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Universities Superannuation Scheme - USS

PRI reporting framework 2018

Export Public Responses

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Pre-investment (selection)

INF 05. Incorporating ESG issues when selecting investments

05.1. Indicate if your organisation typically incorporates ESG issues when selecting infrastructure investments.

05.2. Describe your organisation's approach to incorporating ESG issues in infrastructure investment selection.

Please see answers provided in INF 01 and our "Enhanced Due Diligence and Ongoing Management Process for Infrastructure and Private Equity Investments" policy (under INF 02), for an outline of USS's investment process in infrastructure and the integration of material ESG considerations with a financial bearing into the selection process.

INF 06. ESG advice and research when selecting investments

06.1. Indicate whether your organisation typically uses ESG advice and research sourced internally and/or externally when incorporating ESG issues into the infrastructure investment selection process.

          Portfolio Manager / Private Markets team
          Co-Head RI / RI Advisor
          Operational Due Diligence

06.2. Additional information.

The Responsible Investment, Operational Due Diligence and Legal teams work closely with the infrastructure investment managers in the Private Markets Group to undertake enhanced due diligence as described previously. External research covering some, if not all ESG considerations, will generally be commissioned by the vendor, the owners of the asset or their advisors, or by USS itself.  The scheme will specifically employ its own external advisors / consultants to assess ESG issues and the legal and technical implications for the deal, where ESG is material for the asset under investigation. This is seen as an important part of the due diligence process:  specialist environmental and related consultants provide detailed assessments of E/S risks to enable the USS team to make better informed decisions.

With these processes we are trying to identify what ESG risks exist, how they are being mitigated, and rank whether residual risk remains high, medium or low.  These data are then fed into the USS infrastructure investment decision making process. 

INF 07. Examples of ESG issues in investment selection process

07.1. Indicate which E, S and/or G issues are typically considered by your organisation in the investment selection process and list up to three typical examples per issue.

ESG issues

List up to three typical examples of environmental issues

          Contaminated land
          Flood risk
          Air pollution

List up to three typical examples of social issues

          Health and safety management
          Stakeholder management and community relations
          Human capital management and unions

List up to three typical examples of governance issues

          Key person risk
          Bribery and corruption
          Internal controls, compliance

07.2. Additional information. [Optional]

INF 08. Types of ESG information considered in investment selection

08.1. Indicate what type of ESG information your organisation typically considers during your infrastructure investment selection process.

08.2. Additional information.

The sources and availability of data, and access to the management team, vary significantly deal by deal. However, all of the above could be within the scope of information sought - either through consultants, or through USS's desk based research, or through site visits/ management discussions with the asset.

In many cases, particularly those which are larger or more complex or where we are taking a direct ownership stake, specialist environmental due diligence will be undertaken using external consultants. Legal due diligence is typically commissioned to review employment matters, the regulatory framework and environmental matters for example.

The enhanced due diligence (EDD) process will always include online research into the asset, the potential impacts of the asset (or similar assets) to identify any risks which may be present.

The EDD process feeds into the investment decision making process, with risks and mitigating factors highlighted in a Private Markets Investment Committee (PMIC) investment memo, upon which the final investment decision is taken.

INF 09. ESG issues impact in selection process

09.1. Indicate if ESG issues impacted your infrastructure investment selection processes during the reporting year.

09.2. Indicate how ESG issues impacted your infrastructure investment deal structuring processes during the reporting year.

09.3. Additional information.