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PRI reporting framework 2018

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (C) Implementation: Integration of ESG issues

(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]


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

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on a robust analysis.

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

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information.[Optional]

Material ESG issues for the portfolio are discussed on an ongoing basis during research meetings, as the ESG team is part of the investment team.


LEI 10. Aspects of analysis ESG information is integrated into

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

10.1. Indicate which aspects of investment analysis you integrate material ESG information into.

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

10.2a. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

10.3. Describe how you integrate ESG information into portfolio weighting.

With regards to portfolio construction, ESG integration contributes to all three components that determine the weights of any holding:

  1. Quality / visibility: the ESG analysis leads portfolio managers to assess the overall quality of a company (management, positioning vs. competitors, resilience…)
  2. Dynamic growth: the ESG analysis leads portfolio managers to assess the growth opportunities related to sustainability themes.
  3. Attractive valuation: the ESG quality level resulting from the ESG analysis has an impact on the inputs of the valuation model

These three components affect the level of conviction of the portfolio managers in the portfolio construction.

10.4a. Describe the methods you have used to adjust the income forecast / valuation tool

An ESG quality level is assigned to each company in the portfolio. It is the result of a consensus between the ESG analyst and the financial analyst on the level of ESG quality specific to the company.

Once the ESG quality level has been defined, it is translated into a company specific ESG discount rate which is added to the initial discount rate given by the financial analyst based on country / market risk and business risk. The ESG discount rate takes into account all ESG risk / opportunity elements found.

Proportion of actively managed listed equity exposed to investment analysis

10.2b. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

10.4b. Describe the methods you have used to adjust the income forecast / valuation tool

An ESG quality level is assigned to each company in the portfolio. It is the result of a consensus between the ESG analyst and the financial analyst on the level of ESG quality specific to the company.

Once the ESG quality level has been defined, it is translated into a company specific ESG discount rate which is added to the initial discount rate given by the financial analyst based on country / market risk and business risk. The ESG discount rate takes into account all ESG risk / opportunity elements found.

10.5. Additional information.

Investee companies are monitored on an ongoing basis from an ESG perspective. The purpose is to identify all ESG events (controversies, change in corporate structure, change of board / management…) which could affect companies’ ESG / quality profile, valuation and/or reputation. In the case of such material events, the ESG opinion and the ESG quality level would be revised accordingly and the investment case could be re-assessed.


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