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Universities Superannuation Scheme - USS

PRI reporting framework 2018

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You are in Indirect – Manager Selection, Appointment and Monitoring » Selection

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SAM 02. Selection processes (LE and FI)

02.1. あなたの組織が外部運用会社の選定関連文書の大半カバーしているRI関連情報にはどのようなものがあるか以下の項目から選んで下さい。

投資戦略およびESG目標が当該戦略にどのように関わっているか

ESG組み入れ要件

ESG報告要件

その他

選定関連文書にはRI情報を盛り込んではいない

上場株式
債券 - SSA​
債券 - 社債(金融)
債券 - 社債(非金融)
プライベートエクイティ​
不動産​
投資戦略およびESG目標が当該戦略にどのように関わっているか
ESG組み入れ要件
ESG報告要件
その他
選定関連文書にはRI情報を盛り込んではいない

上記のうち「その他」を選択した場合、具体的に説明してください。

USS has a team dedicated to the selection, appointment and oversight of external asset managers for public assets (the StratCo team) who work closely with the RI Team and other functions at USS Investment Management to deliver the most appropriate fund management options for each external mandate.  

In addition to documentation, the StratCo team and RI team meet with managers to discuss their approaches to investment strategy, ESG integration, stewardship and other RI practices. In addition to materials provided by the fund manager, the RI team will also consider third party research and conduct its own desk-based research and diligence, leveraging the experience and knowledge of the in-house team.

We usually ask the fund manager for a copy of their internal PRI report; and information on how the manager undertakes stewardship and engagement activities. We use reporting in-line with the guidance from Responsible Investment Reporting in Public Equities document: See http://www.sustainablefinance.ch/upload/cms/user/2015_01_26_guide_to_responsible_investment_reporting_in_public_equity_published_NAPF1.pdf.  USS were one of the asset owners responsible for the development of this guidance. 

We also include RI considerations in the appointment of hedge fund managers.  

USS does not typically use RFPs.

 

02.2. あなたの組織では、組織の投資戦略と運用会社の投資アプローチを一致させる投資運用会社の能力をどのように評価しているのかを説明してください。

戦略

運用会社の投資戦略の対象期間を組織・受益者の要求と対比して評価する

投資ポリシーの質およびESG関連文献を評価する

投資アプローチを評価するとともに、投資プロセスにおいてESG目標をどのように導入・実施しているかを評価する

運用会社のRIに関する組織レベルのアプローチと商品レベルのアプローチを精査する

使用するESG定義を評価する

その他

上記のいずれでもない

上場株式​
債券 - SSA
債券 - 社債(金融)
債券 - 社債(非金融)
プライベートエクイティ
不動産
運用会社の投資戦略の対象期間を組織・受益者の要求と対比して評価する
投資ポリシーの質およびESG関連文献を評価する
投資アプローチを評価するとともに、投資プロセスにおいてESG目標をどのように導入・実施しているかを評価する
運用会社のRIに関する組織レベルのアプローチと商品レベルのアプローチを精査する
使用するESG定義を評価する
その他
上記のいずれでもない

ESG担当者/監督

投資チームのESGに関する専門知識を評価する

ESG導入・実施についての監督および責任を精査する

ESGの導入をどのように実行に移しているか/どのようにして万全を図っているかを精査する

RIの実施を強化するために、運用会社のRI推進努力と業界との関わりを精査する

その他

上記のいずれでもない

上場株式
債券 - SSA
債券 - 社債(金融)​
債券 - 社債(非金融)​
プライベートエクイティ
不動産​
投資チームのESGに関する専門知識を評価する
ESG導入・実施についての監督および責任を精査する
ESGの導入をどのように実行に移しているか/どのようにして万全を図っているかを精査する
RIの実施を強化するために、運用会社のRI推進努力と業界との関わりを精査する
その他
上記のいずれでもない

プロセス/ポートフォリオ組成/投資評価

使われているESGデータの質を保証するプロセスを精査する

投資意思決定プロセスにおけるESGデータの使用をを精査し、同意する

ESG分析が投資判断に及ぼす影響を精査のうえ同意する

ESG目標(リスク削減、リターン追求、現実への影響など)に同意する

運用会社のESGリスクフレームワークを精査のうえ同意する

ポートフォリオ・レベル(ポートフォリオ組成)でのESGリスクの限界およびその他のESG目標を精査のうえ同意する

運用会社が、どのようにESG重要度を評価しているかを精査する

ESGインシデントを定義し周知徹底するプロセスを精査する

ESG報告の頻度と詳細を精査し同意する

その他

上記のいずれでもない

上場株式
債券 - SSA
債券 - 社債(金融)​
債券 - 社債(非金融)
プライベートエクイティ
不動産​
使われているESGデータの質を保証するプロセスを精査する
投資意思決定プロセスにおけるESGデータの使用をを精査し、同意する
ESG分析が投資判断に及ぼす影響を精査のうえ同意する
ESG目標(リスク削減、リターン追求、現実への影響など)に同意する
運用会社のESGリスクフレームワークを精査のうえ同意する
ポートフォリオ・レベル(ポートフォリオ組成)でのESGリスクの限界およびその他のESG目標を精査のうえ同意する
運用会社が、どのようにESG重要度を評価しているかを精査する
ESGインシデントを定義し周知徹底するプロセスを精査する
ESG報告の頻度と詳細を精査し同意する
その他
上記のいずれでもない

‘その他’の方法を選択した場合、具体的に記入してください

USS specific reporting

Product level information is very important to USS. The scheme invests in particular funds for particular mandates, and not the whole manager. We therefore seek to ensure that RI discussions and reporting are focused on the scheme's potential or invested assets. There is no point us reviewing materials relating to developed market equities, when we are looking to invest in emerging markets, fixed income or property if the RI approach and processes do not apply to these asset classes (which is what we have experienced!). 

Property specific reporting

USS is encouraged when any property fund it invests in can provide evidence that it considers ESG matters within its own investment and asset management process.  Participation in GRESB is an important signal of this intent, and is considered by us to be an essential requirement.  Post acquisition we would encourage each year an improvement in GRESB performance.

Private equity reporting

USS is a signatory to the Montreal Pledge and has declared our intention to report in line with the TCFD recommendations. We have been highlighting the need, and encouraging our GP’s, to collect data to enable LPs to carbon footprint their private equity fund portfolios for several years.

 

02.3. 選定プロセスおよびそのESG・RI要因について記載してください

02.4. 外部運用会社を選定する際に、あなたの組織では以下の項目のいずれかを設定もしくは使っていますか:

ESGのパフォーマンス開発目標

ESG スコア

ESG ウェイト

実体経済目標

その他のRI留意事項

上記のいずれでもない

上場株式
債券 - SSA
債券 - 社債(金融)​
債券 - 社債(非金融)
プライベートエクイティ
不動産​
ESGのパフォーマンス開発目標
ESG スコア
ESG ウェイト
実体経済目標
その他のRI留意事項
上記のいずれでもない

‘その他’の方法を選択した場合、具体的に記入してください

Private Equity

The scheme has developed its own approach to enhanced due diligence for private equity. The approach is  published on our website here: https://www.uss.co.uk/~/media/document-libraries/uss/investments/riactivities/eddmar2014.pdf?la=en. 

All new GPs and fund teams are asked to complete a questionnaire regarding their approach to environmental, social and governance (ESG) matters, due diligence, disclosure on responsible investment and participation in industry initiatives relating to private equity and ESG. The questionnaire is outlined in SAM 02.05 below. It closely aligns to ESG matters raised in PRI LP questionnaire. USS participated in the PRI working group which helped to develop the PRI LP due diligence questionnaire, published in 2015. 

Property and Infrastructure

For property we take aspects of both the private and public market processes, as appropriate to the mandate. Were we to make infrastructure fund appointments in future, RI questions would be raised as part of the due diligence process, akin with our approach to other manager appointment processes.

Hedge Funds

We have focused on governance at hedge funds. We undertake due diligence on the directors and articulate our governance expectations publicly here: https://www.uss.co.uk/~/media/document-libraries/uss/investments/riactivities/expectationsgovernancehedgefunds2010.pdf?la=en.

Public equity / fixed income

The process is outlined in SAM 01. 

02.5. 精査され議論されたESG情報が選択意思決定プロセスにどのように影響するかを説明してください。[任意]

          USS PE RI diligence process

The first step in the process for USS occurs during the scheme’s due diligence assessments of potential GPs.  Private equity is not just buyouts, where the private equity firm takes control of a company. The LP/GP structure is used for a range of asset types including, among others, debt, infrastructure and mortgages. As a result, while the process USS has developed for undertaking due diligence has some core aspects, it has to be flexible and adaptable to account for differences in the underlying assets. 
 
USS undertakes its own traditional due diligence into GPs and once a prospective fund has passed an initial evaluation, a more detailed assessment is undertaken by the internal private equity managers. As part of that process, and before the investment decision is made, the RI due diligence is undertaken. This process is relatively simple, involving a brief questionnaire followed by either a meeting or teleconference between the GP, internal private equity staff and the USS RI team.
 
USS has developed its own questionnaire (see below), which is sent to all potential GPs. This questionnaire focuses on the following four areas:
1.     How RI issues are considered at the due diligence stage.
2.     How extra financial issues are managed in the overall management of assets.
3.     Communications associated with ESG issues.
4.     Views on UN-supported Principles for Responsible Investment (PRI) and other ESG frameworks.
 
The aim of these questions is twofold:
1.     To ensure the GP is aware that USS is interested in how it manages these issues and is prepared to answer questions around them.
2.     To identify areas for further discussion during the second phase of the due diligence (that is, a teleconference or meeting).
 
It is now unusual not to receive written responses to these questions and it is rare for USS not to receive at least basic information from potential GPs. Indeed, many funds now also provide additional information, including ESG policies and case studies as to how ESG issues have been incorporated into investment processes. USS is also seeing increased inclusion of ESG information in private placement memoranda (PPMs) – the reports that GPs provide to potential investors as part of the marketing process. While this frequently provides very limited information, it does indicate that the private equity sector is becoming both more used to seeing requests for information on ESG issues and more proactive in providing it. Inclusion of such information, in DQMs for example, demonstrates how far the sector has moved in recent years.  
 
The second phase of the process – the follow-up call or meeting – is extremely important. During these calls or meetings, USS asks for more detailed explanations as to how extra financial issues are assessed in the due diligence process, how they are managed across portfolios and how these issues are then communicated with LPs and other stakeholders.
 
In order to prepare for these meetings, USS reviews previous investments made by the GP to identify where ESG issues may have arisen in a portfolio company or asset. This generates specific questions that will usually be sent to the GP in advance of the call to enable them to prepare responses and to ensure that the appropriate people are available during the call to respond to the questions. The due diligence process then drills down to how the potential GP assessed those risks in their due diligence and managed them post investment. If it is a new fund (that is, a first-time fund or new GP), USS will even look back to a potential manager’s investments at previous funds to identify appropriate detailed ESG questions. 
 
Finally, USS – as a strong supporter of the UN-supported PRI – asks GPs for their views around the PRI as a framework for addressing these issues. USS does not require its GPs to be signatories to PRI, but does expect potential GPs to have processes in place to assess and address ESG risks and opportunities. USS does, however, encourage GPs to sign up to the PRI and a number of USS’s GPs have become signatories to the Principles. In fact, the PRI already has a disproportionate number of private equity-focused funds as signatories at about 15 percent of its membership (this is higher than the average asset allocations to the sector by pension funds).   
 
Based on the outcomes of these calls/meetings, responses to the questionnaire and other materials provided by the GP, the RI team provides a written opinion on the level of RI activity within the fund. This opinion is then discussed with USS’s internal Private Equity team to identify any outstanding ESG risks concerns. This report includes, where relevant, the identification of issues for further engagement if USS decides to invest in the fund. This final opinion is then incorporated into a final report on the fund (a deal qualifying memorandum or DQM) and submitted to an internal Private Markets Investment Committee (PMIC), which takes the final decision on investment in a GP.

--------------------------
Private Equity Questionnaire for new GP's and new funds

USS’s Approach to Responsible Investment
The Universities Superannuation Scheme Ltd (USS) is one of the largest pension schemes in the UK.  USS is a long term and responsible investor, and takes seriously its fiduciary obligations to its members and beneficiaries. 

In fulfilling these obligations, USS takes account of short and long term value drivers in its investment process. Environmental, social and governance (ESG) factors are considered in conjunction with financial information. In particular, we believe investee companies’ corporate governance, reputation management, environmental risk exposure, and human resource management should be evaluated as part of an assessment of a company’s competitive positioning and long term profitability. The scheme also seeks to actively encourage responsible corporate behaviour, which is based upon the belief that:  

i)	management of such issues is good for long term corporate performance, and 
ii)	better management of these issues will protect and enhance the value of the Scheme's investments. 

Our approach aims to ensure long term value delivery for our pension fund beneficiaries. 

Implications for Managers
USS expects that its fund managers, both internal and external, will take account of potentially material corporate governance, social and environmental considerations in the selection, retention and realisation of scheme investments. In addition, where the manager owns the assets or company, USS expects the manager to ensure that the above issues are managed to reduce risks, identify opportunities and to protect the reputation of USS.  

Questions for Managers
•	Please describe how your due diligence process incorporates an assessment of environmental, social and governance risks in the assets you are examining.  
•	Please identify the main environmental, social and corporate governance risks both your firm and investee portfolio assets face, and explain how these risks are managed. Please provide examples.

USS is facing increasing demand from members, trustees and investment staff for transparency and disclosure of ESG information. USS is supportive of greater transparency to both LPs and other stakeholders by private equity firms and investee companies. The scheme expects its GPs and their portfolio companies to work towards best practice reporting, and industry standards where applicable, such as the Walker Guidelines (http://www.walker-gmg.co.uk/) in the UK. 

•	Please explain your policy on reporting and disclosure pertaining to your own operations and those of investee companies, and provide supporting material.

USS is a signatory to the UN Principles of Responsible Investment (http://www.unpri.org).  These commit signatories (currently representing some US$60+ trillion in assets) to six aspirational Principles that help guide responsible investment strategy in all asset classes.  Building on the UN PRI, the American Investment Council (AIC - see www.investmentcouncil.org) published its own Responsible Investment Guidelines in February 2009, and Invest Europe’s Professional Standards Handbook also provides guidance on the integration of ESG into investment decision making and portfolio management.

•	Please outline your views on the UN PRI, AIC Guidelines, Invest Europe professional standards and other industry best practice codes. Please outline where you are signatories to such initiatives and provide examples of your commitments. 

For further information please contact RI@uss.co.uk.
-------------------------------------------

RI monitoring for private markets
Post investment, USS Investment Management’s in-house staff undertake monitoring of the GPs to which the scheme has allocated capital. The scheme undertakes monitoring to seek assurance that ESG issues are being managed by its GPs and to encourage improvements in ESG performance.  The information collected during monitoring also helps inform USS’s future allocations to a private equity manager as data collected are used in the due diligence process for new funds (as outlined above).  

The process of RI monitoring begins with research into the portfolio companies or other assets in which a GP has invested. The research identifies relevant ESG risks or opportunities that can be interrogated further with the GP and seeks to understand how they have engaged with portfolio companies on these issues.  A member of the RI team meets with representative members of the GP and questions the processes, actions and outcomes associated with the management of ESG issues within the portfolio. USS carries out these assessments within the context of the LP / GP relationship, where the GP has ultimate responsibility for investment decisions and its portfolios.  As a result, USS is not involved in managing issues at a portfolio or asset level. 

USS aims to assess their GPs on ESG issues on a regular and ongoing basis (typically every three years). This is irrespective of the type of private equity fund in which USS is investing (for example, debt funds or buyouts). It may also be the case that due diligence is undertaken on new funds offered by the private equity manager during this time. USS would assess how RI has been incorporated in any previous investments: this process also acts as a post investment review.

To aid with due diligence and ongoing assessments, USS has developed an internal databank of questions on ESG topics to ensure that the effectiveness of meetings with GPs is maximized covering the broad range of ESG issues. 
-----------------------

Re Public Markets Passive funds
Note on Passive Investment Strategies: For our passive equity portfolio, USS expects the fund manager to adhere to principles of good stewardship and to take an active approach to voting and engagement: the scheme monitors the manager to ensure that this is the case. USS does not consider this to be integration and has not looked at monitoring for ESG integration at its passive equity fund manager. However, it could be argued that the monitoring of ESG risk, active decision making on voting, and engagement on ESG matters within a portfolio would be considered "ESG integration" by some.
        

SAM 03. Evaluating engagement and voting practices in manager selection (listed equity/fixed income)

03.1. あなたの組織では、通常、運用会社の大部分を対象として、各運用会社の積極的な保有実務(積極的な株主行動等)をどのように評価しているかを明示してください。

エンゲージメント

運用会社のエンゲージメントポリシーを精査する

運用会社のエンゲージメント・プロセスを精査する(その事例および結果)

エンゲージメント結果が投資の意思決定プロセスに必ずフィードバックされるよう万全を図る

運用会社の選定プロセスにおけるその他のエンゲージメント課題; 具体的に記入してください

上記のいずれでもない

上場株式
債券 - SSA​
債券 - 社債(金融)
債券 - 社債(非金融)​
運用会社のエンゲージメントポリシーを精査する
運用会社のエンゲージメント・プロセスを精査する(その事例および結果)
エンゲージメント結果が投資の意思決定プロセスに必ずフィードバックされるよう万全を図る
運用会社の選定プロセスにおけるその他のエンゲージメント課題; 具体的に記入してください
上記のいずれでもない

‘その他’の方法を選択した場合、具体的に記入してください

We also review Stewardship Code statements and assessments, and request the fund manager's internal PRI transparency reports. We look to review and discuss case studies.  

The RI team usually meet with the portfolio managers and RI/ ESG teams at external managers (where they exist) to have a more informed discussion. We do not rely on responses from investor relations or client reps alone as they do not tend to have sufficient in-depth knowledge. Similarly, we do not rely on consultant research into fund manager's ESG performance. 

USS's approach to stewardship extends to all the scheme's assets including externally managed and non-equity assets.  We also consider engagement for our private market managers with their portfolio assets - be it portfolio companies, or for property tenants and property managers. Questions regarding stakeholder engagement are included in the GRESB Questionnaire which our property managers (of which we have a small number) and direct infrastructure assets are asked to complete.

 

(委任状による)議決権行使

運用会社の議決権行使ポリシーを精査する

様々な所有権の枠内における運用会社の議決権行使能力について精査する

議決された決定内容についてクライアントに報告する運用会社のプロセス精査する

議決権行使結果が投資の意思決定プロセスに必ずフィードバックされるよう万全を図る

行使した議決権の数を投票用紙/年次株主総会、保有銘柄や入手可能な根拠の割合として精査する

組織の選定プロセスにおけるその他の議決権行使に関わる問題; 具体的に記載してください

上記のいずれでもない

上場株式​
運用会社の議決権行使ポリシーを精査する
様々な所有権の枠内における運用会社の議決権行使能力について精査する
議決された決定内容についてクライアントに報告する運用会社のプロセス精査する
議決権行使結果が投資の意思決定プロセスに必ずフィードバックされるよう万全を図る
行使した議決権の数を投票用紙/年次株主総会、保有銘柄や入手可能な根拠の割合として精査する
組織の選定プロセスにおけるその他の議決権行使に関わる問題; 具体的に記載してください
上記のいずれでもない

‘その他’の方法を選択した場合、具体的に記入してください

We review asset managers' voting data, stewardship code response(s) and consider consistency of voting records between different markets and the corporations public policy positioning.

We consider the manager's public statements and participation in collaborative fora, particularly those focused on corporate governance and shareholder rights.

We consider the manager's approach to voting disclosure in the market, and how or whether they communicate voting decisions to their portfolio companies, in line with good practice.

We request voting data in a raw format so that we are able to analyse key areas and compare it to our in-house voting records. This enables us to drill down to interrogate specific voting issues.  

We also review their approach to stock lending, management of conflicts of interest (both between clients and between asset classes - e.g. public equity and fixed income), vote confirmation processes and request the opportunity to direct voting for pooled fund holdings.

03.2. 組織では、運用会社のエンゲージメント・アプローチが効果的であるかどうかについてどのように評価しているかを説明してください

03.3. 組織では、運用会社の議決権行使アプローチが効果的/適切であるかどうかをどのように評価しているかを説明してください

          As outlined above we consider consistency of voting records with public policy positions, between different markets, and engagement activities. We ask about vote confirmations and votes chains; the management of stock lending practices, communicating vote decisions to companies and public reporting.
        

03.4. 補足情報 [任意]

          Further RI review areas for listed equities are detailed in the Guide to Responsible Investment Reporting in Listed Equities document which we helped to produce in 2015 -
http://www.sustainablefinance.ch/upload/cms/user/2015_01_26_guide_to_responsible_investment_reporting_in_public_equity_published_NAPF1.pdf.

USS is currently working (March 2018) with the PRI Private Equity Disclosures Working Group and ERM to produce Private Equity Reporting and Monitoring Guidance.  

A Co-Head of RI sits on PRI's Private Equity Advisory Committee and has presented to GPs at various international fora on USS's approach to ESG due diligence, monitoring and reporting expectations on many occasions over the past few years.
        

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