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Martin Currie Investment Management

PRI reporting framework 2018

You are in Direct - Listed Equity Incorporation » Outputs and outcomes

Outputs and outcomes

LEI 12. How ESG incorporation has influenced portfolio composition

12.1. Indicate how your ESG incorporation strategies have influenced the composition of your portfolio(s) or investment universe.

Describe any reduction in your starting investment universe or other effects.

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.

Specify the percentage reduction (+/- 5%)

5 %

Select which of these effects followed your ESG integration:

12.2. Additional information.[Optional]

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 may be incorporated in our analysis and modeling in a number of ways, for example:

  • Changes to the cost of capital
  • Changes to the revenue assumptions
  • Changes to capital expenditure
  • Changes to the cost base
  • Changes to the tax rate

The consideration of these factors can therefore have a material influence on our assessment of the investment case for a particular company. We constantly monitor those companies that our clients have exposure to and a change in factors that impact these companies can therefore potentially trigger a review and change of view of the investment case.

In some cases, we will reflect the impact of these factors and in particular the governance framework and metrics in an assessment of the quality of the company and the management of the company in particular.  This will then have an impact on the potential exposure / weighting to an investment idea for a client.

ESG analysis will also have an impact on how we prioritise engagements with companies.  Our frame of reference for identifying issues are our Global Corporate Governance Principles which outlines our approach to corporate governance and what we see as best practice, our Responsible Investment Policy and our internal Industry Frameworks that identify the key issues likely to be material in a particular industry. Where companies deviate from these principles or fall short of what we see as best practice we will look to engage with the board or the management of the company. The materiality and immediacy of a given issue will generally determine the level of our engagement and the priority we will attach to it. An issue where the impact on the potential value of an investment is large or where the timescale is short will be given high priority. In general, the analyst responsible for the stock will set the priorities for engagement however our external service providers, for example ISS, Ownership Matters or MSCI, will also highlight particular issues that they believe should be focused on. They will again identify issues based on their frameworks and will prioritise based on materiality and immediacy.

LEI 13. Measurement of financial and ESG outcomes of ESG incorporation (Private)

LEI 14. Examples of ESG issues that affected your investment view / performance (Private)