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Nikko AM Australian Equities

PRI reporting framework 2018

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ESG incorporation in actively managed listed equities

Implementation processes

LEI 01. Percentage of each incorporation strategy

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

01.1. 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
99 %
Percentage of active listed equity to which the strategy is applied
1 %
Total actively managed listed equities 100%

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

As a long-term investor, Nikko AM Australian Equities is focused on the fundamental performance of the corporates in which we invest. The consideration of responsible investment principals is consistent with our long-term valuation approach.

Nikko AM Australian Equities supports the consideration of Environmental, Social and Governance (ESG) factors by corporates. In the long-term ESG issues can materially affect corporate valuations. By incorporating all material factors at the valuation level (including ESG factors) we can consistently and comprehensively incorporate responsible investment principles into our investment process.

By incorporating ESG factors into the valuation process at the company level, we can raise issues with companies and positively influence behaviour.

As our analysts are experts in the material drivers of company valuation and are in communication with company management they are best placed to value ESG factors into the investment process and also to promote more responsible management behaviour.

 

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

All of our Assets Under Management (AUM) are managed using the bottom-up valuation approach which incorporates ESG factors at the company valuation level.

One of our funds has a screening overlay which precludes investment in companies with a material proportion of socially irresponsible operations, such as gaming, alcohol and tobacco.


LEI 02. Type of ESG information used in investment decision (Private)


LEI 03. Information from engagement and/or voting used in investment decision-making (Private)


(A) Implementation: Screening

LEI 04. Types of screening applied

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

Type of screening

Screened by

Description

We only apply screening to one fund, which has a socially responsbile overlay. This screen is applied after the integrated ESG approach is used and alters the portfolio construction.

The rest of the funds do not utilise a sreening mechanism.

04.2. 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 for that one fund is determined by the client and implemented by the portfolio manager, based on work done by the company analyst. The client can change the screening criteria.


LEI 05. Processes to ensure screening is based on robust analysis

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

          The client specifies the screen for the one fund that utilises a screen. The implementation of the screen is done by the company analyst/PM
        

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.5. Additional information. [Optional]

Screening is only used for one fund, all funds use a bottom up valuation of issues (integrated approach).


LEI 06. Processes to ensure fund criteria are not breached (Private)


(C) Implementation: Integration of ESG issues

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate which ESG factors you systematically research as part of your investment analysis and the proportion of actively managed listed equity portfolios that is impacted by this analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

We review all material factors affecting valuations of stocks, including ESG issues


LEI 09. Processes to ensure integration is based on robust analysis (Private)


LEI 10. Aspects of analysis ESG information is integrated into (Private)


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