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First State Superannuation Scheme

PRI reporting framework 2017

You are in Indirect – Manager Selection, Appointment and Monitoring » Listed Equity and Fixed Income Strategies

Listed Equity and Fixed Income Strategies

SAM 03. Breakdown by passive, quantitative, fundamental and other active strategies (Private)


SAM 04. ESG incorporation strategies

04.1. Indicate which of the following ESG incorporation strategies you require your external manager(s) to implement on your behalf:

Active investment strategies

Active investment strategies

Listed Equity
FI - SSA

Screening

Thematic
Integration
None of the above

Passive investment strategies

Passive investment strategies
Listed Equity
FI - SSA
FI - Corporate (financial)?
FI - Corporate (non-financial)?

Screening

Thematic
Integration
None of the above

04.2. Explain how you integrate ESG factors in the selection, appointment and monitoring of your passive funds

Our passive managers are required to implement our fund wide exclusions and are assessed in the same way as any other manager in accordance with our Responsible Investment Policy as set out below.

Our asset consultant, Willis Towers Watson (WTW), helped us develop a questionnaire for new and existing managers to assess their responsible investment attitude and capabilities. Through this process WTW is fully aware of our position on responsible investment, and although they won't screen out or positively recommend a manager on this basis, they are aware of what is important to us and will frame their recommendation accordingly. WTW has been involved in our manager selection for our socially responsible option and throughout this process only recommended those with a known solid track record in the E, S, and G space.

Once a manager has been recommended a RFP is sent to the manager which contains a section on high level questions relating to E,S and G. Further down the due diligence process we then send a second E,S,G questionnaire, which is much more detailed and asks managers about their philosophy on responsible investment, how they integrate it, their capacity to integrate it and their alignment with our views on responsible investment. This questionnaire is used internally to rank and score managers so that the investment team is aware of how their manager is performing both in terms of financial return but also from an E, S or G perspective. It is envisioned that we will correlate financial performance with E, S and G performance to form an idea of how they affect one another- this however will only be possible once enough data is collected. The responses to the questionnaire are also used as a tool for engagement with the manager. The engagement that we have with a manager at the beginning serves us later on in the monitoring phase such that if in our internal screening process we find a company that scores poorly on an E, S, or G issue we can approach our managers to engage with the company, or if bad enough, to consider dropping from their portfolio.

When appointing managers, we also ensure proxy voting is included in the contract. Thus through proxy voting season we are in contact with our managers daily with regards to mostly governance concerns of a company. This regular contact ensures that our position on responsible investment is reinforced.

Every two years we send out our ESG questionnaire to existing managers so that even if they filled it out on appointment we can re-score them to see if they have improved or fallen behind. We use these scores as a basis for internal ranking and if necessary for further engagement on responsible investment issues.

04.3. Additional information. [Optional]


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