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The Scott Trust Limited (Guardian Media Group)

PRI reporting framework 2018

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Asset class implementation gateway indicators

OO 10. Active ownership practices for listed assets

10.1. Select the active ownership activities your organisation implemented in the reporting year.

Listed equity – engagement

Listed equity – voting

Fixed income SSA – engagement

Fixed income Corporate (financial) – engagement

Fixed income Corporate (non-financial) – engagement

Fixed income Corporate (securitised) – engagement


OO 11. ESG incorporation practices for all assets

Select the externally managed assets classes in which you and/or your investment consultants address ESG incorporation in your external manager selection, appointment and/or monitoring processes.
Asset class
ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes
Listed equity

Listed equity - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fixed income - SSA

Fixed income - SSA - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fixed income - corporate (financial)

Fixed income - corporate (financial) - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fixed income - corporate (non-financial)

Fixed income - corporate (non-financial) - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fixed income - securitised

Fixed income - securitised - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Private equity

Private equity - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Commodities

Commodities - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Hedge funds

Hedge funds - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Cash

Cash - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

11.4. Provide a brief description of how your organisation includes responsible investment considerations in your investment manager selection, appointment and monitoring processes.

The Scott Trust believes that incorporation of environmental, social and governance issues in analysis may positively impact investment returns over the long term. It is also compatible with our own beliefs and investment policy. Managers’ own broader responsible investment policies (e.g. on active equity ownership) are also important in both of these areas. Therefore, the degree to which external managers have integrated such considerations into their process is a fundamental part of our selection, and monitoring processes across all asset classes.

For example, given our stated policy to both divest from fossil fuels over the medium term and invest proactively in strategies which are aimed at supporting the possibility of a lower carbon future, the entire portfolio is being assessed on these terms. Particular emphasis is placed on seeking managers who can demonstrate a strong understanding of both the threats and opportunities presented by a transition to a low carbon economy.

In order to monitor our progress on this stated policy, we are collecting data on fossil fuel exposure twice a year from our external managers as well as looking at this factor in all new potential managers. We have used this information to create objectives for reduction in our fossil fuel exposure over time and make manager selection decisions to meet both of these objectives and the primary duty of generating strong risk-adjusted returns.

Beyond this specific policy, the entire endowment is managed with a strong emphasis on ESG. We aim to be proactive and innovate here. For example, during the reporting year some notable activity was as follows:

  • We moved our entire passive equity allocation to an innovative new ESG solution. This moves away from simple capitalization weighting, halving carbon emissions intensity versus the MSCI World index, eliminating 100% of exposure to owners of fossil fuel reserves, and doubling exposure to companies with green revenues. This is all combined with conventional smart beta factor tilts and is optimized for tracking error. While some existing pooled products offered some aspects of this, we worked with a manager to produce a new innovative solution during the period.
  • We made a major new investment in an active manager whose entire firm is built around applying sustainability and proactive engaged ownership principles in a single global equity product. We are proud to support such ESG innovators.
  • We engaged with major two hedge funds, leading to the creation of two new responsible investment share classes of existing products, and then invested in these.
  • We invested in a new clean energy global equity fund that launched during the reporting period, supporting the creation of an innovative new product.

We analyse managers through integration of ESG considerations in manager research and the collection of fund level data on responsible investment attributes (e.g. ESG integration policies, voting and engagement, investment exclusions, the ability to accommodate responsible investment demands in separate accounts). We also conduct analysis of underlying holdings of our managers. This latter work has included carbon footprinting of our portfolio and ESG scoring of the underlying holdings using third party ESG analytical tools.


OO 12. Modules and sections required to complete

12.1. Below are all applicable modules or sections you may report on. Those which are mandatory to report (asset classes representing 10% or more of your AUM) are already ticked and read-only. Those which are voluntary to report on can be opted into by ticking the box.

Core modules

RI implementation via external managers

Indirect - Selection, Appointment and Monitoring of External Managers

Closing module

12.2. Additional information. [Optional]


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