This report shows public data only. Is this your organisation? If so, login here to view your full report.

Martin Currie Investment Management

PRI reporting framework 2018

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities

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
69 %
Percentage of active listed equity to which the strategy is applied
31 %
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.

We believe that sustainability or environmental, social and governance (ESG) factors create risks and opportunities for investors. We believe it is in the interests of our clients to consider these factors when making an investment in a company, and for the companies themselves to manage these appropriately.

We believe the sustainability of a company's business model is critical to maintaining its competitive industrial positioning and strong capital returns. In addition, companies that exhibit strong governance and are well managed are more likely to be successful, long-term investments. We believe our sustainability approach helps identify good management teams, understand their motivation and determine whether their interests are aligned with minority investors.

ESG factors and their consideration form a key part of our sustainability analysis. We incorporate these factors into our financial modeling and they form part of our engagement process with management.

We work with a number of segregated clients, tailoring their portfolios to avoid securities of specific companies or countries based on their ethical or values based concerns and a number of funds that operate under required restrictions. We do not have a house policy on this but will incorporate specific requests from our clients.

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

For some clients we operate on the basis of specific sector exclusions (directed by the client) which vary by client and can change over time depending on the requirements of the clients. The most common exclusions are no involvement in tobacco products, alcohol, cluster munitions, armaments, nuclear or contraception. The wording of client mandates varies but generally the exclusion will be based upon either the core activity of the company or a specific percentage of revenues. For these restrictions we operate a negative screening process to exclude companies from the investable universe based on these particular criteria.  Over and above this we take the same approach as all other unrestricted mandates - ESG factors and their consideration form a key part of our sustainability analysis. We incorporate these factors into our financial modeling and they form part of our engagement process with management.


LEI 02. Type of ESG information used in investment decision

02.1. Indicate what ESG information you use in your ESG incorporation strategies and who provides this information.

Type of ESG information

Indicate who provides this information  

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

02.2. Provide a brief description of the ESG information used, highlighting any different sources of information across your ESG incorporation strategies.

Our ESG research is obtained from a range of resources. We do not do maintenance research; we focus on factors that are material to the investment case. We expect all providers of our external analysis to consider ESG issues when they are material to the investment case.

We source dedicated external research on ESG factors, including:

  • MSCI ESG research - MSCI covers most of the MSCI ACWI constituents and produces industry and company specific research;
  • Morgan Stanley provides ESG-themed research as part of its general research offering
  • UBS provides ESG-themed research as part of its general research offering
  • HSBC provides ESG-themed research as part of its general research offering - notably on climate change
  • ISS - ISS produce research reports focusing on voting recommendations for shareholders meetings
  • Eurasia - a leading global political risk group who provide insights on pertinent political issues and regulatory risks
  • CDP - companies report to CDP to varying degrees on climate change and water use

We also work with a third party who do commissioned diagnostic accounting and governance work on our behalf.

Our extensive engagement with companies allows us to obtain relevant and material data - this is integrated into our research.

 

02.3. Indicate if you incentivise brokers to provide ESG research.

02.4. Describe how you incentivise brokers.

There are a number of brokers who already provide good quality ESG research but we expect any research provided by the sell side to take account of material ESG factors that might influence the investment case for a particular company. We regularly review the quality and value of the research we receive from brokers, notably in the run-up to MIFID II, consider how they incorporate these material ESG factors and provide feed-back on a regular basis.

02.5. Additional information.[Optional]


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

03.1. Indicate if your organisation has a process through which information derived from ESG engagement and/or (proxy) voting activities is made available for use in investment decision-making.

03.2. Additional information. [Optional]

We have established a research portal at Martin Currie. All our research, which includes specific commentary on ESG factors that may affect a company, and any engagement regarding ESG factors that has taken place is published on this portal ensuring that it is readily available to the wider investment team. As the analysis and engagement will involve or be lead by the investment team it is considered as part of investment decision making.
For clients who have delegated responsibility for voting on their holdings to Martin Currie the investment team is responsible for ensuring votes are instructed in line with intentions. We assess voting matters on a case-by-case basis, taking into account a company's circumstances, but are guided by our over-arching principles on corporate governance. Information relating to these factors are also considered routinely as part of investment decision making. All proxy voting research, which includes specific commentary on ESG factors that may affect a company, and any engagement regarding proxy voting matters is readily available to the wider investment team.


(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

Any negative screening is driven by specific client requirements.  These operate on the basis of specific sector exclusions (directed by the client) which vary by client and can change over time depending on the requirements of the clients. The most common exclusions are no involvement in tobacco products, alcohol, cluster munitions, armaments, nuclear or contraception. The wording of client mandates varies but generally the exclusion will be based upon either the core activity of the company or a specific percentage of revenues. For these restrictions we operate a negative screening process to exclude companies from the investable universe according to these particular criteria.  Over and above this we take the same approach as all other unrestricted mandates - ESG factors and their consideration form a key part of our sustainability analysis. We incorporate these factors into our financial modeling and they form part of our engagement process with management.

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 criteria are set by specific clients based on their needs and requirements.


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.

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.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

Any negative screening is driven by specific client requirements.  These operate on the basis of specific sector exclusions (directed by the client) which vary by client and can change over time depending on the requirements of the clients. The most common exclusions are no involvement in tobacco products, alcohol, armaments, nuclear or contraception. The wording of client mandates varies but generally the exclusion will be based upon either the core activity of the company or a specific percentage of sales. For these restrictions we operate a negative screening process to exclude companies from the investable universe based on these particular criteria.  In most cases external service providers are used to identify companies to be excluded / included.  These external providers offer the ability to set the detailed criteria in a manner suitable to each different client requirement.  These providers are subject to regular due diligence overseen by David Sheasby, Head of Stewardship and ESG.  This includes looking at the methodology for screening and the frequency of updates and reviews.  The processes in place are comprehensive, provide the opportunity for companies to correct any inaccuracies, are subject to audit, are overseen by an independent committee and are periodically reviewed for quality assurance purposes.

Where a client portfolio is subject to restrictions these are then coded into the portfolio management and dealing systems to ensure ongoing compliance with client requirements.  There is a daily feed to ensure that the universe exclusions remain consistent with client requirements.


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]

Because responsible investment forms a key part of our investment process we will systematically consider those ESG factors that we believe could have a material impact on the ability of a company to generate sustainable returns. These factors are essentially those that can have a material impact on a company's cash flows, balance sheet, reputation and ultimately, corporate value and may be environmental, social or governance issues. We believe that governance is the key starting point in this analysis as this sets the framework for accountability, for how decisions are made and sets the tone for the corporate culture.  We set out our governance framework in our Global Corporate Governance Principles.  We have also established industry frameworks that provide guidance on the material sustainability factors to consider when looking at each industry, reflecting the wide variation in what may be material and relevant across different industries.


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]

Our ESG external research is obtained from a range of resources including specialist and general providers. These providers are regularly reviewed with a focus on the quality, coverage, timeliness and accuracy of the reports produced.

Our extensive engagement with companies also allows us to identify, discuss and verify relevant material data - this is integrated into our own research.

All analysts producing stock research are required to consider the material and relevant governance, social and environmental factors that could impact the ability of the company to generate sustainable returns. These factors are recorded in a standard dedicated section of our bespoke stock analysis template. This includes a specific section requiring an explanation on how these factors have been incorporated into the analysis.

For stocks held in portfolios these are updated at least annually.

All the investment team are able to access data and reports provided by our external research suppliers.
We have established a research portal at Martin Currie. All our research, which includes specific commentary on ESG factors that may affect a company, will be published on this portal ensuring that it is readily available to the wider organisation.


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


Top