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Parnassus Investments

PRI reporting framework 2017

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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
86 %
Percentage of active listed equity to which the strategy is applied
14 %
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.

Parnassus Investments follows a responsible investment approach to understand the full impact of a company. We carefully consider a company's environmental, social and governance (ESG) factors. By incorporating ESG factors into our fundamental investment process, we believe we can identify risks and opportunities that the market may have ignored, and identify responsible companies. 

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

The responsible investment process begins by applying exclusionary screens to the list of investment ideas approved by a portfolio manager for due diligence. The screens eliminate companies that derive significant revenue from the manufacture of alcohol, tobacco or weapons, or have significant involvement with nuclear power, gambling or Sudan. From this investable universe the investment team then begins their fundamental analysis. The next step in the responsible investment process is for a company to undergo a rigorous, proprietary ESG evaluation. ESG research is fully integrated into the investment process such that both fundamental and ESG research analysts are able to identify and address company-specific ESG issues. 

In addition, the Parnassus Endeavor Fund invests principally in companies with outstanding workplaces. The Fund also avoids investing in companies engaged in the extraction, exploration, production, manufacturing or refining of fossil fuels; the Fund may invest in companies that use fossil fuel-based energy to power their operations or for other purposes.

The Parnassus Fund avoids investing in companies engaged in the extraction, exploration, production, manufacturing or refining of fossil fuels; the Fund may invest in companies that use fossil fuel-based energy to power their operations or for other purposes.


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

Parnassus Investments applies exclusionary screens to the entire investment universe. The spirit of these exclusionary screens is to avoid investment in companies with negative impacts that outweigh any potential benefits from their business activities. Parnassus Investments does not invest in companies that derive significant revenue from the following activities:

  • Manufacture of alcohol or tobacco products
  • Direct involvement with gambling
  • Manufacture of weapons
  • Generation of electricity from nuclear power
  • Business involvement with Sudan

Additionally, the Parnassus Fund and Parnassus Endeavor Fund avoid investing in companies engaged in the extraction, exploration, production, manufacturing or refining of fossil fuels; each Fund may invest in companies that use fossil fuel-based energy to power their operations or for other purposes. 

Screened by

Description

Parnassus Investments seeks to invest in companies with positive performance on ESG criteria. The ESG factors the investment team evaluates include:

  • Corporate governance and business ethics
  • Employee benefits and corporate culture
  • Stakeholder relations
  • Product, customers and supply chain
  • Environmental impact

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.

Parnassus Investments has extensive experience applying environmental, social and governance (ESG) screens to investment strategies. Parnassus Investments has applied ESG screens to the investment universe since the founding of the firm in 1984. 

The spirit of the exclusionary screens is to avoid investment in companies with negative impacts that outweigh any potential benefits from their business activities. Parnassus Investments believes these lines of business do more social harm than good, and excludes companies with significant involvement for that reason. The majority of these screens have been applied to the firm's investment strategies since its inception. The Sudan screen was added in 2006 when the international community recognized the Darfur region conflict as genocide.

ESG performance for portfolio companies are re-evaluated on an annual basis. However, the investment team conducts a quarterly review of all investments, and during this review the ESG research team reassesses any material ESG factors that may affect the price of a stock. 

Changes to the criteria would require a prospectus update. If Parnassus Investments were to make a change at the time of a regular prospectus update, clients would be notified when they read the new prospectus (each client receives the new prospectus either electronically or via mail). If a change is made at a time other than that of the regular update, clients would be sent a supplement to the prospectus.   


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)


(B) Implementation: Thematic

LEI 09. Types of sustainability thematic funds/mandates

09.1. Indicate the type of sustainability thematic funds or mandates your organisation manages.

09.2. Describe your organisation’s processes for sustainability themed funds. [Optional]

The Parnassus Endeavor Fund is a diversified, fundamental, U.S., large-cap, core equity fund. The Fund invests principally in undervalued equity securities of large-capitalization companies with outstanding workplaces. Companies with good workplaces usually are able to recruit and retain better employees, and perform at a higher level than competitors in terms of innovation, productivity, customer loyalty and profitability. The Fund avoids investing in companies engaged in the extraction, exploration, production, manufacturing or refining of fossil fuels; the Fund may invest in companies that use fossil fuel-based energy to power their operations or for other purposes.

The Parnassus Fund is a diversified, fundamental, U.S., multi-cap, core equity fund. The Fund invests principally in undervalued equity securities of all market capitalizations companies. The Fund seeks to invest in good businesses with attractive valuations. The Fund avoids investing in companies engaged in the extraction, exploration, production, manufacturing or refi ning of fossil fuels; the Fund may invest in companies that use fossil fuel-based energy to power their operations or for other purposes. 


(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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