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

PRI reporting framework 2017

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You are in Direct - Listed Equity Active Ownership » Engagement » Outputs and outcomes

Outputs and outcomes

LEA 11. Number of companies engaged with, intensity of engagement and effort

11.1. Indicate the amount of your listed equities portfolio with which your organisation engaged during the reporting year.

Number of companies engaged

(avoid double counting, see explanatory notes)

Proportion (to the nearest 5%)
Specify the basis on which this percentage is calculated

Individual / Internal staff engagements

1000 Number of companies engaged
30 Proportion (to the nearest 5%)

Specify the basis on which this percentage is calculated

Collaborative engagements

2
0 Proportion (to the nearest 5%)

Specify the basis on which this percentage is calculated

11.2. Indicate the proportion of engagements that involved multiple, substantive and detailed discussions or interactions with a company during the reporting year relating to ESG issue.

Type of engagement

% Comprehensive engagements

 

 

Individual / Internal staff engagements

 

 

Collaborative engagements

11.3. Indicate the percentage of your collaborative engagements for which you were a leading organisation during the reporting year.

Type of engagement

% Leading role

 

 

Collaborative engagements

11.5. Additional information. [Optional]

There is some variability in how different investment teams define and capture engagements which makes it difficult to track from a whole of organisation level. The number of comprehensive engagements was estimated by two teams to be greater than 50%, by three teams as between 10-50% and by two teams as less than 10%, two teams could not estimate. 


LEA 12. Engagement methods

12.1. Indicate which of the following your engagement involved.

12.2. Additional information. [Optional]


LEA 13. Engagements on E, S and/or G issues

13.1. Indicate if your engagements in the reporting year covered E, S and/or G issues, providing an estimation of the breakdown.

Individual / Internal staff engagements

25 % Environmental only
20 % Social only
50 % Corporate Governance only
5 % Overlapping ESG issues
Total 100%

Collaborative engagements

40 % Environmental only
40 % Social only
20 % Corporate Governance only
0 % Overlapping ESG issues
Total 100%

13.2. Additional information. [optional]

We can confirm that engagements covered all three areas however we do not track the number of engagements in this way consequently the breakdowns are estimates.


LEA 14. Companies changing practices / behaviour following engagement

14.1. Indicate whether you track the number of cases during the reporting year where a company changed its practices, or made a formal commitment to do so, following your organisation’s and/or your service provider's engagement activities.

14.3. Additional information [Optional].


LEA 15. Examples of ESG engagements

15.1. Provide examples of the engagements that your organisation or your service provider carried out during the reporting year.

Topic or ESG issue
          Board Experience
        
Conducted by
Objectives

Additional independent directors, preferably with ASX 100 board and US Medical Device Industry experience. 

Scope and Process

Sirtex

Sirtex Medical is an Australian-based biotechnology company which engages in the development, manufacture, and distribution of liver cancer treatments.

Sirtex Medical sales have grown tenfold over the last decade as their sole product, SIR-Spheres, rapidly gained adoption by oncology centres in the US. This stellar run of growth catapulted Sirtex Medical from the small companies’ universe into the S&P/ASX 100 in a relatively-short period of time.

We met with Sirtex Medical’s Chairman and CEO to raise concerns we had regarding lack of top 100 listed experience among directors, given that Sirtex Medical was now a large cap company and would face new challenges and responsibilities.

We suggested recruitment of additional independent directors, preferably with ASX 100 board and US Medical Device Industry experience. We consider the structure of company boards to be important and we will engage with companies where we feel the board’s skills and experience could be strengthened. 

Outcomes

Ongoing

Topic or ESG issue
          Executive Remuneration
        
Conducted by
Objectives

Improved structure of remuneration 

Scope and Process

Goodman Group

Goodman Group is Australia’s largest listed industrial property group. Its portfolio consists of more than 160 industrial and business properties across Australia.

At Goodman’s annual general meeting in November 2016 we voted against the Remuneration Report on the basis of proposed substantial equity grants as part of the remuneration structure, and for these grants to be based on a single metric, being EPS. We had concerns with the reliance on a single metric, the method of calculation of this hurdle, as well as the size of the equity grants being proposed.

We met with the head of the Remuneration Committee in late October to express our concerns and to listen to Goodman’s rationale for the size and structure of the proposed equity grant. Despite explanations for the proposal from the head of the Remuneration Committee, we remained opposed to the remuneration structure and, after informing Goodman of our intentions, voted accordingly. The company’s Remuneration Report subsequently received its ‘first strike’, with more than 25% of shareholders voting against it.

Outcomes

Company received first strike. 

Topic or ESG issue
          Capital management
        
Conducted by
Objectives

Improved capital management

Scope and Process

Fraport

Fraport operates Frankfurt Airport, a key transport hub for Lufthansa, and also has exposure to faster-growing markets such as Turkey, Bulgaria and Peru. 

During the year we engaged with Fraport regarding their strategy and ways in which they could maximise shareholder value.  In November 2016 we wrote a letter to the Board making the following suggestions:

  • Pay a special dividend
  • Increase the dividend payout ratio
  • Refrain from international airport acquisitions
  • Recycle mature assets 

We will continue to engage with the Board on relevant issues, as we have done with multiple companies in the past. 

Outcomes

We received a hand written letter from the chairman which we appreciated. The company does not agree with our suggestions however as long term shareholders we will continue to engage with the Board on relevant issues, as we have done with multiple companies in the past. 

Topic or ESG issue
          Board diversity (age)
        
Conducted by
Objectives

Encourage board renewal 

Scope and Process

Eurotunnel 

In December 2016 we met with the company regarding corporate governance practises at Eurotunnel.  

Of Eurotunnel’s eleven Board members, six are over 70 years old.   We highlighted that the US Class 1 freight railroads have done an exemplary job in terms of safety and productivity improvements in recent years. We suggested that introducing a Board member with that level of experience could be a positive.

Outcomes

The company reassured us that they are conscious of this issue and are currently looking to address it.  In addition teh company highlighted their efforts to make the board more independent and diverse for example they have four female Board members. We welcome greater diversity at Board level, as we believe that the ability to draw on a range of skills, perspectives and experiences is beneficial to an organisation. We will continue to encourage moves in this direction.

Topic or ESG issue
          Green Buildings
        
Conducted by
Objectives

Better understand and encourage the companies approach to green buildings.

Scope and Process

Case study 1: Kilroy Realty

Kilroy Realty is a US REIT which owns and operates office properties on the US West Coast. We initially invested in the stock in 2013, as the company appeared well positioned to benefit from growing office demand from technology and media companies.

Kilroy is a leading developer and operator of LEED (Leadership in Energy and Environmental Design) properties. Its development projects are all built to LEED Platinum and Gold standards, and its stabilised property portfolio is 47% LEED-certified. LEED certification is of central importance to prospective tenants because the environments help tenants attract and retain the most effective employees, and sustainability is important to today’s modern workforce.

Kilroy’s dedication to green buildings has set new standards for office development in San Francisco. The company’s successful integration of solar panels at its 333 Brannan and Hundred Hooper developments inspired San Francisco City Council to make it a requirement that buildings under six stories must either have solar panels on solar-ready areas; or have a green roof (or “living”) roof. Global Real Estate Sustainability Benchmark (GRESB) has named Kilroy the top real estate company on sustainability in North America for the past three years. 

Outcomes

Over time we have engaged with Kilroy’s management in order to fully understand their progress in this area of their business. Kilroy’s expertise at constructing high-performance buildings means that LEED Gold and Platinum certification costs Kilroy less (with cost differentials of 0.1% and 0.6% respectively) than the market average of between 1% and 2%, reinforcing their competitive advantage in this market. The company remains a core holding in our global portfolios. 

15.2. Additional information. [Optional]


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