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Great Lakes Advisors

PRI reporting framework 2017

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities

ESG incorporation in actively managed listed equities

Implementation processes

LEI 03. Percentage of each incorporation strategy

New selection options have been added to this indicator. Please review your prefilled responses carefully.

03.1. Indicate (1) which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities and (2) the breakdown of your actively managed listed equities by strategy or combination of strategies (+/- 5%)

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied
57 %
Percentage of active listed equity to which the strategy is applied
1 %
Percentage of active listed equity to which no strategy is applied
42 %
Total actively managed listed equities 100%

03.2. Describe your organisation’s approach to incorporation and the reasons for choosing the particular ESG incorporation strategy/strategies.

For GLA’s Fundamental Equity strategies (57% of total equity), ESG factors are considered as part of our in-depth bottom-up analysis of each company. In particular, we have found that our assessment of management quality is a strong indicator of how well environmental and social risks and opportunities are being managed. We believe that when conducting a fundamental analysis, a company’s ESG risks and performance are material considerations that can affect investment performance.

For GLA's Disciplined Equity (quant) ESG strategies, all companies in the universe are assigned an ESG score; in each sector, the bottom quintile is excluded; the model then constructs a portfolio where the portfolio's ESG score is 10% higher than the benchmark for LargeCap and 15% higher than the benchmark for SMidCap. 

GLA's standard Disciplined Equity (quant) strategy involves using linear regression to identify a small number of factors that are the strongest predictors of future returns and rebalancing portfolios every-other week based on updated values. We have found that ESG factors, which are typically updated annually, don't meaningfully impact the bi-weekly future return prediction results and are therefore not weighted heavily in the linear regression model.

03.3. Where assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]


LEI 04. Type of ESG information used in investment decision (Private)


LEI 05. Information from engagement and/or voting used in investment decision-making (Private)


(A) Implementation: Screening

LEI 06. Types of screening applied

06.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

In GLA's Disciplined Equity (quant) ESG strategies, all companies in the universe are assigned an ESG score. The bottom-scoring quintile in each sector is screened from the portfolio, and the model then uses the ESG scores to construct a portfolio with a portfolio ESG score higher than the respective benchmarks' ESG scores.

06.2. Describe how the screening criteria are established, how often the criteria are reviewed and how you notify clients and/or beneficiaries when changes are made.

The screening criteria were established to control for sector biases by excluding the bottom quintile in each sector rather than the overall universe. Criteria are reviewed annually at a minimum. 


LEI 07. Processes to ensure screening is based on robust analysis

07.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

07.2. Additional information. [Optional]


LEI 08. Processes to ensure fund criteria are not breached (Private)


(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]


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


LEI 12. Aspects of analysis ESG information is integrated into (Private)


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