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Colonial First State Global Asset Management (including First State Investments)

PRI reporting framework 2016

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You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (C) Implementation: Integration of ESG issues

(C) Implementation: Integration of ESG issues

LEI 10. Review ESG issues while researching companies/sectors

10.1. Indicate if E, S and G issues are reviewed while researching companies and/or sectors in active strategies.

ESG issues

Coverage/extent of review on these issues

Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

10.2. Additional information. [Optional]

Six of the investment teams review of the significance of ESG issues, while one team does, and our smart beta team does not currently review or incorporate these issues into their company analysis due to the nature of their investment process. 


LEI 11. Processes to ensure integration is based on robust analysis

11.1. Indicate which processes your organisation uses to ensure that ESG integration is based on a robust analysis.

          Quarterly reporting to Global Investment Assurance Committee
        

11.2. Describe how ESG information is held and used by your portfolio managers.

11.3. Additional information.

Of the eight listed equity teams, seven use a centralised database, seven teams have a standard section of stock notes dedicated to ESG, and three teams maintain systematic records of how ESG information was incorporated into the investment decision-making process.


LEI 12. Aspects of analysis ESG information is integrated into

12.1. Indicate into which aspects of investment analysis you integrate ESG information.

12.2a. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

12.3. Describe how you integrate ESG information into portfolio construction

Three teams reported adjustments to valuation tools and two teams reported adjustments to income forecasts. Four teams do not make these types of adjustments but instead reported that it was implied or captured in quality assessments which influenced portfolio weights. For example one of our teams reported that:

"ESG analysis is integrated into our investment process through our quality assessment and ranking model. This model consists of 25 criteria that influence stock returns in general and infrastructure securities in particular. A score is assigned to each criterion. A lower quality score makes it harder for a stock to be included within the overall portfolio. ESG criteria account for 20% of the overall quality score."

While another reported that:

"ESG information is not explicitly integrated into fair value analysis. We regard each of the areas within ESG as broadly equivalent in importance and avoid investing in companies which cannot demonstrate that they meet appropriate standards or who are not making clear progress towards meeting them in the context of their operating environment."

12.4a. Describe the methods you have used to adjust the income forecast / valuation tool

Three teams reported adjustments to valuation tools and two teams reported adjustments to income forecasts.

Four teams do not make these types of adjustments but instead reported that it was implied or captured in quality assessments which influenced portfolio weights. For example one of our teams reported that:

"ESG analysis is integrated into our investment process through our quality assessment and ranking model. This model consists of 25 criteria that influence stock returns in general and infrastructure securities in particular. A score is assigned to each criterion. A lower quality score makes it harder for a stock to be included within the overall portfolio. ESG criteria account for 20% of the overall quality score."

While another reported that:

"ESG information is not explicitly integrated into fair value analysis. We regard each of the areas within ESG as broadly equivalent in importance and avoid investing in companies which cannot demonstrate that they meet appropriate standards or who are not making clear progress towards meeting them in the context of their operating environment."

12.2b. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

12.4b. Describe the methods you have used to adjust the income forecast / valuation tool

Three teams reported adjustments to valuation tools and two teams reported adjustments to income forecasts. Four teams do not make these types of adjustments but instead reported that it was implied or captured in quality assessments which influenced portfolio weights. For example one of our teams reported that:

"ESG analysis is integrated into our investment process through our quality assessment and ranking model. This model consists of 25 criteria that influence stock returns in general and infrastructure securities in particular. A score is assigned to each criterion. A lower quality score makes it harder for a stock to be included within the overall portfolio. ESG criteria account for 20% of the overall quality score."

While another reported that:

"ESG information is not explicitly integrated into fair value analysis. We regard each of the areas within ESG as broadly equivalent in importance and avoid investing in companies which cannot demonstrate that they meet appropriate standards or who are not making clear progress towards meeting them in the context of their operating environment."

12.5. Additional information.


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