group’s
underlying performance is lower year on year, we assessed using a normalised profit measure would indicate a
materiality which is inappropriate for the size and scale of the wider business.
Our Group materiality of £14m, was determined by applying a percentage to the Group revenue (FY21: Group
normalised profit before tax). When using a revenue benchmark to determine overall materiality, KPMG’s
approach for listed entities considers a guideline range 0.5% to 1% (FY21: 3% to 5%) of the measure. In setting
151abrdn.comAnnual report 2022
FINANCIAL INFORMATION
6. Independent auditor’s report to the members of abrdn plc continued
overall Group materiality, we applied a percentage of 1% (FY21: 3.5% of Group normalised profit before tax
which equated to 1.7% of Group profit before tax) to the projected benchmark at planning, which equates to
0.9% of the full year benchmark.
Materiality for the parent company financial statements as a whole was set at £5.6m (FY21: £7.6m), which is
component materiality for the parent company determined by the Group audit engagement team (FY21:
same). This is lower than the materiality we would otherwise have determined with reference to parent
company total assets, of which it represents 0.1% (FY21: 0.1%).
£9.1m
(FY21: £14.25m)
Performance
materiality
What we mean
Our procedures on individual account balances and disclosures were performed to a lower threshold,
performance materiality, so as to reduce to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material amount across the financial statements as a
whole.
Basis for determining performance materiality and judgments applied
We have considered performance materiality at a level of 65% (FY21: 75%) of materiality for abrdn plc’s Group
financial statements as a whole to be appropriate.
The parent company performance materiality was set at £3.6m (FY21: £5.7m), which equates to 65% (FY21:
75%) of materiality for the parent company financial statements as a whole.
We applied this reduced percentage in our determination of performance materiality for the Group and parent
company financial statements in the current year as we identified specific factors indicating an elevated level of
aggregation risk. These factors included the ongoing level of restructuring and change impacting the Group.
£0.7m
(FY21: £0.95m)
Audit
misstatement
posting threshold
What we mean
This is the amount below which identified misstatements are considered to be clearly trivial from a quantitative
point of view. We may become aware of misstatements below this threshold which could alter the nature,
timing and scope of our audit procedures, for example if we identify smaller misstatements which are indicators
of fraud.
This is also the amount above which all misstatements identified are communicated to abrdn plc’s Audit
Committee.
Basis for determining the audit misstatement posting threshold and judgments applied
We set our audit misstatement posting threshold at 5% (FY21: 5%) of our materiality for the Group financial
statements. We also report to the Audit Committee any other identified misstatements that warrant reporting
on qualitative grounds.
The overall materiality for the Group financial statements of £14m (FY21: £19m) compares as follows to the main
financial statement caption amounts:
Total Group revenue Group profit/(loss) before tax Total Group assets
FY22 FY21 FY22 FY21 FY22 FY21
Financial statement
caption
£1,538m £1,685m (£615m) £1,115m £9,247m £11,418m
Group materiality as %
of caption
0.9% 1.1% 2.3% 1.7% 0.2% 0.2%
7. Scope of our audit
Group Scope
What we mean
How the Group audit team determined the procedures to be performed across the Group.
The Group has 311 (FY21: 301) reporting components. In order to determine the work performed at the
reporting component level, we identified those components which we considered to be of individual financial
significance, those which were significant due to risk and those remaining components on which we required
procedures to be performed to provide us with the evidence we required in order to conclude on the group
financial statements as a whole.
We determined individually financially significant components as those contributing at least 10% (FY21: 10%) of
Group total revenue, Group net assets or total profits and losses that made up Group profit before tax. We
selected these metrics because these are the most representative of the relative size of the components. We
identified 7 (FY21: 7) components as individually financially significant components and performed full scope
audits on all of these components (FY21: 6). In FY21 specific risk-focused audit procedures included procedures
152 abrdn.com Annual report 2022
over one component that became financially significant due to the gains recognised on an investment, and the
year end carrying value of this investment.
In addition to the individually financially significant components, we identified 2 (FY21: 2) components as
significant, owing to significant risks of material misstatement affecting the group financial statements. Of the 2
(FY21: 2) components identified as significant due to risk, we performed full scope audits for 2 components
(FY21: 2).
In addition, to enable us to obtain sufficient appropriate audit evidence for the group financial statements as a
whole, we selected 12 (FY21: 12) further components on which to perform procedures. Of these components,
we performed full scope audits for 10 components (FY21: 9) and performed specific risk-focused audit
procedures over revenue on 1 component (FY21: 1) and investment valuation and fair value gains and losses on
1 component (FY21: 2).
The components within the scope of our work accounted for the following percentages of the Group’s results,
with the prior year comparatives indicated in brackets:
Scope Number of components
Range of materiality
applied
Group revenue
Total profits and losses
that made up Group PBT
Group net assets
Full scope audits 19 (17) £0.7m - £6.3m
(£1m - £8.6m)
83% (73%) 82% (63%) 89% (84%)
Specific risk-
focused audit
procedures
2 (4) £1.4m - £2.8m
(£19m)
3% (16%) 2% (26%) 4% (6%)
Total 21 (21) 86% (90%) 84% (89%) 93% (90%)
Specific risk-focused procedures over total profits and losses that made up Group profit before tax for FY21
included those procedures performed by the Group team in respect of the gains recognised on an investment.
The remaining 14% (FY21: 10%) of total Group revenue, 16% (FY21: 11%) of total profits and losses that made up
Group profit before tax and 7% (FY21: 10%) of net Group assets is represented by 290 (FY21: 280) reporting
components, none of which individually represented more than 2% (FY21: 5%) of any of total Group revenue,
total profits and losses that made up Group profit before tax or net Group assets. For these components, we
performed analysis at an aggregated group level to re-examine our assessment that there were no significant
risks of material misstatement within these.
The work on 17 of the 21 components (FY21: 8 of the 21 components) was performed by component auditors
and the rest, including the audit of the parent company, was performed by the Group team.
Testing over all KAMs included in Section 4 was performed by the Group team, with the exception of testing over
management fee revenue from contracts with customers, which is performed by our component auditors. In
addition, the Group team has also performed audit procedures on the following areas on behalf of the
components:
–
Testing of IT Systems in those instances where Group and components use common systems.
–
Testing over the completeness of journal postings in the period in those instances where Group and
components use common systems.
These items were audited by the Group team because the consistency of these systems and processes meant
that this was the most effective way to obtain audit evidence. The Group team communicated the results of
these procedures to the component teams.
The Group team instructed component auditors as to the significant areas to be covered, including the relevant
risks detailed above and the information to be reported back. The Group team approved the component
materialities, as detailed in the table above, having regard to the mix of size and risk profile of the Group across
the components.
The scope of the audit work performed was predominately substantive as we placed limited reliance upon the
Group's internal control over financial reporting.
Group audit team
oversight
What we mean
The extent of the Group audit team’s involvement in component audits.
In working with component auditors, the Group audit team:
–
Held a virtual global planning and risk assessment meeting led by the Group audit engagement partner to
discuss key audit risks and obtain input from component teams.
153abrdn.comAnnual report 2022
FINANCIAL INFORMATION
6. Independent auditor’s report to the members of abrdn plc continued
–
Held planning calls and meetings with component audit teams to discuss the significant areas of the audit
relevant to the components, including the key audit matter identified in respect of recognition of
management fee revenue from contracts with customers.
–
Issued Group audit instructions to component auditors, on the scope of their work, including specifying the
minimum procedures to perform in their audit of revenue within the Investments vector and cash.
–
Visited three (FY21: zero) of the four component teams not located in the UK (FY21: four), to assess the audit
risk and strategy. Video and telephone conference meetings were also held with these component auditors
(in Luxembourg and Singapore) and the other component (in the United States) not located in the UK that
was not physically visited. At these subsequent virtual meetings, the findings reported to the Group team
were discussed in more detail, and any further work required by the Group team was then performed by
the component audit teams.
–
Inspection of component audit team’s key working papers within component audit files (using remote
technology capabilities) to understand and challenge the audit approach and audit findings of each
component.
8. Other information in the Annual report and accounts
The Directors are responsible for the other information presented in the Annual report together with the financial
statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do
not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
All other information
Our responsibility
Our responsibility is to read the other information and, in doing so, consider whether,
based on our financial statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or our audit knowledge.
Our reporting
Based solely on that work we
have not identified material
misstatements or inconsistencies
in the other information.
Strategic report and Directors’ report
Our responsibility and reporting
Based solely on our work on the other information described above we report to you as
follows:
–
We have not identified material misstatements in the Strategic report and the
Directors’ report.
–
In our opinion the information given in those reports for the financial year is consistent
with the financial statements.
–
In our opinion those reports have been prepared in accordance with the Companies
Act 2006.
Directors’ remuneration report
Our responsibility
We are required to form an opinion as to whether the part of the Directors’ remuneration
report to be audited has been properly prepared in accordance with the Companies
Act 2006.
Our reporting
In our opinion the part of the
Directors’ remuneration report to
be audited has been properly
prepared in accordance with the
Companies Act 2006.
Corporate governance disclosures
Our responsibility and reporting
We are required to perform procedures to identify whether there is a material
inconsistency between the financial statements and our audit knowledge, and:
–
The Directors’ statement that they consider that the Annual report and financial
statements taken as a whole is fair, balanced and understandable, and provides the
information necessary for shareholders to assess the Group’s position and
performance, business model and strategy.
–
The section of the Annual report and accounts describing the work of the Audit
Committee, including the significant issues that the Audit Committee considered in
relation to the financial statements, and how these issues were addressed.
–
The section of the Annual report and accounts that describes the review of the
effectiveness of the Group’s risk management and internal control systems.
Our reporting
Based on those procedures, we
have concluded that each of
these disclosures is materially
consistent with the financial
statements and our audit
knowledge.
We are also required to review the part of the Corporate Governance Statement
relating to the Group’s compliance with the provisions of the UK Corporate Governance
Code specified by the Listing Rules for our review.
We have nothing to report in this
respect.
154 abrdn.com Annual report 2022
Other matters on which we are required to report by exception
Our responsibility
Under the Companies Act 2006, we are required to report to you if, in our opinion:
–
Adequate accounting records have not been kept by the parent company or returns
adequate for our audit have not been received from branches not visited by us; or
–
The parent company financial statements and the part of the Directors’
remuneration report to be audited are not in agreement with the accounting records
and returns; or
–
Certain disclosures of Directors’ remuneration specified by law are not made; or
–
We have not received all the information and explanations we require for our audit.
Our reporting
We have nothing to report in
these respects.
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 137, the Directors are responsible for: the preparation of the
financial statements including being satisfied that they give a true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error; assessing the Group and parent company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the
Group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report prepared using the single
electronic reporting format specified in the TD ESEF Regulation. This auditor’s report provides no assurance over
whether the annual financial report has been prepared in accordance with that format.
10. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and the terms of our engagement by the Company. Our audit work has been undertaken so
that we might state to the Company’s members those matters we are required to state to them in an auditor’s
report, and the further matters we are required to state to them in accordance with the terms agreed with the
Company, and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
Richard Faulkner (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Saltire Court
20 Castle Terrace
Edinburgh
EH1 2EG
28 February 2023
155abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements
Consolidated income statement
For the year ended 31 December 2022
2022 2021
Notes £m £m
Revenue from contracts with customers 3 1,53 8 1,685
Cost of sales 3 (82 ) (142 )
Net operating revenue 1,45 6 1,543
Restructuring and corporate transaction expenses 5 (21 4 ) (259 )
Impairment of intangibles acquired in business combinations and through the
purchase of customer contracts 5 (36 9 ) –
Amortisation of intangibles acquired in business combinations and through the
purchase of customer contracts 5 (12 5 ) (99 )
Staff costs and other employee-related costs 5
(54 9 )
(604 )
Other administrative expenses 5
(66 2 )
(594 )
Total administrative and other expenses
(1, 9 19 )
(1,55 6 )
Net gains or losses on financial instruments and other income
Fair value movements and dividend income on significant listed investments 4 (11 9 )
(227 )
Other net gains or losses on financial instruments and other income 4 (3 ) 44
Total net gains or losses on financial instruments and other income (12 2 ) (183 )
Finance costs (29 )
(30 )
Profit on disposal of subsidiaries and other operations 1 – 127
Profit on disposal of interests in associates 1 6 1, 236
Loss on impairment of interests in associates 14 (9 ) –
Share of profit or loss from associates and joint ventures 14 2 (22 )
(Loss)/profit before tax (61 5 ) 1,115
Tax credit/(expense) 9 66
(120 )
(Loss)/profit for the year (54 9 ) 995
Attributable to:
Equity shareholders of abrdn plc (56 1 ) 994
Other equity holders 28 11 –
Non-controlling interests – ordinary shares
28
(54 9 ) 995
Earnings per share
Basic (pence per share) 10 (26 .8 ) 46.8
Diluted (pence per share) 10 (26. 8 ) 46. 0
The Notes on pages 163 to 264 are an integral part of these consolidated financial statements.
156 abrdn.com Annual report 2022
Consolidated statement of comprehensive income
For the year ended 31 December 2022
2022 2021
Notes £m £m
(Loss)/profit for the year (549 ) 995
Items that will not be reclassified subsequently to profit or loss:
Remeasurement (losses)/gains on defined benefit pension plans 31 (79 3 ) 117
Share of other comprehensive income of associates and joint ventures 14 – 12
Equity holder tax effect of items that will not be reclassified subsequently to profit or loss 9 – 3
Total items that will not be reclassified subsequently to profit or loss (793 ) 132
Items that may be reclassified subsequently to profit or loss:
Fair value gains on cash flow hedges 18 85 19
Exchange differences on translating foreign operations
Share of other comprehensive income of associates and joint ventures 14 (2 8 ) (4 )
Items transferred to the consolidated income statement
Fair value (gains) on cash flow hedges 18 (78 ) (10 )
Realised foreign exchange losses 1 – 18
Share of other comprehensive income of associates and joint ventures 1 –
(9 )
Equity holder tax effect of items that may be reclassified subsequently to profit or loss 9 (2 ) (3 )
Total items that may be reclassified subsequently to profit or loss 13 9
Other comprehensive income for the year (780 ) 141
Total comprehensive income for the year (1, 3 29 ) 1,136
Attributable to:
Equity shareholders of abrdn plc (1, 341 ) 1,135
Other equity holders 28 11 –
Non-controlling interests – ordinary shares 28 1 1
(1, 3 29 ) 1,136
The Notes on pages 163 to 264 are an integral part of these consolidated financial statements.
157abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
Consolidated statement of financial position
As at 31 December 2022
2022 2021
Notes £m £m
Assets
Intangible assets 13 1, 61 9 704
Pension and other
p
ost-retirement benefit assets 31 831 1,607
Investments in associates and joint ventures accounted for using the equity method 14 267 274
Property, plant and equipment 15
Deferred tax assets 9
Financial investments 17 2,93 9 4,316
Receivables and other financial assets 19
Current tax recoverable 9
Other assets 20
Assets held for sale 21
Cash and cash e
q
uivalents 22 1,13 3 1,904
Assets backin
g
unit linked liabilities 23
Financial investments
Receivables and other unit linked assets
Cash and cash equivalents
Total assets 9,24 7 11, 41 8
158 abrdn.com Annual report 2022
2022 2021
Notes £m £m
Liabilities
Third party interest in consolidated funds 29 242 104
Subordinated liabilities 30
Pension and other post-retirement benefit provisions 31
Deferred income 32
Deferred tax liabilities 9
Current tax liabilities 9
Derivative financial liabilities 29
Other financial liabilities 33
Provisions 34
Other liabilities 34
Liabilities of operations held for sale 21
Unit linked liabilities 23
I
nvestment contract liabilities
Third
p
art
y
interest in consolidated funds 173 378
Other unit linked liabilities
Total liabilities 3,37 0 3,562
E
q
uit
y
Share capital 24 280 305
Shares held b
y
trusts 25
(
)
(
)
Share premium reserve 24
Retained earnin
g
s 26 5 ,0 21 5, 775
Other reserves 27
(
)
E
q
uit
y
attributable to e
q
uit
y
shareholders of abrdn
p
lc 5,663 7, 643
Other equity 28 207 207
Non-controllin
g
interests - ordinar
y
shares 28 7 6
Total e
q
uit
y
Total e
q
uit
y
and liabilities
T
he Notes on pages 163 to 264 are an integral part of these consolidated financial statements.
The consolidated financial statements on pages 156 to 264 were approved by the Board and signed on its behalf by the
following Directors:
Sir Dou
g
las Flint Stephanie Bruce
Chairman
28 February 2023
Chief Financial Officer
28 February 2023
159abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
Consolidated statement of changes in equity
For the year ended 31 December 2022
Sh
are
capital
Shares held
by trusts
Share
premium
reserve
Retained
earnings
1
Other
reserves
1
Total equity
attributable
to equity
shareholders
of abrdn plc
Other
equity
Non-
controlling
interests -
ordinary
shares Total equity
Notes £m £m £m £m £m £m £m £m £m
1 January 2022 305 (17 1 ) 640 5,77 5 1,09 4 7,64 3 207 6 7,85 6
Loss for the year – – – (5 61 ) – (561 ) 11 1 (549 )
Other comprehensive income
for the year
Total comprehensive income for
the year 26,27 – – – (1, 382 ) 41 (1, 341 ) 11 1 (1,329 )
Issue of share capital 24 – – – – – – – – –
Dividends paid on ordinary
shares
12 – – –
(307
) –
(307
)
Interest paid on other equity 28
(11 )
Share buyback 24, 26, 27 (25 )
)
) –
)
Cancellation of capital
redemption reserve 26, 27
) – – –
Other movements in non-
controlling interests in the year 28 – – – –
Reserves credit for employee
share-based payments 27
Transfer to retained earnings for
vested employee share-based
payments
2
6,27 – – – 6 3 (6 3 )
Transfer between reserves on
disposal of subsidiaries
) –
Transfer between reserves on
impairment of subsidiaries
) –
Shares acquired by employee
trusts
2
5
(46 )
(46 ) – – (4 6 )
Shares distributed by employee
and other trusts and related
dividend equivalents 25, 26
(70 )
(2
)
)
O
ther movements
1
26, 27 – – – (2 3 ) 1 7 (6 ) – – (6 )
31 De
cember 2022 280 (14 9 ) 640 5,02 1 (12 9 ) 5,66 3 207 7 5, 87 7
1. Other movements include the transfer of (£1 7 m) previously recognised in the foreign currency translation reserve (which is part of Other reserves) to
Retained earnings. In prior years we have considered the functional currency of an intermediate subsidiary holding the Group’s investment in HDFC Life to be
US Dollars. We now consider that the functional currency should have been GBP, resulting in the current period transfer between reserves. Prior periods have
not been restated as the impact on prior periods is not considered material. There is no impact on net assets for any period presented.
160 abrdn.com Annual report 2022
Sh
are
capital
Shares
held by
trusts
Share
premium
reserve
Retained
earnings
Other
reserves
Total equity
attributable
to equity
shareholders
of abrdn plc
Other
equity
Non-
controlling
interests -
ordinary
shares
Total
equity
Notes £m £m £m £m £m £m £m £m £m
1 January 2021 306
(170 )
Profit for the year – – – 99 4 – 994 – 1 995
Other comprehensive income
for the year
Total comprehensive income for
the year 26,27 – –
Issue of share capital 24 – – – – – – – – –
Issue of other equity 28 – – – – – – 207 – 20 7
Dividends paid on ordinary
shares 12
(3 08 )
(3 08 )
Share buyback 24, 26, 27 (1 ) – – – 1 – – – –
Other movements in non-
controlling interests in the year 28 – – – 6
Reserves credit for employee
share-based payments 27
Transfer to retained earnings for
vested employee share-based
payments 26,27 – – – 36 (3 6 )
Shares acquired by employee
trusts 25
(4 1 )
Shares distributed by employee
and other trusts and related
dividend equivalents 25, 26 – 40 – (42 ) – (2 ) – – (2 )
31 December 2021 305
(171
)
T
he Notes on pages 163 to 264 are an integral part of these consolidated financial statements.
161abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
Consolidated statement of cash flows
For the year ended 31 December 2022
2022 2021
Notes £m £m
Cash flows from operating activities
(Loss)/profit before tax (615 ) 1,115
Change in operating assets 38
Change in operating liabilities 38
(72 5 ) (209 )
Other non-cash and non-operating items 38
Dividends received from associates and joint ventures 14 – 15
Taxation paid
1
(36 ) (22 )
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
(21 ) (12 )
Acquisition of subsidiaries and unincorporated businesses net of cash acquired 1(b)
(1, 378 ) (145 )
Disposal of subsidiaries net of cash disposed of 38
Acquisition of investments in associates and joint ventures 14
(20 ) (11 )
Proceeds in relation to contingent consideration
2
37 18 54
Payments in relation to contingent consideration 37
(7 )
(28 )
Disposal of investments in associates and joint ventures 1(c)
Taxation paid on disposal of investments in associates and joint ventures
1
(33 )
Purchase of financial investments
(29 7 )
(368 )
Proceeds from sale or redemption of financial investments 17
Taxation paid on sale or redemption of financial investments
1
(28 ) –
Prepayment in respect of potential acquisition of customer contracts 1(c)(iii)
Acquisition of intangible assets
(6 ) –
Net cash flows from investing activities
(86 ) 755
Cash flows from financing activities
Proceeds from issue of perpetual subordinated notes – 208
Repayment of subordinated liabilities 30
(92 ) –
Payment of lease liabilities – principal
(46 ) (27 )
Payment of lease liabilities - interest
(6 ) (6 )
Shares acquired by trusts
(46 ) (41 )
Interest paid on subordinated liabilities and other equity
(34 ) (28 )
Other interest paid
(2 ) –
Cash received relating to collateral held in respect of derivatives hedging
subordinated liabilities
Share buyback 24
(30 2 ) (41 )
Ordinary dividends paid 12
(30 7 ) (308 )
Net cash flows from financing activities
(76 1 )
(243 )
Net (decrease)/increase in cash and cash equivalents (73 7 ) 526
Cash and cash equivalents at the beginning of the year 1,87 5 1,358
Effects of exchange rate changes on cash and cash equivalents 28 (9 )
Cash and cash equivalents at the end of the year
22 1,16 6 1,875
Supplemental disclosures on cash flows from operating activities
Interest paid – 1
Interest received
Dividends received 110 122
Rental income received on investment property
1. Total taxation paid was £64 m in 2022 (2021: £55 m).
2. Proceeds in relation to contingent consideration for the year ended 31 December 2021 included £34 m in relation to discontinued operations (2022: £nil).
The Notes on pages 163 to 264 are an integral part of these consolidated financial statements.
162 abrdn.com Annual report 2022
163abrdn.comAnnual report 2022
FINANCIAL INFORMATION
164 abrdn.com Annual report 2022
165abrdn.comAnnual report 2022
FINANCIAL INFORMATION
166 abrdn.com Annual report 2022
167abrdn.comAnnual report 2022
FINANCIAL INFORMATION
168 abrdn.com Annual report 2022
169abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
170 abrdn.com Annual report 2022
171abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
172 abrdn.com Annual report 2022
173abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
174 abrdn.com Annual report 2022
175abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
176 abrdn.com Annual report 2022
177abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
178 abrdn.com Annual report 2022
179abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
180 abrdn.com Annual report 2022
181abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
182 abrdn.com Annual report 2022
183abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
184 abrdn.com Annual report 2022
185abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
186 abrdn.com Annual report 2022
187abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
188 abrdn.com Annual report 2022
189abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
190 abrdn.com Annual report 2022
191abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
192 abrdn.com Annual report 2022
193abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
194 abrdn.com Annual report 2022
195abrdn.comAnnual report 2022
FINANCIAL INFORMATION
196 abrdn.com Annual report 2022
197abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
198 abrdn.com Annual report 2022
199abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
200 abrdn.com Annual report 2022
201abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
202 abrdn.com Annual report 2022
203abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
204 abrdn.com Annual report 2022
205abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
206 abrdn.com Annual report 2022
207abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
208 abrdn.com Annual report 2022
209abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
210 abrdn.com Annual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
212 abrdn.com Annual report 2022
213abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
214 abrdn.com Annual report 2022
215abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
216 abrdn.com Annual report 2022
217abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
218 abrdn.com Annual report 2022
219abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
220 abrdn.com Annual report 2022
221abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
222 abrdn.com Annual report 2022
223abrdn.comAnnual report 2022
FINANCIAL INFORMATION
2070 2120208020602050
224 abrdn.com Annual report 2022
225abrdn.comAnnual report 2022
FINANCIAL INFORMATION
226 abrdn.com Annual report 2022
227abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
228 abrdn.com Annual report 2022
229abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
230 abrdn.com Annual report 2022
231abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
232 abrdn.com Annual report 2022
233abrdn.comAnnual report 2022
FINANCIAL INFORMATION
234 abrdn.com Annual report 2022
235abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
236 abrdn.com Annual report 2022
237abrdn.comAnnual report 2022
FINANCIAL INFORMATION
238 abrdn.com Annual report 2022
239abrdn.comAnnual report 2022
FINANCIAL INFORMATION
240 abrdn.com Annual report 2022
241abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
242 abrdn.com Annual report 2022
243abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
244 abrdn.com Annual report 2022
245abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
246 abrdn.com Annual report 2022
247abrdn.comAnnual report 2022
FINANCIAL INFORMATION
248 abrdn.com Annual report 2022
249abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
250 abrdn.com Annual report 2022
251abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
252 abrdn.com Annual report 2022
253abrdn.comAnnual report 2022
FINANCIAL INFORMATION
254 abrdn.com Annual report 2022
255abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
256 abrdn.com Annual report 2022
257abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
258 abrdn.com Annual report 2022
259abrdn.comAnnual report 2022
FINANCIAL INFORMATION
260 abrdn.com Annual report 2022
261abrdn.comAnnual report 2022
FINANCIAL INFORMATION
262 abrdn.com Annual report 2022
263abrdn.comAnnual report 2022
FINANCIAL INFORMATION
7. Group financial statements continued
264 abrdn.com Annual report 2022
8. Company financial statements
Company statement of financial position
As at 31 December 2022
2022 2021
Notes £m £m
Assets
Investments in subsidiaries A 4,482 5,065
Investments in associates and joint ventures B
196 206
Deferred tax assets N
143 113
Loans to subsidiaries C
110 70
Derivative financial assets C
85 8
Equity securities and interests in pooled investment funds C
709 1,187
Debt securities C
211 227
Receivables and other financial assets C
48 30
Other assets F
48 83
Cash and cash equivalents C
27 20
Total assets
6,059 7,009
Equity
Share capital G 280 305
Shares held by trusts H
(145) (167)
Share premium reserve G
640 640
Retained earnings I
Brought forward retained earnings
3,301 2,631
(Loss)/profit for the year attributable to equity shareholders of abrdn plc
1
(402) 990
Other movements in retained earnings 766 (320)
Total retained earnings
3,665 3,301
Other reserves J 485 1,856
Equity attributable to equity shareholders of abrdn plc
4,925 5,935
Other equity K 207 207
Total equity 5,132 6,142
Liabilities
Subordinated liabilities L
621 644
Derivative financial liabilities D 1 –
Other financial liabilities L
272 177
Provisions P
33 35
Other liabilities P – 11
Total liabilities
927 867
Total equity and liabilities 6,059 7,009
1. The Company’s total loss for the year was £391m (2021: profit of £990m) of which a profit of £11m was attributable to other equity holders (2021: £nil).
The financial statements on pages 265 to 278 were approved by the Board and signed on its behalf by the following
Directors:
Sir Douglas Flint Stephanie Bruce
Chairman Chief Financial Officer
28 February 2023 28 February 2023
Company registered number: SC286832
The Notes on pages 268 to 278 are an integral part of these financial statements.
265abrdn.comAnnual report 2022
FINANCIAL INFORMATION
8. Company financial statements continued
Company statement of changes in equity
For the year ended 31 December 2022
Share capital
Shares held by
trusts
Share
premium
reserve
Retained
earnings
Other
reserves
Total equity
attributable to
equity
shareholders
of abrdn plc Other equity Total equity
2022 Notes £m £m £m £m £m £m £m £m
1 January 305 (167) 640 3,301 1,856 5,935 207 6,142
Loss for the year – – – (402) – (402) 11 (391)
Other comprehensive
income for the year
– – – – 5 5 – 5
Total comprehensive income
for the year
– – – (402) 5 (397) 11 (386)
Interest paid on other equity K – – – – – – (11) (11)
Dividends paid on ordinary
shares I
– – – (307) – (307) – (307)
Share buyback G
(25) – – (302) 25 (302) – (302)
Cancellation of the capital
redemption reserve
J
– – – 1,059 (1,059) – – –
Reserves credit for employee
share-based payment J
– – – – 24 24 – 24
Transfer to retained earnings
for vested employee share-
based payment J
– – – 63 (63) – – –
Transfer between reserves
on disposal of subsidiaries
J
– – – 1 (1) – – –
Transfer between reserves
on impairment of subsidiaries J
– – – 302 (302) – – –
Shares acquired by
employee trusts H
– (46) – – – (46) – (46)
Shares distributed by
employee and other trusts
and related dividend
equivalents
H
– 68 – (69) – (1) – (1)
Other movements I – – – 19 – 19 – 19
31 December
280 (145) 640 3,665 485 4,925 207 5,132
The Notes on pages 268 to 278 are an integral part of these financial statements.
266 abrdn.com Annual report 2022
Share capital
Shares held
by trusts
Share
premium
reserve
Retained
earnings
Other
reserves
Total equity
attributable
to equity
shareholders
of abrdn plc
Other equity Total equity
2021 Notes £m £m £m £m £m £m £m £m
1 January 306 (161) 640 2,631 1,842 5,258 – 5,258
Profit for the year – – – 990 – 990 – 990
Other comprehensive
income for the year – – – – 6 6 – 6
Total comprehensive income
for the year
– – – 990 6 996 – 996
Issue of other equity K – – – – – – 207 207
Dividends paid on ordinary
shares I – – – (308) – (308) – (308)
Share buyback G (1) – – – 1 – – –
Reserves credit for employee
share-based payment J – – – – 43 43 – 43
Transfer to retained earnings
for vested employee share-
based payment J – – – 36 (36) – – –
Shares acquired by
employee trusts
H – (52) – – – (52) – (52)
Shares distributed by
employee and other trusts
and related dividend
equivalents H – 46 – (48) – (2) – (2)
31 December 305 (167) 640 3,301 1,856 5,935 207 6,142
The Notes on pages 268 to 278 are an integral part of these financial statements.
267abrdn.comAnnual report 2022
FINANCIAL INFORMATION
8. Company financial statements continued
Company accounting policies
(a) Basis of preparation
These separate financial statements are presented as required by the Companies Act 2006. The Company meets the
definition of a qualifying entity under Application of Financial Reporting Requirements 100 as issued by the Financial
Reporting Council. Accordingly, the financial statements for period ended 31 December 2022 have been prepared in
accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) as issued by the Financial
Reporting Council.
The financial statements have been prepared on a going concern basis and under the historical cost convention, as
modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through
profit or loss (FVTPL).
As permitted by FRS 101, the Company has taken advantage of the following disclosure exemptions available under that
standard:
– A cash flow statement and related notes.
– Capital management.
– Effect of IFRSs issued but not effective.
– Related party transactions with wholly owned subsidiaries.
As equivalent disclosures are given in the consolidated financial statements, we have also applied the disclosure
exemptions for share based payments and financial instruments.
The principal accounting policies adopted are the same as those given in the consolidated financial statements, together
with the Company specific policies set out below. These accounting policies have been consistently applied to all financial
reporting periods presented in these financial statements.
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its own
income statement in these financial statements. The auditors’ remuneration for audit and other services is disclosed in Note
7 to the consolidated financial statements. The Company has no employees.
(i) Investment in subsidiaries, associates and joint ventures
The Company has certain subsidiaries which are investment vehicles such as open-ended investment companies, unit
trusts and limited partnerships whose primary function is to generate capital or income growth through holding
investments. This category of subsidiary is held at FVTPL since they are managed on a fair value basis.
Investments in subsidiaries (other than those measured at FVTPL), associates (other than those measured at FVTPL) and
joint ventures are initially recognised at cost and subsequently held at cost less any impairment charge. An impairment
charge is recognised when the carrying amount of the investment exceeds its recoverable amount. Any gain or loss on
disposal of a subsidiary, associate or joint venture is recognised in profit for the year.
Distributions received of non-cash assets, including investments in subsidiaries, are recognised at fair value in the balance
sheet and as dividends in specie in the income statement.
268 abrdn.com Annual report 2022
(ii) Critical accounting estimates and judgements in applying accounting policies
The preparation of financial statements requires management to make estimates and assumptions and exercise
judgements in applying the accounting policies that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses arising during the year. Estimates and
judgements are continually evaluated and based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
The areas where judgements have the most significant effect on the amounts recognised in the Company financial
statements are as follows:
Financial statement area Critical judgements in applying accounting policies Related notes
Investments in subsidiaries held at cost
Given that the net assets attributable to
shareholders of abrdn plc at 31 December
2022 were higher than the market
capitalisation of the Company judgement was
required to determine for which subsidiaries
this was considered an indicator of impairment
Note A
The areas where assumptions and other sources of estimation uncertainty at the end of the reporting period have a
significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial
year are as follows:
Financial statement area Critical accounting estimates and assumptions Related notes
Investments in subsidiaries held at cost Determination of the recoverable amount Note A
269abrdn.comAnnual report 2022
FINANCIAL INFORMATION
8. Company financial statements continued
Notes to the Company financial statements
A. Investments in subsidiaries
2022 2021
Notes
£m £m
Investments in subsidiaries measured at cost 4,312 3,737
Investments in subsidiaries measured at FVTPL C 170 1,328
Investments in subsidiaries
4,482 5,065
2022 2021
£m £m
At 1 January 5,065 4,013
Investment into existing subsidiaries measured at cost 139 210
Acquisition of subsidiaries at cost
1,380 –
Acquisition of subsidiaries via dividend in specie – 4
Disposal of subsidiaries measured at cost
(18) –
Impairment of subsidiaries measured at cost
(927) (45)
Acquisition of subsidiaries at FVTPL
2 884
Disposal of subsidiaries at FVTPL (1,158) (2)
Gains/(losses) on subsidiaries at FVTPL
(1) 1
At 31 December
4,482 5,065
Details of the Company’s subsidiaries are given in Note 45 of the Group financial statements.
(a) Acquisitions
During 2022, the Company made the following acquisitions of subsidiaries measured at cost:
– The Company acquired 100% of the issued share capital of Antler Holdco Limited (Antler), the parent company for the
interactive investor (ii) group of companies for a cash consideration of £1,380.2m. Further details are provided in Note
1(b)(i) of the Group financial statements. The Company’s consideration was lower than the £1,485m cash
consideration recognised in the Group financial statements as it did not include funding of £118.8m provided to Antler
to facilitate the acquisition of minority interests in Interactive Investor Limited (IIL) prior to the acquisition of Antler. The
Company’s consideration included transaction costs of £14m which were included in Restructuring and corporate
transaction expenses in the Group Consolidated income statement.
– The Company subsequently increased its investment in Antler by £139.2m through the purchase of 139,163,986
ordinary shares.
– The Company then acquired IIL via a dividend in specie from Antler and recognised IIL at an amount of £1,512m, with
the carrying value of Antler reduced correspondingly to £7m and therefore no impact on investment in subsidiaries in
the Company Statement of financial position. The dividend in specie was recognised at £nil in the Company’s total
comprehensive income for the year due to the reduction in the Antler carrying value.
During 2021, the Company made the following acquisitions of subsidiaries measured at cost:
– The Company increased its investment in abrdn Financial Planning Limited (aFPL) through the purchase of 40,000,000
ordinary shares for a cash consideration of £40m.
– The Company increased its investment in Aberdeen Asset Management PLC (now renamed abrdn Holdings Limited)
by £165.3m through the purchase of 1,031,250 ordinary shares for a cash consideration of £3.3m, the purchase of
21,350,600 ordinary shares for a cash consideration of £68.3m, the purchase of 1,718,750 ordinary shares for a cash
consideration of £5.5m and the purchase of 27,562,500 ordinary shares for a cash consideration of £88.2m.
– The Company increased its investment in Aberdeen Corporate Services Limited through the purchase of 3,385
ordinary shares for a cash consideration of £3.4m.
– The Company acquired Focus Business Solutions (FBS) via a dividend in specie from Focus Solutions Group Limited and
recognised this subsidiary at an amount of £3.8m. The Company further increased its investment in FBS through the
purchase of 150,000,000 ordinary shares for a cash consideration of £1.5m.
See Section (d) below for details on investments in subsidiaries at FVTPL.
(b) Disposals
During 2022, the Company made the following disposals of subsidiaries measured at cost:
– Standard Life Oversea Holding (SLOH) was liquidated. Prior to liquidation, the carrying value of the Company’s interest
in SLOH was £18m and the Company received final liquidation proceeds of £20m in the form of a distribution in specie
of its intercompany balance due to SLOH. Refer Note J for details of the transfer from the merger reserve to retained
earnings in relation to the disposal of SLOH.
270 abrdn.com Annual report 2022
(c) Impairment
The Company’s net assets attributable to shareholders of abrdn plc at 31 December 2022 of £4.9bn are higher than the
Company’s market capitalisation of £3.8bn. This, together with lower projected future asset management earnings, was
considered to be an indicator of impairment of the Company’s investment in its asset management subsidiaries, abrdn
Holdings Limited (formerly named Aberdeen Asset Management PLC (aHL)) and abrdn Investments (Holdings) Limited
(aIHL)). All other investments in subsidiaries (with the exception of aFPL and abrdn Client Management Limited (aCM)
discussed below) were supported by financial assets, or other relevant analysis.
Asset management subsidiaries aHL and aIHL
The Company’s investment in its subsidiaries, aHL and aIHL were impaired during 2022 by £847m (2021: £nil) and £51m
(2021: £nil) respectively. The impairments primarily resulted from lower future revenue projections and further work being
required to reduce Investments costs given this level of revenue. The lower future revenue projections primarily resulted
from the impact of lower equity market levels during 2022 and forecast equity market falls in 2023 on assets under
management, net outflows in 2022 particularly in the equity asset class and lower forecasts of net inflows in future periods
reflecting both macroeconomic conditions and business performance, and the expected reduction in Phoenix revenue as
a result of certain active equity and fixed income strategies moving to lower yielding passive quantitative strategies and
related pricing changes. The impairment in aIHL also reflects the impact of dividends paid to abrdn plc of £286m during
2022 and fair value movements relating to the interest in HDFC Asset Management held by its subsidiary, abrdn Investment
Management Limited.
The recoverable amount of aHL which is its fair value less costs of disposal (FVLCD) at 31 December 2022 was £1,258m.
The approach and key assumptions in determining the FVLCD of both aHL and aIHL are primarily the same as used in the
impairment review for asset management goodwill set out in Note 13 of the Group financial statements. The asset
management group of cash generating units overseas business is performed by entities within the aHL group and the
asset management group of cash generating units UK business is split between the aHL group and the aIHL group. The
recoverable amount for aHL also includes the value of its subsidiaries, associates and joint ventures not included in the asset
management group of cash generating units. These primarily include Finimize Limited (Finimize), Archax Holdings Limited
and VMUTM. Details of the valuation of Finimize at 31 December 2022 is set out in Note 13 of the Group financial
statements.
The recoverable amount of aIHL which is its FVLCD at 31 December 2022 was £988m. The recoverable amount for aIHL
also includes the value of its subsidiaries not included in the asset management group of cash generating units. These
primarily include abrdn Capital Limited (aCL). The valuation of aCL is based on FVLCD and is based on an estimated price
from the current sale process (refer Note 21 of the Group financial statements). The recoverable amount also includes the
fair value of the interest in HDFC Asset Management, which was £477m at 31 December 2022 based on the year end share
price of this listed investment.
The recoverable amounts for aHL and aIHL are level 3 measurements as they are measured using inputs which are not
based on observable market data.
Sensitivities of key assumptions
The business plan projections used to determine the future asset management earnings are based on macroeconomic
forecasts including future equity market and interest rate levels, and forecast levels of net flows, fee revenue yields by asset
class and expenses. For aIHL, fee revenue yield assumptions are adjusted to take into account an expected contraction in
yield on Phoenix assets. Market assumptions assume equity market falls in 2023 with recovery during 2024 and 2025. The
projections are therefore sensitive to these assumptions, and in particular future expected market levels. Given current
macroeconomic uncertainties a 25% reduction in forecast asset management cash flows has been provided as a
sensitivity.
A post tax discount rate sensitivity of 2% has been provided taking into account the impact of these market uncertainties
on interest rates.
For aIHL a 25% reduction in the value of HDFC AMC has also been provided as a sensitivity given the inherent risk of equity
market fluctuations.
The following table shows the consequence of these illustrative downside sensitivities of key assumptions on the carrying
amount of the aHL and aIHL at 31 December 2022. As the year end carrying values are the recoverable amount any
downside sensitivity will lead to a further future impairment loss.
aHL
£m
aIHL
£m
25% reduction in future asset management cash flows
(273)
(64)
2% increase in post tax discount rate
(159)
(46)
25% reduction in the value of HDFC Asset Management (aIHL only)
N/A
(119)
271abrdn.comAnnual report 2022
FINANCIAL INFORMATION
8. Company financial statements continued
For the year ended 31 December 2021, the recoverable amount of aHL was determined based on value in use and based
on this assessment no impairment of aHL was required at 31 December 2021. The reason for the change in valuation
approach in 2022 was that, at 31 December 2022, FVLCD was assessed by management as being higher than VIU. The VIU
is significantly reduced by the IFRS requirement to add back certain staff and property expense savings to management’s
expectation of the level of future operating expenses, where these expense savings require provisions to be made in future
years.
aFPL
The Company’s investment in its subsidiary aFPL was impaired during 2022 by £25m (2021: £45m).
The recoverable amount of aFPL which is its FVLCD at 31 December 2022 was £85m (2021: £110m). The FVLCD
considered a number of valuation approaches, with the primary approach being a multiples approach based on price to
revenue and price to assets under advice (AUAdv). Multiples were based on recent transactions, adjusted to take into
account profitability where appropriate, and were benchmarked against trading multiples for aFPL’s peer companies.
Revenue and AUAdv were based on 2022 results. The expected cost of disposal was based on past experience of previous
transactions. This is a level 3 measurement as it is measured using inputs which are not based on observable market data.
The impairment resulted from the impact of macroeconomic conditions, markets and level of 2022 profitability and
outflows on valuation expectations for the business. As the year end carrying value is the recoverable amount any
downside sensitivity will lead to a further future impairment loss. A 20% reduction in recurring revenue and AUAdv would
result in a further impairment of £17m. A 20% reduction in market transaction multiples, adjusted to be appropriate to the
abrdn financial planning business, would result in a further impairment of £17m.
The recoverable amount of aFPL at 31 December 2021 of £110m was also based on FVLCD which similarly considered a
number of valuation approaches, with the primary approach being a multiples approach based on price to revenue and
price to AUAdv.
aCM
The Company’s investment in its subsidiary aCM was impaired during 2022 by £4m. The impairment resulted from the
payment of a dividend from aCM to the Company. The carrying amount of the Company’s investment in aCM is £nil (2021:
£4m).
IIL
No impairment was recognised on the Company’s investment in IIL in 2022 and there were no indicators of impairment at
31 December 2022.
The recoverable amount of IIL was determined at 31 December 2022 based on FVLCD and used the same approach and
key assumptions as used in the impairment review for interactive investor goodwill set out in Note 13 of the Group financial
statements. The basis for sensitivities of key assumptions is also set out in Note 13 of the Group financial statements. The
impact of these illustrative sensitivities on the carrying amount of IIL at 31 December 2022 is as follows:
Impact on carrying amount at 31 December 2022 £m
20% reduction in forecast post tax adjusted earnings
(127)
25% reduction in market multiple
(210)
(d) Investments in subsidiaries at FVTPL
Investments in subsidiaries at FVTPL, valued at £170m (2021: £1,328m), relate to holdings in funds over which the Company
has control. This decrease primarily relates to lower holdings in a liquidity fund.
B. Investments in associates and joint ventures
2022 2021
£m £m
Investment in associates measured at cost – 10
Investment in joint venture measured at cost 196 196
Investments in associates and joint ventures
196 206
272 abrdn.com Annual report 2022
(a) Investment in associates
The Company has an interest of 25.3% (2021: 25.3%) in Tenet Group Limited (Tenet), a company incorporated in England
and Wales which is measured at cost less impairment. During the year ended 31 December 2022, the Company increased
its interest in Tenet by £3.8m. The Company also recognised an impairment of £14m in its interest during 2022. The
impairment resulted from losses incurred by the business during the year and the impact of this level of profitability on
valuation expectations. The carrying amount of the Company’s investment in Tenet is £nil (2021: £10m).
During the year ended 31 December 2021, the Company judged its investment in Phoenix Group Holdings plc (Phoenix)
was no longer classified as an associate. Further details are provided in Note 14 of the Group Financial Statements. The
Company’s 14.4% shareholding in Phoenix was therefore reclassified from an investment in associate measured at cost
less impairment to equity securities and interests in pooled investment funds measured at fair value. The fair value on 22
February 2021 was £1,023m, which was higher than the previous carrying value as an associate of £1,010m. A
reclassification gain of £13m was therefore recognised for the year ended 31 December 2021.
(b) Investment in joint ventures
The Company has a 50% (2021: 50%) interest in Heng An Standard Life Insurance Company Limited (HASL), a company
incorporated in China. Further details on this joint venture are provided in Note 14 of the Group financial statements.
C. Financial investments
Fair value through
profit or loss
Derivative financial
instruments used for hedging Amortised cost Total
2022 2021 2022 2021 2022 2021 2022 2021
Notes £m £m £m £m £m £m £m £m
Investments in subsidiaries
measured at FVTPL
A
170 1,328 – – – – 170 1,328
Loan to subsidiaries – – – – 110 70 110 70
Derivative financial assets D
– – 85 8 – – 85 8
Equity securities and interests
in pooled investment funds
709 1,187 – – – – 709 1,187
Debt securities
1 1 – – 210 226 211 227
Receivables and other
financial assets E
– – – – 48 30 48 30
Cash and cash equivalents
– – – – 27 20 27 20
Total
880 2,516 85 8 395 346 1,360 2,870
The amount of debt securities expected to be recovered or settled after more than 12 months is £1m (2021: £62m). The
amount of loans to subsidiaries expected to be recovered or settled after more than 12 months is £110m (2021: £70m).
The amount of equity securities and interests in pooled investment funds expected to be recovered or settled after more
than 12 months is £25m (2021: £708m).
Under IFRS 9 the Company calculates expected credit losses (ECL) on financial assets which are measured at amortised
cost (refer to Note 35 (c) of the Group financial statements), including loans to subsidiaries (which are unrated). At
31 December 2022 the Company does not hold financial assets at amortised cost that it regards as credit-impaired or for
which it considers the probability of default would result in material expected credit losses. The expected credit losses
recognised were less than £1m (2021: less than £1m). In making this assessment the Company has considered if any
evidence is available to indicate the occurrence of an event which would result in a detrimental impact on the estimated
future cash flows of these assets.
D. Derivative financial instruments
The Company uses derivative financial instruments in order to reduce the risk from potential movements in foreign
exchange rates.
2022 2021
Contract
amount
Fair value
assets
Fair value
liabilities
Contract
amount
Fair value
assets
Fair value
liabilities
£m £m £m £m £m £m
Cash flow hedges 623 85 – 554 8 –
Foreign exchange forwards 48 – 1 64 – –
Derivative financial instruments
671 85 1 618 8 –
The derivative asset of £85m (2021: derivative asset of £8m) is expected to be settled after more than 12 months.
On 18 October 2017, the Company issued subordinated notes with a principal amount of US $750m. In order to manage
the foreign exchange risk relating to the principal and coupons payable on these notes the Company entered into
a cross-currency swap which is designated as a hedge of future cash flows.
273abrdn.comAnnual report 2022
FINANCIAL INFORMATION
8. Company financial statements continued
The maturity profile of the contractual undiscounted cash flows in relation to derivative financial instruments is as follows:
Within
1 year
2-5
years
6-10
years
11-15
years Total
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
£m £m £m £m £m £m £m £m £m £m
Cash inflows
Cash flow hedges 26 24 106 94 637 589 – – 769 707
Foreign exchange forwards
47 55 – – – – – – 47 55
Total
73 79 106 94 637 589 – – 816 762
Cash outflows
Cash flow hedges
(18) (18) (91) (73) (578) (596) – – (687) (687)
Foreign exchange forwards
(48) (55) – – – – – – (48) (55)
Total
(66) (73) (91) (73) (578) (596) – – (735) (742)
Net derivative financial
instruments cash flows
7 6 15 21 59 (7) – – 81 20
E. Receivables and other financial assets
2022 2021
£m £m
Amounts due from related parties 45 14
Other financial assets 3 16
Total receivables and other financial assets
48 30
The carrying amounts disclosed above reasonably approximate the fair values at the year end.
Receivables and other financial assets of £nil (2021: £nil) are expected to be recovered after more than 12 months.
F. Other assets
2022 2021
£m £m
Prepayments 43 56
Other 5 27
Other assets
48 83
The amount of Other assets which are expected to be recovered after more than 12 months is £20m (2021: £48m).
Prepayments of £43m (2021: £56m) relate to the Group’s future purchase of certain products in the Phoenix Group’s
savings business offered through abrdn’s Wrap platform together with the Phoenix Group’s trustee investment plan
business for UK pension scheme clients (refer Note 1(c)(iii) of the Group financial statements). Other includes £5m (2021:
£27m) in respect of amounts due from related parties.
G. Share capital and share premium
Details of the Company’s share capital and share premium are given in Note 24 of the Group financial statements including
details of the share buyback.
H. Shares held by trusts
Shares held by trusts relates to shares in abrdn plc that are held by the abrdn Employee Benefit Trust (formerly named the
Standard Life Aberdeen Employee Benefit Trust) (abrdn EBT) and Standard Life Employee Trust (ET). Further details of
these trusts are provided in Note 25 of the Group financial statements.
I. Retained earnings
Details of the dividends paid on the ordinary shares by the Company are provided in Note 12 of the Group financial
statements. Note 12 also includes information regarding the final dividend proposed by the Directors for the year ended
31 December 2022.
Refer Note J for details of the transfers from the capital redemption reserve and the merger reserve to retained earnings
during the year ended 31 December 2022.
Retained earnings includes a movement of £19m relating to the interactive investor employee benefit trust becoming part
of the abrdn employee benefit trust sponsored by the Company.
274 abrdn.com Annual report 2022
J. Movements in other reserves
The following tables show the movements in other reserves during the year:
Merger reserve
Equity compensation
reserve
Special reserve
Capital
redemption
reserve
Cash flow
hedges
Total
2022 £m £m £m £m £m £m
At 1 January 578 86 115 1,059 18 1,856
Fair value gains on cash flow hedges – – – – 85 85
Realised gains on cash flow hedges
transferred to income statement
– – – – (78) (78)
Share buyback
– – – 25 – 25
Cancellation of the capital redemption
reserve
– – – (1,059) – (1,059)
Reserves credit for employee share-based
payments
– 24 – – – 24
Transfer to retained earnings for vested
employee share-based payments
– (63) – – – (63)
Transfer between reserves on disposal of
subsidiaries
(1) – – – – (1)
Transfer between reserves on impairment of
subsidiaries
(302) – – – – (302)
Tax effect of items that may be reclassified
subsequently to profit or loss
– – – – (2) (2)
At 31 December
275 47 115 25 23 485
Merger reserve
Equity compensation
reserve Special reserve
Capital
redemption
reserve
Cash flow
hedges Total
2021 £m £m £m £m £m £m
At 1 January 578 79 115 1,058 12 1,842
Fair value gains on cash flow hedges – – – – 19 19
Realised gains on cash flow hedges
transferred to income statement
– – – – (10) (10)
Share buyback – – – 1 – 1
Reserves credit for employee share-based
payments – 43 – – – 43
Transfer to retained earnings for vested
employee share-based payments
– (36) – – – (36)
Tax effect of items that may be reclassified
subsequently to profit or loss – – – – (3) (3)
At 31 December 578 86 115 1,059 18 1,856
Following the impairment loss recognised in 2022 on the Company’s investments in aHL and aIHL (refer Note A), £302m
(2021: £nil) was transferred from the merger reserve to retained earnings.
During 2022, £25m (2021: £1m) was recognised in the capital redemption reserve for the share buyback (refer Note 24 of
the Group financial statements).
On 1 July 2022, the Company’s capital redemption reserve at this date was cancelled in accordance with section 649 of
the Companies Act 2006 resulting in a transfer of £1,059m to retained earnings.
K. Other Equity
5.25 % Fixed Rate Reset Perpetual Subordinated Contingent Convertible Notes
During the year ended 31 December 2021, the Company issued £210m of 5.25% Fixed Rate Reset Perpetual Subordinated
Contingent Convertible Notes (the Notes). The Notes were classified as other equity and initially recognised at £207m (the
proceeds received less issuance costs of £3m). Refer Note 28 (a) of the Group financial statements for further details.
The profit for the year attributable to other equity was £11m (2021: £nil).
275abrdn.comAnnual report 2022
FINANCIAL INFORMATION
8. Company financial statements continued
L. Financial liabilities
Designated as at fair value through
profit or loss Amortised cost Total
2022 2021 2022 2021 2022 2021
Notes £m £m £m £m £m £m
Subordinated liabilities M – – 621 644 621 644
Derivative financial liabilities D 1 - - - 1 -
Other financial liabilities O
14 9 258 168 272 177
Total
15 9 879 812 894 821
M. Subordinated liabilities
2022 2021
Principal
amount
Carrying
value
Principal
amount
Carrying
value
Subordinated notes:
4.25% US Dollar fixed rate due 30 June 2028 $750m £621m $750m £552m
5.5% Sterling fixed rate due 4 December 2042
– – £92m £92m
Total subordinated liabilities
£621m £644m
The principal amount of the subordinated liabilities is expected to be settled after more than 12 months. There is no
accrued interest on the subordinated liabilities at 31 December 2022 (2021: less than £1m).
The 5.5% Sterling fixed rate due 4 December 2042 subordinated notes were redeemed during the year ended 31
December 2022.
Further information on the subordinated liabilities including the terms and conditions and the redemption is given in Note 30
of the Group financial statements.
276 abrdn.com Annual report 2022
N. Deferred tax assets and liabilities
2022 2021
£m £m
Deferred tax assets 143 113
The amount of deferred tax assets expected to be recovered or settled after more than 12 months are £143m
(2021: £113m).
Recognised deferred tax
2022 2021
£m £m
Deferred tax assets comprise:
Losses carried forward 151 120
Unrealised losses on cash flow hedges
– -
Gross deferred tax assets
151 120
Less: Offset against deferred tax liabilities (8) (7)
Deferred tax assets 143 113
Deferred tax liabilities comprise:
Unrealised gains on investments – 1
Unrealised gains on cash flow hedges
8 6
Gross deferred tax liabilities
8 7
Less: Offset against deferred tax assets (8) (7)
Deferred tax liabilities – –
Net deferred tax asset at 31 December 143 113
Movements in net deferred tax assets comprise:
At 1 January 113 77
Amounts credited to profit or loss
32 39
Amounts charged to other comprehensive income
(2) (3)
At 31 December
143 113
The deferred tax assets and liabilities recognised are in respect of unused tax losses and unrealised gains on cash flow
hedges respectively and include the impact of the revaluation of these due to the future impact of the increase in the UK
Corporation Tax rate to 25% from 1 April 2023. The deferred tax assets are recognised to the extent that it is probable that
the losses will be capable of being offset against future taxable profits (refer Note 9(c)(i) of the Group financial
statements).
There is no unrecognised deferred tax relating to temporary timing differences associated with investments in subsidiaries,
branches and associates and interests in joint arrangements (2021: none).
Movements in deferred tax assets and liabilities
Losses carried forward
Unrealised gains on
investments
Unrealised gains or losses on
cash flow hedges
Net deferred tax asset
£m £m £m £m
At 1 January 2022 120 (1) (6) 113
Amounts credited to the income
statement
31 1 – 32
Tax on cash flow hedge – – (2) (2)
At 31 December 2022
151 – (8) 143
Losses carried forward
Unrealised gains on
investments
Unrealised gains or losses on
cash flow hedges
Net deferred tax asset
£m £m £m £m
At 1 January 2021 80
(1) (2)
77
Amounts credited to the income
statement 40 - - 40
Tax on cash flow hedge - -
(4) (4)
At 31 December 2021 120
(1) (6)
113
277abrdn.comAnnual report 2022
FINANCIAL INFORMATION
8. Company financial statements continued
O. Other financial liabilities
2022 2021
£m £m
Outstanding purchase of investment securities – 5
Amounts due to related parties 161 137
Collateral held in respect of derivative contracts
89 15
Contingent consideration liability
14 9
Other
8 11
Other financial liabilities
272 177
Other financial liabilities of £nil (2021: £5m) are expected to be settled after more than 12 months.
P. Provisions and other liabilities
Of Provisions of £33m (2021: £35m), £nil are expected to be settled after more than 12 months (2021: £nil).
The provisions in both 2022 and 2021 relate to separation costs. Refer Note 34 of the Group financial statements for further
information and details of the provisions.
Of Other liabilities at 31 December 2021 of £11m, £11m was expected to be settled within 12 months and was in respect of
amounts due to related parties.
Q. Contingent liabilities, contingent assets, indemnities and guarantees
(a) Legal proceedings and regulations
The Company, like other financial organisations, is subject to legal proceedings and complaints in the normal course of its
business. All such material matters are periodically reassessed, with the assistance of external professional advisers where
appropriate, to determine the likelihood of the Company incurring a liability. Where it is concluded that it is more likely than
not that a material outflow will be made a provision is established based on management’s best estimate of the amount
that will be payable. At 31 December 2022, there are no identified contingent liabilities expected to lead to a material
exposure.
(b) Indemnities and guarantees
Under the trust deed in respect of the abrdn UK Group (SLSPS) plan, ACSL, the principal employer, must pay contributions
to the pension plan as the trustees’ actuary may certify necessary. The Company has guaranteed the obligations of ACSL
in relation to this plan. In addition, the Company has guaranteed similar obligations in respect of certain other subsidiaries’
UK and Ireland defined benefit pension plans.
None of these guarantees give rise to any liabilities at 31 December 2022 (2021: none).
R. Related party transactions
(a) Key management personnel
The Directors and key management personnel of theCompany are considered to be the same as for the Group.
See Note 42 of the Group financial statements for further information.
278 abrdn.com Annual report 2022
9. Supplementary information
9.1 Alternative performance measures
We assess our performance using a variety of measures that are not defined under IFRS and are therefore termed
alternative performance measures (APMs). The APMs that we use may not be directly comparable with similarly named
measures used by other companies. We have presented below reconciliations from these APMs to the most appropriate
measure prepared in accordance with IFRS. All APMs should be read together with the consolidated income statement,
consolidated statement of financial position and consolidated statement of cash flows, which are presented in the Group
financial statements section of this report and related metrics. Adjusted operating profit excludes certain items which are
likely to be recurring such as restructuring costs, amortisation of certain intangibles, dividends from significant listed
investments and the share of profit or loss from joint ventures.
Metric used for executive remuneration in 2023. See page 107 for more information.
Definition Purpose
Adjusted operating profit
Adjusted operating profit before tax is the Group’s key APM. Adjusted operating profit
includes the results of the Group’s three growth vectors: Investments, Adviser and
Personal, along with Corporate/strategic.
It excludes the Group’s adjusted net financing costs and investment return, and
discontinued operations.
Adjusted operating profit also excludes the impact of the following items:
– Restructuring costs and corporate transaction expenses. Restructuring
includes the impact of major regulatory change.
– Amortisation and impairment of intangible assets acquired in business
combinations and through the purchase of customer contracts.
– Profit or loss arising on the disposal of a subsidiary, joint venture or equity
accounted associate.
– Change in fair value of/dividends from significant listed investments.
– Share of profit or loss from associates and joint ventures.
– Impairment loss/reversal of impairment loss recognised on investments in
associates and joint ventures accounted for using the equity method.
– Fair value movements in contingent consideration.
– Items which are one-off and, due to their size or nature, are not indicative of
the long-term operating performance of the Group.
Further details are included in Note 11 of the Group financial statements.
Adjusted operating profit reporting
provides further analysis of the
results reported under IFRS and
the Directors believe it helps to
give shareholders a fuller
understanding of the
performance of the business by
identifying and analysing adjusting
items.
Segment reporting used in
management information is
reported to the level of adjusted
operating profit.
Net operating revenue
Net operating revenue (previously named fee based revenue) includes revenue we
generate from asset management charges (AMCs), platform charges, treasury
income and other transactional charges. AMCs are earned on products such as
mutual funds, and are calculated as a percentage fee based on the assets held.
Investment risk on these products rests principally with the client, with our major indirect
exposure to rising or falling markets coming from higher or lower AMCs. Net operating
revenue is shown net of costs of sale, such as commissions and similar charges.
The revenue metric included within adjusted operating profit has been renamed from
fee based revenue to net operating revenue. For 2022 this measure is aligned to net
operating revenue as presented in the IFRS consolidated income statement. For 2021
this measure of segmental revenue excludes £28m of net operating revenue as
presented in the IFRS consolidated income statement which was classified as adjusting
items. See Note 3 of the Group financial statements for more information.
Net operating revenue is a
component of adjusted operating
profit and provides the basis for
reporting of the revenue yield
financial ratio. Net operating
revenue is also used to calculate
the cost/income ratio.
Adjusted operating expenses
Adjusted operating expenses is a component of adjusted operating profit and relates
to the day-to-day expenses of managing our business. Adjusted operating expenses
excludes restructuring and corporate transaction expenses. Adjusted operating
expenses also excludes amortisation and impairment of intangible assets acquired in
business combinations and through the purchase of customer contracts.
Adjusted operating expenses is a
component of adjusted operating
profit and is used to calculate the
cost/income ratio.
APM
R
APM
APM
R
APM
279abrdn.comAnnual report 2022
FINANCIAL INFORMATION
9. Supplementary information continued
Definition Purpose
Adjusted profit before tax
In addition to the results included in adjusted operating profit above, adjusted profit
before tax includes adjusted net financing costs and investment return.
Adjusted profit before tax is a key
input to the adjusted earnings per
share measure.
Adjusted net financing costs and investment return
Adjusted net financing costs and investment return relates to the return from the net
assets of the shareholder business, net of costs of financing. This includes the net assets
in defined benefit staff pension plans and net assets relating to the financing of
subordinated liabilities.
Adjusted net financing costs and
investment return is a component
of adjusted profit before tax.
Cost/income ratio
This is an efficiency measure that is calculated as adjusted operating expenses divided
by net operating revenue in the period.
This ratio is used by management
to assess efficiency and reported
to the Board and executive
leadership team.
Net operating revenue yield (bps)
The net operating revenue yield (previously named fee revenue yield) is calculated as
annualised net operating revenue (excluding performance fees, interactive investor
and revenue for which there are no attributable assets) divided by monthly average
fee based assets. interactive investor is excluded from the calculation of Personal and
total net operating revenue yield as fees charged for this business are primarily from
subscriptions and trading transactions.
The net operating revenue yield is
a measure that illustrates the
average margin being earned on
the assets that we manage,
administer or advise our clients on
excluding interactive investor.
Adjusted diluted earnings per share
Adjusted diluted earnings per share is calculated on adjusted profit after tax. The
weighted average number of ordinary shares in issue is adjusted during the period to
assume the conversion of all dilutive potential ordinary shares, such as share options
granted to employees.
Details on the calculation of adjusted diluted earnings per share are set out in Note 10 of
the Group financial statements.
Earnings per share is a commonly
used financial metric which can be
used to measure the profitability
and capital efficiency of a
company over time. We also
calculate adjusted diluted
earnings per share to illustrate the
impact of adjusting items on the
metric.
This ratio is used by management
to assess performance and
reported to the Board and
executive leadership team.
Adjusted capital generation
Adjusted capital generation is part of the analysis of movements in IFPR regulatory
capital. Adjusted capital generation is calculated as adjusted profit after tax less returns
relating to pension schemes in surplus and interest paid on other equity which do not
benefit regulatory capital. It also includes dividends from associates, joint ventures and
significant listed investments.
This measure aims to show how
adjusted profit contributes to
regulatory capital, and therefore
provides insight into our ability to
generate capital that is deployed
to support value for shareholders.
Adjusted diluted capital generation per share
Adjusted diluted capital generation per share is calculated as adjusted capital
generation divided by the weighted average number of diluted ordinary shares
outstanding.
This ratio is a measure used to
assess performance for
remuneration purposes.
Cash and liquid resources
Cash and liquid resources are IFRS cash and cash equivalents (netted down for
overdrafts), money market instruments and holdings in money market funds. It also
includes surplus cash that has been invested in liquid assets such as high quality
corporate bonds, gilts and pooled investment funds. Seed capital and co-investments
are excluded. Cash collateral, cash held for charitable funds and cash held in employee
benefit trusts are excluded from cash and liquid resources.
The purpose of this measure is to
demonstrate how much cash and
invested assets we hold and can
be readily accessed.
APM R
APM
APM
APM
APM
APM
APM
APM
280 abrdn.com Annual report 2022
9.1.1 Adjusted operating profit and adjusted profit
Reconciliation of adjusted operating profit and adjusted profit to IFRS profit by component
The components of adjusted operating profit are net operating revenue and adjusted operating expenses. These
components provide a meaningful analysis of our adjusted results. The table below provides a reconciliation of movements
between adjusted operating profit component measures and relevant IFRS terms.
A reconciliation of Adjusted operating expenses to the IFRS item Total administrative and other expenses, and a
reconciliation of Adjusted net financing costs and investment return to the IFRS item Net gains on financial instruments and
other income are provided in Note 2b(ii) of the Group financial statements. A reconciliation of Net operating revenue to the
IFRS item Revenue from contracts with customers is provided in Note 3 of the Group financial statements.
IFRS term IFRS
Presentation
differences
Adjusting
items
Adjusted
profit Adjusted profit term
2022 £m £m £m £m
Net operating revenue 1,456 - - 1,456 Net operating revenue
Total administrative and other
expenses
(1,919) (35) 761 (1,193)
Adjusted operating expenses
1
(463) (35) 761 263 Adjusted operating profit
Net gains or losses on financial
instruments and other income
(122) 8 104 (10)
Adjusted net financing costs and
investment return
Finance costs (29) 27 2 - N/A
Profit on disposal of interests in
associates
6 - (6) -
N/A
Share of profit or loss from
associates and joint ventures
2 - (2) -
N/A
Impairment of interests in
associates
(9) - 9 -
N/A
Loss before tax
(615) - 868 253 Adjusted profit before tax
Total tax credit 66 - (88) (22) Tax on adjusted profit
Loss for the year (549) - 780 231 Adjusted profit after tax
1. Adjusted operating expenses includes staff and other related costs of £612m compared with IFRS staff costs and other employee-related costs of £549m.
The difference primarily relates to the inclusion of contractor, temporary agency staff and recruitment and training costs of £25m (IFRS basis: Reported within
other administrative expenses) and losses on funds to hedge deferred bonus awards of £9m (IFRS basis: Reported within other net gains on financial
instruments and other income) within staff and other related costs. IFRS staff costs and other employee-related costs includes the benefit from the net
interest credit relating to the staff pension schemes of £29m (Adjusted profit basis: Reported within adjusted net financing costs and investment return).
IFRS term IFRS
Presentation
differences
Adjusting
items
Adjusted
profit Adjusted profit term
2021 £m £m £m £m
Net operating revenue 1,543 - (28) 1,515 Net operating revenue
Total administrative and other
expenses (1,556) (9) 373 (1,192) Adjusted operating expenses
(13) (9) 345 323 Adjusted operating profit
Net gains on financial instruments
and other income (183) (20) 203 -
Adjusted net financing costs and
investment return
Finance costs (30) 29 1 - N/A
Profit on disposal of subsidiaries
and other operations 127 - (127) - N/A
Profit on disposal of interests in
associates 1,236 - (1,236) - N/A
Share of profit or loss from
associates and joint ventures
(22) - 22 - N/A
Profit before tax 1,115 - (792) 323 Adjusted profit before tax
Total tax expense (120) - 94 (26) Tax on adjusted profit
Profit for the year 995 - (698) 297 Adjusted profit after tax
Presentation differences primarily relate to amounts presented in a different line item of the consolidated income
statement.
281abrdn.comAnnual report 2022
FINANCIAL INFORMATION
9. Supplementary information continued
Analysis of adjusting items
The table below provides detail of the adjusting items made in the calculation of adjusted profit before tax:
2022 2021
£m £m
Restructuring and corporate transaction expenses (214) (259)
Amortisation and impairment of intangible assets acquired in business combinations and through the
purchase of customer contracts
(494) (99)
Profit on disposal of subsidiaries and other operations - 127
Profit on disposal of interests in associates
6 1,236
Change in fair value of significant listed investments
(187) (298)
Dividends from significant listed investments
68 71
Share of profit or loss from associates and joint ventures
2 (22)
Impairment of interests in joint ventures
(9) -
Other
(40) 36
Total adjusting items including results of associates and joint ventures
(868) 792
An explanation for why individual items are excluded from adjusted profit is set out below:
- Restructuring and corporate transaction expenses are excluded from adjusted profit. Restructuring includes the
impact of major regulatory change. By highlighting and excluding these costs we aim to give shareholders a fuller
understanding of the performance of the business. Restructuring and corporate transaction expenses include costs
relating to the integration of businesses acquired and our transformation programme. Other restructuring costs
excluded from adjusted profit relate to projects which have a significant impact on the way the Group operates. Costs
are only excluded from adjusted profit where they are outwith business as usual activities and the costs would not have
been incurred had the restructuring project not taken place. For headcount related costs, where duplicate posts are
identified as a result of an integration or transformation plan, the duplicated cost will be treated as a restructuring cost
from the beginning of the process which eliminates the duplicate cost. The 2022 expenses mainly comprised of costs of
£43m (2021: £35m) in respect of specific costs to effect savings in investments, investments re-platforming, and
integration, £51m (2021: £64m) of other transformation costs such as finance and platform transformation, £66m
(2021: £65m) of other headcount reduction related costs and property restructuring, £7m (2021: £27m) in respect of
Phoenix separation costs, and £45m (2021: £35m) of corporate transaction costs primarily related to the acquisition of
interactive investor. Platform transformation and Investment vector restructuring are significant multi-year
programmes that are included in the restructuring expenses noted above, with further costs expected to be incurred in
future periods. Total restructuring expenses (excluding corporate transaction costs) are expected to be £0.2bn in 2023,
primarily relating to the Investments vector restructuring which is expected to complete in 2023. Restructuring
expenses in 2023 will also include costs of c£0.05bn relating to Platform transformation which is expected to complete
in 2024.
– Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of
customer contracts is included as an adjusting item. This is consistent with peers and therefore excluding these items
aids comparability. Highlighting this as an adjusting item aims to give a fuller understanding of these accounting impacts
which arise where businesses have been acquired but do not arise where businesses have grown organically. Further
details are provided in Note 13 of the Group financial statements.
– Profit on disposal of subsidiaries and other operations in 2021 primarily related to the sales of Parmenion and
Bonaccord. These items are excluded from adjusted profit as they are non-recurring in nature.
– Profit on disposal of interests in associates of £6m (2021: £1,236m) relates to the sale of our stake in Origo Services
Limited in May 2022. The 2021 figure included the one-off accounting gains following the reclassification of HDFC Asset
Management (£897m) and Phoenix (£68m) from investment in associates accounted for using the equity method to
equity securities measured at fair value and £271m from the sale of 5% of shares in HDFC Asset Management. Details
are provided in Note 14 of the Group financial statements. These items are excluded from adjusted profit as they are
volatile and the accounting gains are non-recurring in nature.
– The change in fair value of significant listed investments was negative £187m (2021: negative £298m) and represents
the impact of market movements on our holdings in HDFC Life (£38m reduction in value including impact of stake sale
in September 2022), in Phoenix (£44m reduction in value including impact of stake sale in January 2022) and in HDFC
Asset Management (£105m reduction in value including impact of stake sale in August 2022). Excluding fair value
movements on significant listed investments for the purposes of adjusted profit is aligned with our treatment of gains on
disposal for these holdings when they were classified as an associate, and reflects that the fair value movements are
not indicative of the long-term operating performance of the Group.
– Dividends from significant listed investments relates to our shareholdings in HDFC Life, Phoenix and HDFC Asset
Management that were previously associates and were reclassified on 3 December 2020, 23 February 2021 and 29
September 2021 respectively. Following the reclassification, dividends received are now recognised as income within
our financial statements. The £68m in 2022 relates to dividends received from Phoenix (£52m), HDFC Asset
Management (£15m) and HDFC Life (£1m). Dividends from significant listed investments are included in adjusting
items, as such dividends result in fair value movements.
282 abrdn.com Annual report 2022
– Share of profit or loss from associates and joint ventures was a profit of £2m (2021: loss £22m). In 2022, this mainly
comprises of the share of profit or loss from our holdings in HASL, Virgin Money UTM and Tenet. In 2021, prior to the
reclassification noted above, share of profit or loss from associates and joint ventures also included Phoenix and HDFC
Asset Management. Associate and joint venture results are excluded from adjusted profit to help in understanding the
performance of our core business separately from these holdings.
– The impairment of associates and joint ventures in 2022 of £9m relates to our associate holding in Tenet.
– Details on items classified as ‘Other’ in the table above are provided in Note 11 of the Group financial statements. Other
adjusting items in 2022 primarily relates to a single process execution event provision of £41m. 2022 also includes a net
gain on fair value movements in contingent consideration of £35m primarily in relation to Tritax, fair value loss of £11m
on a financial instrument liability related to a prior period acquisition, and a loss of £13m in relation to market losses on
the investments held by the abrdn Financial Fairness Trust which is consolidated by the Group.
9.1.2 Cost/income ratio
2022 2021
Adjusted operating expenses (£m) (1,193) (1,192)
Net operating revenue (£m) 1,456 1,515
Cost/income ratio (%)
82 79
9.1.3 Net operating revenue yield (bps)
1
Average AUMA (£bn)
Net operating revenue (£m)
1
Net operating revenue yield (bps)
1
2022 2021
2022 2021
2022 2021
Institutional and Wholesale
2
236.2 250.1
861 979
36.1 38.8
Insurance 169.5 205.0 179 206
10.5 10.0
Investments
2
405.7 455.1
1,040 1,185
25.4 25.9
Adviser
2
70.8 71.5
185 178
26.1 24.9
Personal Wealth
2
13.5 14.0
87 92
59.2 61.0
Parmenion
3
- 3.9
- 14
- 38.1
Eliminations
(11.8) (11.3)
N/A N/A
N/A N/A
Net operating revenue yield
1,2
478.2 533.2
1,312 1,469
27.1 27.3
interactive investor
4
114 -
Performance fees
30 46
Net operating revenue
1
1,456 1,515
Analysis of Institutional and Wholesale by asset class
2
Average AUM (£bn)
Net operating revenue (£m)
Net operating revenue yield (bps)
2022 2021
2022 2021
2022 2021
Equities 57.3 69.5
357 449
62.5 64.5
Fixed income 41.2 46.6
115 132
27.9 28.3
Multi-asset
31.5 35.1
93 118
29.4 33.7
Private equity
12.4 11.2
52 58
42.2 51.8
Real assets
42.0 36.1
187 170
44.4 47.2
Alternatives
22.1 20.4
29 25
12.9 12.3
Quantitative
9.7 5.8
5 4
5.0 6.8
Liquidity
20.0 25.4
13 15
6.7 6.0
Institutional and Wholesale
236.2 250.1
851 971
36.1 38.8
1. Previously fee based revenue/yield. The Group’s measure of segmental revenue has been renamed from fee based revenue to net operating revenue, with a
corresponding change in name of the yield measure.
2. Institutional and Wholesale net operating revenue yield excludes revenue of £10m (2021: £8m) and Personal Wealth net operating revenue yield excludes
revenue of £7m (2021: £7m) for which there are no attributable assets.
3. Parmenion was included in the Corporate/strategic vector. The sale of Parmenion completed on 30 June 2021 and the net operating revenue yield reflects
the position as at the date of disposal.
4. interactive investor is excluded from the calculation of Personal and total net operating revenue yield as fees charged for this business are primarily from
subscriptions and trading transactions.
283abrdn.comAnnual report 2022
FINANCIAL INFORMATION
9. Supplementary information continued
9.1.4 Additional ii information
The results for ii are included in the Group’s results following the completion of the acquisition on 27 May 2022. The adjusted
operating profit for ii for the seven months to 31 December 2022 of £67m is included in our overall 2022 adjusted operating
profit of £263m.
The tables below provide detail of the performance of ii for the 7 months ended 31 December 2022 and the full 12 months
ended 31 December for 2022 and 2021 to provide a fuller understanding of the performance of this business. Adjusted
operating profit has also been presented excluding losses relating to Share Limited to provide a more meaningful
comparison to the go-forward position.
Analysis of ii profit
2022
7 months
£m
2022
12 months
£m
2021
12 months
£m
Excl Share
1
2021
12 months
£m
Incl Share
1
Net operating revenue 114 176 128 135
Adjusted operating expenses (47) (82) (83) (99)
Adjusted operating profit
67 94 45 36
The 2021 adjusted operating profit of £36m included losses relating to Share Limited of £9m while part of this business was
wound down. Excluding losses from Share Limited, the 2021 adjusted operating profit was £45m. The 2022 impact was £nil.
Analysis of ii net operating revenue
2022
7 months
£m
2022
12 months
£m
2021
12 months
£m
Excl Share
1
2021
12 months
£m
Incl Share
1
Trading transactions 27 55 79 84
Subscription/account fees 32 56 48 50
Treasury income
58 71 9 9
Less: Cost of sales
(3) (6) (8) (8)
Net operating revenue
114 176 128 135
1. Losses were incurred in Share Limited and its subsidiaries (Share) as part of this business was wound down.
9.1.5 Adjusted capital generation
The table below provides a reconciliation of movements between adjusted profit after tax and adjusted capital generation.
A reconciliation of adjusted profit after tax to IFRS loss for the year is included earlier in this section.
2022 2021
£m £m
Adjusted profit after tax 231 297
Less net interest credit relating to the staff pension schemes (29) (17)
Less interest paid on other equity
(11) –
Add dividends received from associates, joint ventures and significant listed investments
68 86
Adjusted capital generation
259 366
Net interest credit relating to the staff pension schemes
The net interest credit relating to the staff pension schemes is the contribution to adjusted profit before tax from defined
benefit pension schemes which are in surplus.
Dividends received from associates, joint ventures and significant listed investments
An analysis is provided below:
2022 2021
£m £m
Phoenix 52 69
HDFC Life 1 2
HDFC Asset Management
15 15
Dividends received from associates, joint ventures and significant listed investments
68 86
The table below provides detail of dividend coverage on an adjusted capital generation basis.
2022 2021
Adjusted capital generation (£m) 259 366
Full year dividend (£m) 295 309
Dividend cover on an adjusted capital generation basis (times) 0.88 1.18
284 abrdn.com Annual report 2022
9.1.6 Adjusted diluted capital generation per share
A reconciliation of adjusted capital generation to adjusted profit after tax is included in 9.1.5 above.
2022 2021
Adjusted capital generation (£m) 259 366
Weighted average number of diluted ordinary shares outstanding (millions)
1
– Note 10 2,094 2,159
Adjusted diluted capital generation per share (pence) 12.4 17.0
1. In accordance with IAS 33, no share options and awards have been treated as dilutive for the twelve months ended 31 December 2022 due to the loss
attributable to equity holders of abrdn plc in that period. See Note 10 for further details.
9.1.7 Cash and liquid resources
The table below provides a reconciliation between IFRS cash and cash equivalents and cash and liquid resources. Seed
capital and co-investments are excluded. Details of seed capital and co-investments are provided in Note 35 (b) in the
Group financial statements.
2022 2021
£bn £bn
Cash and cash equivalents per Note 22 of the Group financial statements 1.1 1.9
Bank overdrafts – Note 22 - (0.1)
Debt securities excluding third party interests
2
– Note35 (c)(i) 0.7 1.1
Corporate funds held in absolute return funds – Note35 (b)(i)(i)
0.1 0.2
Other
3
(0.2) –
Cash and liquid resources
1.7 3.1
2. Excludes £76m (2021: £76m) relating to seeding.
3. Cash collateral, cash held for charitable funds and cash held in employee benefit trusts are excluded from cash and liquid resources.
9.2 Investment performance
Definition Purpose
Investment performance
Investment performance has been aggregated using a money weighted average of
our assets under management which are outperforming their respective benchmark.
The calculation of investment performance has been revised to use a closing AUM
weighting basis. In prior periods investment performance was weighted based on AUM
at the start of the performance period. 2021 comparatives have been restated. We
believe that this approach provides a more representative view of current investment
performance, given the significant changes to business mix over the investment
timeframe, and provides investment performance data which is more comparable
with peers. Calculations for investment performance are made gross of fees with the
exception of those for which the stated comparator is net of fees. Benchmarks differ by
fund and are defined in the relevant investment management agreement or
prospectus, as appropriate. The investment performance calculation covers all funds
that aim to outperform a benchmark, with certain assets excluded where this measure
of performance is not appropriate or expected, such as private markets and execution
only mandates, as well as replication tracker funds which aim to perform in line with a
given index
As an asset managing business this
measure demonstrates our ability to
generate investment returns for our
clients.
1 year 3 years
5 years
% of AUM ahead of benchmark
2022
2021
restated
1
2021
reported
2022
2021
restated
1
2021
reported
2022
2021
restated
1
2021
reported
Equities 30 37 36 63 74 72 65 65 61
Fixed income 65 58 59 72 79 82 79 81 87
Multi-asset
13 72 41 50 73 39 22 70 44
Real assets
57 86 83 63 58 52 52 62 50
Alternatives
88 87 87 100 98 98 100 98 98
Quantitative
17 99 98 27 15 44 29 42 68
Liquidity
84 89 88 97 92 87 97 92 84
Total
41 66 57 65 78 67 58 77 67
1. The calculation of investment performance has been revised to use a closing AUM weighting basis. In prior periods investment performance was weighted
based on AUM at the start of the performance period. 2021 comparatives have been restated. We believe that this approach provides a more representative
view of current investment performance.
285abrdn.comAnnual report 2022
FINANCIAL INFORMATION
9. Supplementary information continued
9.3 Assets under management and administration and flows
Definition Purpose
AUMA
AUMA is a measure of the total assets we manage, administer or advise on behalf of
our clients. It includes assets under management (AUM), assets under administration
(AUA) and assets under advice (AUAdv).
AUM is a measure of the total assets that we manage on behalf of individual and
institutional clients. AUM also includes fee generating assets managed for corporate
purposes.
AUA is a measure of the total assets we administer for clients through platform
products such as ISAs, SIPPs and general trading accounts.
AUAdv is a measure of the total assets we advise our clients on, for which there is an
ongoing charge.
The amount of funds that we manage,
administer or advise directly impacts
the level of net operating revenue that
we receive.
Net flows
Net flows represent gross inflows less gross outflows or redemptions. Gross inflows are
new funds from clients. Redemptions is the money withdrawn by clients during the
period. Cash dividends which are retained on the ii platform are included in net flows
for the ii business only. Cash dividends are included in market movements for other
parts of the group including the Investments and Adviser platform businesses. We
consider that this different approach is appropriate for the ii business as cash dividend
payments which are retained result in additional income for ii, but are largely revenue
neutral for the rest of the group.
The level of net flows that we generate
directly impacts the level of net
operating revenue that we receive.
9.3.1 Analysis of AUMA
Opening
AUMA at
1 Jan 2022 Gross inflows Redemptions Net flows
Market
and other
movements
Corporate
actions
2
Closing
AUMA at
31 Dec 2022
12 months ended 31 December 2022 £bn £bn £bn £bn £bn £bn £bn
Institutional 174.0 20.1 (27.3) (7.2) (12.4) 7.5 161.9
Wholesale 79.1 16.4 (20.8) (4.4) (5.4) - 69.3
Insurance 210.5 22.8 (52.2) (29.4) (28.7) (7.5) 144.9
Investments
463.6 59.3 (100.3) (41.0) (46.5) - 376.1
Adviser 76.2 6.6 (5.0) 1.6 (9.3) - 68.5
interactive investor
- 4.1 (2.5) 1.6 (3.0) 55.4 54.0
Personal Wealth
14.4 1.5 (1.2) 0.3 (1.6) - 13.1
Personal
1
14.4 5.6 (3.7) 1.9 (4.6) 55.4 67.1
Eliminations
1
(12.1) (2.5) 2.1 (0.4) 1.7 (0.9) (11.7)
Total AUMA
542.1 69.0 (106.9) (37.9) (58.7) 54.5 500.0
Opening
AUMA at
1 Jan 2021 Gross inflows Redemptions Net flows
Market
and other
movements
Corporate
actions
3
Closing
AUMA at
31 Dec 2021
12 months ended 31 December 2021 £bn £bn £bn £bn £bn £bn £bn
Institutional 171.7 22.5 (25.4) (2.9) 5.4 (0.2) 174.0
Wholesale 80.0 19.4 (21.6) (2.2) 1.3 – 79.1
Insurance 205.2 21.5 (27.0) (5.5) 10.8 – 210.5
Investments 456.9 63.4 (74.0) (10.6) 17.5 (0.2) 463.6
Adviser 67.0 9.1 (5.2) 3.9 5.3 – 76.2
interactive investor - - - - - - -
Personal Wealth 13.3 1.7 (1.1) 0.6 0.5 – 14.4
Personal
1
13.3 1.7 (1.1) 0.6 0.5 – 14.4
Parmenion 8.1 0.7 (0.4) 0.3 0.3 (8.7) –
Eliminations
1
(10.7) (2.6) 2.2 (0.4) (1.0) – (12.1)
Total AUMA 534.6 72.3 (78.5) (6.2) 22.6 (8.9) 542.1
1. Eliminations remove the double count reflected in Investments, Adviser and Personal. The Personal vector includes assets that are reflected in both the
discretionary investment management and financial planning businesses. This double count is also removed within Eliminations.
2. Corporate actions in 2022 relate to the acquisition of interactive investor on 27 May 2022 and also reflect the transfer of retained LBG AUM of c£7.5bn from
Insurance into Institutional (quantitatives), to better reflect how the relationship is being managed. The eliminations are to remove the double count for the
assets that are reflected in both interactive investor and Investments.
3. Corporate actions in 2021 relate to the acquisition of a majority interest in Tritax on 1 April 2021 (£5.8bn) and the disposals of our domestic real estate business
in the Nordics region on 31 May 2021 (£3.3bn) and Bonaccord/Hark on 30 September 2021 (£1.5bn). Corporate actions also include the impact of the
decision to exit the Total Return Bond strategy of £1.2bn. The sale of Parmenion completed on 30 June 2021.
286 abrdn.com Annual report 2022
9.3.2 Quarterly net flows
3 months to
31 Dec 22
3 months to
30 Sep 22
3 months to
30 Jun 22
3 months to
31 Mar 22
3 months to
31 Dec 21
15 months ended 31 December 2022 £bn £bn £bn £bn £bn
Institutional 2.2 (0.3) (7.8) (1.3) 2.5
Wholesale (2.0) (0.5) - (1.9) (0.8)
Insurance
(6.3) 3.2 (4.6) (21.7) (0.4)
Investments
(6.1) 2.4 (12.4) (24.9) 1.3
Adviser - 0.2 0.5 0.9 1.1
interactive investor 0.6 0.8 0.2 - –
Personal Wealth
0.2 - - 0.1 –
Personal
0.8 0.8 0.2 0.1 –
Eliminations (0.1) - (0.1) (0.2) (0.2)
Total net flows
(5.4) 3.4 (11.8) (24.1) 2.2
9.4 Institutional and Wholesale AUM
Detailed asset class split
Opening
AUM at
1 Jan 2022 Gross inflows Redemptions Net flows
Market
and other
movements
Corporate
actions
Closing
AUM at
31 Dec 2022
12 months ended 31 December 2022 £bn £bn £bn £bn £bn £bn £bn
Developed markets equities 17.0 2.1 (3.4) (1.3) (4.6) - 11.1
Emerging markets equities 16.4 1.9 (2.9) (1.0) (2.9) - 12.5
Asia Pacific equities
25.3 2.5 (4.8) (2.3) (2.5) - 20.5
Global equities
10.3 1.2 (1.6) (0.4) (1.7) - 8.2
Total equities
69.0 7.7 (12.7) (5.0) (11.7) - 52.3
Developed markets credit 28.3 3.8 (5.8) (2.0) (3.8) - 22.5
Developed markets rates 2.9 0.3 (0.6) (0.3) (0.6) - 2.0
Emerging markets fixed income 12.2 2.4 (2.4) - (0.9) - 11.3
Private credit
2.4 0.2 (0.1) 0.1 (0.7) - 1.8
Total fixed income
45.8 6.7 (8.9) (2.2) (6.0) - 37.6
Absolute return 10.0 0.4 (1.9) (1.5) (2.8) - 5.7
Diversified growth/income 0.5 0.1 (0.2) (0.1) (0.1) - 0.3
MyFolio
17.7 1.7 (2.0) (0.3) (1.8) - 15.6
Other multi-asset 7.8 1.7 (1.1) 0.6 (1.7) - 6.7
Total multi-asset
36.0 3.9 (5.2) (1.3) (6.4) - 28.3
Total private equity 12.3 0.5 (1.1) (0.6) 0.6 - 12.3
UK real estate 19.9 0.4 (1.7) (1.3) 0.7 - 19.3
European real estate 10.3 0.8 (0.4) 0.4 3.6 - 14.3
Global real estate
1.8 0.3 (0.3) - (0.2) - 1.6
Real estate multi-manager
1.2 0.2 (0.2) - 0.2 - 1.4
Infrastructure equity
6.2 0.4 (0.9) (0.5) 0.4 - 6.1
Total real assets
39.4 2.1 (3.5) (1.4) 4.7 - 42.7
Total alternatives 20.8 2.2 (1.6) 0.6 0.8 - 22.2
Total quantitative
1
5.5 3.2 (1.7) 1.5 0.5 7.5 15.0
Total liquidity 24.3 10.2 (13.4) (3.2) (0.3) - 20.8
Total
1
253.1 36.5 (48.1) (11.6) (17.8) 7.5 231.2
1. Corporate actions include the transfer of retained LBG AUM of c£7.5bn from Insurance into Institutional (quantitatives), to better reflect how the relationship is
being managed.
287abrdn.comAnnual report 2022
FINANCIAL INFORMATION
9. Supplementary information continued
Opening
AUM at
1 Jan 2021 Gross inflows Redemptions Net flows
Market
and other
movements
Corporate
actions
Closing
AUM at
31 Dec 2021
12 months ended 31 December 2021 £bn £bn £bn £bn £bn £bn £bn
Developed markets equities 14.7 3.0 (3.6) (0.6) 2.9 – 17.0
Emerging markets equities 19.0 2.0 (3.7) (1.7) (0.9) – 16.4
Asia Pacific equities 26.6 4.8 (5.7) (0.9) (0.4) – 25.3
Global equities 8.9 1.8 (1.6) 0.2 1.2 – 10.3
Total equities 69.2 11.6 (14.6) (3.0) 2.8 – 69.0
Developed markets credit 32.2 5.9 (6.6) (0.7) (2.0) (1.2) 28.3
Developed markets rates 2.8 0.6 (0.6) – 0.1 – 2.9
Emerging markets fixed income 12.2 3.5 (3.1) 0.4 (0.4) – 12.2
Private credit 1.0 1.5 – 1.5 0.8 (0.9) 2.4
Total fixed income 48.2 11.5 (10.3) 1.2 (1.5) (2.1) 45.8
Absolute return 11.5 0.8 (2.0) (1.2) (0.3) – 10.0
Diversified growth/income 0.6 0.1 (0.2) (0.1) – – 0.5
MyFolio 15.6 2.1 (2.5) (0.4) 2.5 – 17.7
Other multi-asset 10.0 1.2 (1.4) (0.2) (2.0) – 7.8
Total multi-asset 37.7 4.2 (6.1) (1.9) 0.2 – 36.0
Total private equity 10.9 1.5 (1.2) 0.3 1.7 (0.6) 12.3
UK real estate 9.2 0.9 (0.8) 0.1 4.8 5.8 19.9
European real estate 12.1 1.0 (0.4) 0.6 0.9 (3.3) 10.3
Global real estate 1.8 0.3 (0.4) (0.1) 0.1 – 1.8
Real estate multi-manager 1.6 0.1 (0.1) – (0.4) – 1.2
Infrastructure equity 5.3 1.0 (0.4) 0.6 0.3 – 6.2
Total real assets 30.0 3.3 (2.1) 1.2 5.7 2.5 39.4
Total alternatives 19.5 2.0 (1.9) 0.1 1.2 – 20.8
Total quantitative 6.4 1.2 (1.2) – (0.9) – 5.5
Total liquidity 29.8 6.6 (9.6) (3.0) (2.5) – 24.3
Total 251.7 41.9 (47.0) (5.1) 6.7 (0.2) 253.1
288 abrdn.com Annual report 2022
9.5 Analysis of Insurance
Opening
AUM at
1 Jan 2022
Gross inflows Redemptions
Net
flows
Market
and other
movements
Corporate
actions
Closing
AUM at
31 Dec 2022
12 months ended 31 December 2022 £bn £bn £bn £bn £bn £bn £bn
Phoenix 175.5 22.5 (26.6) (4.1) (27.7) - 143.7
Lloyds
1
33.6 0.3 (25.5) (25.2) (0.9) (7.5) -
Other
1.4 - (0.1) (0.1) (0.1) - 1.2
Total
1
210.5 22.8 (52.2) (29.4) (28.7) (7.5) 144.9
Opening
AUM at
1 Jan 2021 Gross inflows Redemptions
Net
flows
Market
and other
movements
Corporate
actions
Closing
AUM at
31 Dec 2021
12 months ended 31 December 2021 £bn £bn £bn £bn £bn £bn £bn
Phoenix 171.5 17.1 (20.3) (3.2) 7.2 – 175.5
Lloyds 31.8 4.4 (6.3) (1.9) 3.7 – 33.6
Other 1.9 – (0.4) (0.4) (0.1) – 1.4
Total 205.2 21.5 (27.0) (5.5) 10.8 – 210.5
1. Following completion of the LBG tranche withdrawals in H1 2022, the remaining retained LBG AUM of c£7.5bn was reallocated to quantitatives in Institutional
and is included in corporate actions in the table above.
9.6 Investments AUM by geography
31 Dec 2022 31 Dec 2021
Institutional and
Wholesale Insurance Total
Institutional
and Wholesale Insurance Total
£bn £bn £bn £bn £bn £bn
UK 111.2 144.9 256.1 120.3 210.5 330.8
Europe, Middle East and Africa (EMEA) 57.5 - 57.5 62.5 – 62.5
Asia Pacific (APAC)
16.4 - 16.4 19.2 – 19.2
Americas
46.1 - 46.1 51.1 – 51.1
Total AUM
231.2 144.9 376.1 253.1 210.5 463.6
289abrdn.comAnnual report 2022
FINANCIAL INFORMATION
290 abrdn.com Annual report 2022
Other information
291abrdn.comAnnual report 2022
OTHER INFORMATION
Contents
10
Glossary
292
11 Shareholder information 296
12 Forward-looking statements 297
13 Contact us IBC
292 abrdn.com Annual report 2022
10. Glossary
Adjusted net financing costs and investment
return
Adjusted net financing costs and investment return is a
component of adjusted profit and relates to the return
from the net assets of the shareholder business, net of
costs of financing. This includes the net assets in defined
benefit staff pension plans and net assets relating to the
financing of subordinated liabilities.
Adjusted operating expenses
Adjusted operating expenses is a component of adjusted
operating profit and relates to the day-to-day expenses of
managing our business.
Adjusted operating profit
Adjusted operating profit before tax is the Group’s key
APM. Adjusted operating profit includes the results of the
Group’s three growth vectors: Investments, Adviser and
Personal, along with Corporate/strategic.
It excludes the Group’s adjusted net financing costs and
investment return, and discontinued operations.
Adjusted operating profit also excludes the impact of the
following items:
– Restructuring costs and corporate transaction
expenses. Restructuring includes the impact of major
regulatory change.
– Amortisation and impairment of intangible assets
acquired in business combinations and through the
purchase of customer contracts.
– Profit or loss arising on the disposal of a subsidiary, joint
venture or equity accounted associate.
– Change in fair value of/dividends from significant listed
investments.
– Share of profit or loss from associates and joint
ventures.
– Impairment loss/reversal of impairment loss
recognised on investments in associates and joint
ventures accounted for using the equity method.
– Fair value movements in contingent consideration.
– Items which are one-off and, due to their size or nature,
are not indicative of the long-term operating
performance of the Group.
Adjusted profit before tax
In addition to the results included in adjusted operating
profit above, adjusted profit before tax includes adjusted
net financing costs and investment return.
Assets under management and administration
(AUMA)
AUMA is a measure of the total assets we manage,
administer or advise on behalf of our clients. It includes
assets under management (AUM), assets under
administration (AUA) and assets under advice (AUAdv).
AUMA does not include assets for associates and joint
ventures.
AUM is a measure of the total assets that we manage on
behalf of individual and institutional clients. AUM also
includes assets managed for corporate purposes.
AUA is a measure of the total assets we administer for
clients through our Platforms.
AUAdv is a measure of the total assets we advise our
clients on, for which there is an ongoing charge.
Board
The Board of Directors of the Company.
Carbon intensity
Weighted-Average Carbon Intensity (WACI) is calculated
by summing the product of each company’s weight in the
portfolio or loan book with that company’s carbon-to-
revenue intensity. Carbon-to-revenue intensity is
calculated by dividing the sum of all apportioned
emissions, with the sum of all apportioned revenues across
an investment portfolio or loan book. This metric gives an
indication of how efficient companies in a portfolio or loan
book are at generating revenues per tonne of carbon
emitted.
Carbon neutral
Being carbon neutral means that carbon released through
our operational emissions is balanced by an equivalent
amount being removed through carbon offsetting.
Carbon offsetting
Carbon offsetting is an internationally recognised way to
take responsibility for carbon emissions. The aim of carbon
offsetting is that for every one tonne of offsets purchased
there will be one less tonne of carbon dioxide in the
atmosphere than there would otherwise have been. To
offset emissions we purchase the equivalent volume of
carbon credits (independently verified emissions
reductions) to compensate for our operational carbon
emissions. We have been reviewing our use of offsetting,
and although we continue to use offsets as a means of
addressing our residual emissions, our prime objective is
always to reduce our environmental impact before
compensating for it.
Chief Operating Decision Maker
The executive leadership team.
Company
abrdn plc.
Cost/income ratio
This is an efficiency measure that is calculated as adjusted
operating expenses divided by net operating revenue.
CRD IV
CRD IV is the European regulatory capital regime
(comprising the Capital Requirements Directive and
Capital Requirements Regulation) that applied to
investment firms up to and including 31 December 2021.
The new IFPR regime came into force on 1 January 2022.
Director
A director of the Company.
293abrdn.comAnnual report 2022
OTHER INFORMATION
Earnings per share (EPS)
EPS is a commonly used financial metric which can be
used to measure the profitability and strength of a
company over time. EPS is calculated by dividing profit by
the number of ordinary shares. Basic EPS uses the
weighted average number of ordinary shares outstanding
during the year. Diluted EPS adjusts the weighted average
number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares, such as
share options awarded to employees.
Effective tax rate
Tax expense/(credit) attributable to equity holders’ profit
divided by profit before tax attributable to equity holders’
profits expressed as a percentage.
Executive leadership team (ELT)
Our ELT leads across our businesses and supporting
functions globally and is responsible for executing and
monitoring progress on the delivery of our business plans.
The ELT also ensures we meet our obligations to our
clients, people, shareholders, regulators and partners.
Fair value through profit or loss (FVTPL)
FVTPL is an IFRS measurement basis permitted for assets
and liabilities which meet certain criteria. Gains or losses on
assets or liabilities measured at FVTPL are recognised
directly in the income statement.
FCA
Financial Conduct Authority of the United Kingdom.
Greenhouse gases
Greenhouse gases are the atmospheric gases responsible
for causing global warming (i.e. the greenhouse effect)
and climate change. These gases, both natural and
anthropogenic in origin include carbon dioxide, methane
and nitrous oxide. Other greenhouse gases which are less
prevalent but with a greater Global Warming Potential
include hydrofluorocarbons (HFCs), perfluorocarbons
(PFCs) and sulphur hexafluoride (SF6).
Group or abrdn
Relates to the Company and its subsidiaries.
Growth vectors
We provide services across three growth vectors:
– Investments: Asset management investment solutions
for institutional, wholesale and insurance clients.
– Adviser: Our UK adviser platform business.
– Personal: Comprises of Personal Wealth which includes
our financial planning business and our direct-to-
consumer services, and interactive investor following
the completion of the acquisition in May 2022.
Internal Capital Adequacy and Risk
Assessment (ICARA)
The ICARA is the means by which the Group assesses the
levels of capital and liquidity that adequately support all of
the relevant current and future risks in its business.
International Financial Reporting Standards
(IFRS)
International Financial Reporting Standards are
accounting standards issued by the International
Accounting Standards Board (IASB).
Investment Firms Prudential Regime (IFPR)
The Investment Firms Prudential Regime is the FCA’s new
prudential regime for MiFID investment firms. The regime
came into force on 1 January 2022.
Investment performance
Investment performance has been aggregated using a
money weighted average of our assets under
management which are outperforming their respective
benchmark. The calculation of investment performance
has been revised to use a closing AUM weighting basis. In
prior periods investment performance was weighted
based on AUM at the start of the performance period.
2021 comparatives have been restated. We believe that
this approach provides a more representative view of
current investment performance, given the significant
changes to business mix over the investment time frame,
and provides investment performance data which is more
comparable with peers. Calculations for investment
performance are made gross of fees with the exception of
those for which the stated comparator is net of fees.
Benchmarks differ by fund and are defined in the relevant
investment management agreement or prospectus, as
appropriate. The investment performance calculation
covers all funds that aim to outperform a benchmark, with
certain assets excluded where this measure of
performance is not appropriate or expected, such as
private markets and execution only mandates, as well as
replication tracker funds which aim to perform in line with
a given index.
LBG tranche withdrawals
On 24 July 2019, the Group announced that it had agreed
a final settlement in relation to the arbitration proceedings
between the parties concerning LBG’s attempt to
terminate investment management arrangements under
which assets were managed by members of the Group
for LBG entities. In its decision of March 2019, the arbitral
tribunal found that LBG was not entitled to terminate these
investment management contracts. The Group had
continued to manage approximately £104bn (as at
30 June 2019) of assets under management (AUM) for
LBG entities during the period of the dispute.
Approximately two thirds of the total AUM (the transferring
AUM) will be transferred to third party managers
appointed by LBG through a series of planned tranches
from 24 July 2019. During this period, the Group will
continue to be remunerated for its services in relation to
the transferring AUM. The final tranche withdrawal was
completed in H1 2022.
294 abrdn.com Annual report 2022
10. Glossary continued
Market Disclosure
This IFPR disclosure complements the Own funds
requirement and Own funds threshold requirement with
the aim of improving market discipline by requiring
companies to publish certain details of their risks, capital
and risk management. Relevant disclosures are made in
the abrdn plc consolidated annual report and accounts
and in the accounts of the Group’s individual IFPR-
regulated entities, all of which can be found on the abrdn
plc Group’s website.
Net flows
Net flows represent gross inflows less gross outflows or
redemptions. Gross inflows are new funds from clients.
Redemptions is the money withdrawn by clients during the
period. Cash dividends which are retained on the ii
platform are included in net flows for the ii business only.
Cash dividends are included in market movements for
other parts of the group including the Investments and
Adviser platform businesses. We consider that this
different approach is appropriate for the ii business as
cash dividend payments which are retained result in
additional income for ii, but are largely revenue neutral for
the rest of the group.
Net operating revenue
The Group’s measure of segmental revenue has been
renamed from fee based revenue to net operating
revenue. There are no differences between Net operating
revenue as presented in the IFRS consolidated income
statement and the analysis of Group adjusted profit by
segment for the year ended 31 December 2022. This
measure of segmental revenue excludes £28m of net
operating revenue as presented in the IFRS consolidated
income statement for the year ended 31 December 2021
which was classified as adjusting items. The adjusting items
primarily related to the net release of deferred income of
£25m (refer Note 32).
Net operating revenue is a component of adjusted
operating profit and includes revenue we generate from
asset management charges (AMCs), platform charges,
treasury income and other transactional charges. AMCs
are earned on products such as mutual funds, and are
calculated as a percentage fee based on the assets held.
Investment risk on these products rests principally with the
client, with our major indirect exposure to rising or falling
markets coming from higher or lower AMCs. Treasury
income is the interest earned on cash balances less the
interest paid to customers. Net operating revenue is shown
net of fees, costs of sale, commissions and similar charges.
Costs of sale include revenue from fund platforms which is
passed to the product provider.
Net operating revenue yield (bps)
The net operating revenue yield (previously named fee
revenue yield) is a measure that illustrates the average
margin being earned on the assets that we manage,
administer or advise our clients on excluding interactive
investor. It is calculated as annualised net operating
revenue (excluding performance fees, interactive investor
and revenue for which there are no attributable assets)
divided by monthly average fee based assets. interactive
investor is excluded from the calculation of Personal and
total net operating revenue yield as fees charged for this
business are primarily from subscriptions and trading
transactions.
Net zero
It is generally accepted that net zero is the target of
completely negating the amount of greenhouse gases
produced by human activity, to be achieved by reducing
emissions to the lowest possible amount and offsetting
(see carbon offsetting) only the remainder as a last resort.
Net Zero Directed Investing
Net Zero Directed Investing means moving towards the
goal of net zero in the real world - not just in specific
investment portfolios. At abrdn we seek to achieve this
goal through a holistic set of actions, including rigorous
research into net-zero trajectories, developing net-zero-
directed investment solutions and active ownership to
influence corporates and policy makers.
Operational emissions
Operational emissions are the greenhouse gas emissions
related to the operations of our business. They are
categorised into three groups or ‘scopes’ in alignment with
the Greenhouse Gas Protocol. Corporate Accounting and
Reporting Standard. Scope 1 covers direct emissions from
owned or controlled sources. Scope 2 covers indirect
emissions from the generation of purchased electricity,
steam, heating and cooling consumed by the reporting
company. Scope 3 includes all other indirect emissions that
occur in a company’s value chain. At abrdn we report on
Scope 1 and Scope 2 emissions, and a selection of Scope 3
categories, where deemed material, which includes our
working from home emissions.
Own Funds Requirement
Under IFPR, the Own Funds Requirement is the higher of
the permanent minimum capital requirement, the fixed
overhead requirements, and the K-factor requirement.
The K-factor requirement is the sum of: Risk-to-Client,
Risk-to-Market, and Risk-to-Firm K-factors.
Own Funds Threshold Requirement
Under IFPR, the Own Funds Threshold Requirement is the
higher of Own funds required on an ongoing basis and
Own funds required on a wind-down basis. The firm
identifies and measures risks of harm and determines the
degree to which systems and controls alone mitigate
those risks of harm (or risks of disorderly wind-down). Any
additional own funds needed, over and above the Own
funds requirement, to cover this identified residual risk is
held under the Own Funds Threshold Requirement.
Paris alignment
‘Paris alignment’ refers to the alignment of public and
private financial flows with the objectives of the Paris
Agreement on climate change. Article 2.1c of the Paris
Agreement defines this alignment as making finance flows
consistent with a pathway towards low greenhouse gas
emissions and climate-resilient development. Alignment in
this way will help to scale up the financial flows needed to
strengthen the global response to the threat of climate
change.
295abrdn.comAnnual report 2022
OTHER INFORMATION
Phoenix or Phoenix Group
Phoenix Group Holdings plc or Phoenix Group Holdings plc
and its subsidiaries.
Significant listed investments
Relates to our investments in HDFC Asset Management,
HDFC Life and Phoenix. Fair value movements and
dividend income relating to these investments are treated
as adjusting items for the purpose of determining the
Group’s adjusted profit.
Subordinated liabilities
Subordinated liabilities are debts of a company which, in
the event of liquidation, rank below its other debts but
above share capital. The 5.25% Fixed Rate Reset Perpetual
Subordinated Contingent Convertible Notes issued by the
Company in December 2021 are classified as other equity
as no contractual obligation to deliver cash exists.
296 abrdn.com Annual report 2022
11. Shareholder information
Registered office
1 George Street
Edinburgh
EH2 2LL
Company registration number: SC286832
For shareholder services call: 0371 384 2464*
* Calls are monitored/recorded to meet regulatory obligations and for
training and quality purposes. Call charges will vary.
Secretary: Julian Baddeley
Registrar: Equiniti
Auditors: KPMG LLP
Solicitors: Slaughter and May
Brokers: JP Morgan Cazenove, Goldman Sachs
Shareholder services
We offer a wide range of shareholder services. For more
information, please:
– Contact our registrar, Equiniti, who manage this service
for us. Their details can be found on the inside back
cover.
– Visit our share portal at www.abrdnshares.com
Sign up for Ecommunications
Signing up means:
– You’ll receive an email when documents like the annual
report and accounts, Half year results and AGM guide
are available on our website.
– Voting instructions for the Annual General Meeting will
be sent to you electronically.
Set up a share portal account
Having a share portal account means you can:
– Manage your account at a time that suits you.
– Download your documents when you need them.
To find out how to sign up, visit www.abrdnshares.com
Preventing unsolicited mail
By law, the Company has to make certain details from its
share register publicly available. As a result it is possible that
some registered shareholders could receive unsolicited
mail, emails or phone calls. You could also be targeted by
fraudulent ‘investment specialists’, clone firms or
scammers posing as government bodies e.g. HMRC, FCA.
Frauds are becoming much more sophisticated and may
use real company branding, the names of real employees
or email addresses that appear to come from the
company. If you get a social or email message and you’re
unsure if it is from us, you can send it to
emailscams@abrdn.com and we’ll let you know.
You can also check the FCA warning list and warning from
overseas regulators, however, please note that this is not
an exhaustive list and do not assume that a firm is
legitimate just because it does not appear on the list as
fraudsters frequently change their name and it may not
have been reported yet.
www.fca.org.uk/consumers/unauthorised-firms-individuals
www.iosco.org/investor_protection/?subsection=investor_
alerts_portal
You can find more information about share scams at the
Financial Conduct Authority website
www.fca.org.uk/consumers/scams
If you are a certificated shareholder, your name and
address may appear on a public register. Using a nominee
company to hold your shares can help protect your
privacy. You can transfer your shares into the Company-
sponsored nominee – the abrdn Share Account – by
contacting Equiniti, or you could get in touch with your
broker to find out about their nominee services.
If you want to limit the amount of unsolicited mail you
receive generally, please visit www.mpsonline.org.uk
Financial calendar
Full year results 2022 28 February
Ex-dividend date for 2022 final dividend 30 March
Record date for 2022 final dividend
31 March
Last date for DRIP elections for 2022 final dividend
26 April
Annual General Meeting – Edinburgh
10 May
Dividend payment date for 2022 final dividend
16 May
Half year results 2023
8 August
Ex-dividend date for 2023 interim dividend
17 August
Record date for 2023 interim dividend
18 August
Last date for DRIP elections for 2023
interim dividend
6 September
Dividend payment date for 2023 interim dividend
26 September
Analysis of registered shareholdings at
31 December 2022
Range of shares
Number of
holders
% of total
holders Number of shares
% of total
shares
1-1,000 58,446 65.56 23,403,697 1.17
1,001-5,000 26,027 29.19 54,067,044 2.70
5,001-10,000 2,732 3.06 18,432,881 0.92
10,001-100,000 1,495 1.68 35,094,093 1.75
#
100,001+ 455 0.51 1,870,894,184 93.46
Total
89,155 100.00 2,001,891,899 100.00
# These figures include the Company-sponsored nominee – the abrdn
Share Account – which had 914,644 participants holding 648,559,822
shares.
297abrdn.comAnnual report 2022
OTHER INFORMATION
12. Forward-looking statements
This document may contain certain ‘forward-looking statements’ with respect to the financial condition, performance,
results, strategies, targets, objectives, plans, goals and expectations of the Company and its affiliates. These forward-
looking statements can be identified by the fact that they do not relate only to historical or current facts.
Forward-looking statements are prospective in nature and are not based on historical or current facts, but rather on
current expectations, assumptions and projections of management of the abrdn Group about future events, and are
therefore subject to known and unknown risks and uncertainties which could cause actual results to differ materially from
the future results expressed or implied by the forward-looking statements.
For example but without limitation, statements containing words such as ‘may’, ‘will’, ‘should’, ‘could’, ‘continues’, ‘aims’,
‘estimates’, ‘projects’, ‘believes’, ‘intends’, ‘expects’, ‘hopes’, ‘plans’, ‘pursues’, ‘ensure’, ‘seeks’, ‘targets’ and ‘anticipates’, and
words of similar meaning (including the negative of these terms), may be forward-looking. These statements are based on
assumptions and assessments made by the Company in light of its experience and its perception of historical trends,
current conditions, future developments and other factors it believes appropriate.
By their nature, all forward-looking statements involve risk and uncertainty because they are based on information
available at the time they are made, including current expectations and assumptions, and relate to future events and/or
depend on circumstances which may be or are beyond the Group’s control, including among other things: UK domestic
and global political, economic and business conditions, (such as the UK’s exit from the EU and the ongoing conflict between
Russia and Ukraine); market related risks such as fluctuations in interest rates and exchange rates, and the performance of
financial markets generally; the impact of inflation and deflation; the impact of competition; the timing, impact and other
uncertainties associated with future acquisitions, disposals or combinations undertaken by the Company or its affiliates
and/or within relevant industries; experience in particular with regard to mortality and morbidity trends, lapse rates and
policy renewal rates; the value of and earnings from the Group’s strategic investments and ongoing commercial
relationships; default by counterparties; information technology or data security breaches (including the Group being
subject to cyberattacks); operational information technology risks, including the Group’s operations being highly
dependent on its information technology systems (both internal and outsourced); natural or man-made catastrophic
events; the impact of pandemics, such as the COVID-19 (coronavirus) outbreak; climate change and a transition to a low-
carbon economy (including the risk that the Group may not achieve its targets); exposure to third party risks including as a
result of outsourcing; the failure to attract or retain necessary key personnel; the policies and actions of regulatory
authorities and the impact of changes in capital, solvency or accounting standards, and tax and other legislation and
regulations (including changes to the regulatory capital requirements that the Group is subject to in the jurisdictions in
which the Company and its affiliates operate. As a result, the Group’s actual future financial condition, performance and
results may differ materially from the plans, goals, objectives and expectations set forth in the forward-looking statements.
Neither the Company, nor any of its associates, directors, officers or advisers, provides any representation, assurance or
guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this document will
actually occur. Persons receiving this document should not place reliance on forward-looking statements. All forward-
looking statements contained in this document are expressly qualified in their entirety by the cautionary statements
contained or referred to in this section. Each forward-looking statement speaks only as at the date of the particular
statement. Neither the Company nor its affiliates assume any obligation to update or correct any of the forward-looking
statements contained in this document or any other forward-looking statements it or they may make (whether as a result
of new information, future events or otherwise), except as required by law. Past performance is not an indicator of future
results and the results of the Company and its affiliates in this document may not be indicative of, and are not an estimate,
forecast or projection of, the Company’s or its affiliates’ future results.
298 abrdn.com Annual report 2022
Notes
Notes
299abrdn.comAnnual report 2022
OTHER INFORMATION
Notes
300 abrdn.com Annual report 2022
Contact us
Got a shareholder question? Contact our shareholder services team.
UK and overseas (excluding Germany and Austria)
phone +44 (0)371 384 2464*
email questions@abrdnshares.com
visit www.abrdnshares.com
mail abrdn Shareholder Services
Aspect House
Spencer Road
Lancing, West Sussex
BN99 6DA, United Kingdom
Germany and Austria
phone +44 (0)371 384 2493*
email fragen@abrdnshares.com
visit www.abrdnshares.com
mail abrdn Shareholder Services
Aspect House
Spencer Road
Lancing, West Sussex
BN99 6DA, United Kingdom
* Calls are monitored/recorded to meet regulatory obligations and for training and quality purposes. Call charges will vary. s. Call charges will vary.
Designed by Black Sun Plc (Strategic report) and abrdn plc
(rest of Annual report and accounts)
Published by Adare SEC (Nottingham) Limited
Please remember that the value of shares can go down as well as up
and you may not get back the full amount invested or any income
from it. All figures and share price information have been calculated
as at 31 December 2022 (unless otherwise indicated).
This document has been published by abrdn plc for information
only. It is based on our understanding as at February 2023 and does
not provide financial or legal advice.
abrdn plc is registered in Scotland (SC286832) at 1 George Street,
www.abrdn.com © 2023 abrdn, images reproduced under licence.
All rights reserved.
UKARA22 0223
abrdn.com