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PM Capital

PRI reporting framework 2018

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ESG incorporation in actively managed fixed income

Implementation processes

FI 01. Incorporation strategies applied

01.1. Indicate 1) Which ESG incorporation strategy and/or combination of strategies you apply to your actively managed fixed income investments; and 2) The proportion (+/- 5%) of your total actively managed fixed income investments each strategy applies to.

Corporate (financial)
0 Screening alone
0 Thematic alone
0 Integration alone
100 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
0 Integration alone
100 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%

01.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

PM CAPITAL has a policy of exclusion when we feel that a company or sector can not as a result of its primary business activities be considered to be a Responsible Investment.

The exclusion of a stock or sector has a negligible effect on the size of the investable universe. PM CAPITAL is typically looking to hold 55-65 investment positions in its portfolios at any time within it's Fixed Income portfolio. Some examples of sectors that are screened from our investable universe include tobacco manufacturers and weapons manufacturers.

While we exclude certain sectors, we acknowledge that this may in the short term affect investment performance on a relative basis. However, in the long term, we believe that the investment performance of quality business franchises will ultimately prevail and deliver above average shareholder value. Many people believe a negative screening process forces an unacceptable trade-off between ethical criteria and investment returns. For PM CAPITAL, research of sustainability factors within the context of an effective company risk management framework plays a key role in achieving our primary aim - that is, to maximize long-term returns for investors over a three to five year period.

01.3. Additional information [Optional].


FI 02. ESG issues and issuer research (Private)


FI 03. Processes to ensure analysis is robust

03.1. Indicate how you ensure that your ESG research process is robust:

specify description

          Our investment positions are regularly reviewed by our analysts and Chief Investment Officer to ensure the reasons why we invested are still relevant.
        

03.2. Describe how your ESG information or analysis is shared among your investment team.

03.3. Additional information. [Optional]

Comprehensive research conducted by our investment team covering various aspects of the businesses being considered for investment are held in a centralised database for accessible to all investment staff.


(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
Corporate (financial)
Corporate (non-financial)
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

04.2. Describe your approach to screening for internally managed active fixed income

PM CAPITAL has a policy of exclusion when we feel that a company or sector can not as a result of its primary business activities be considered to be a Responsible Investment.

The exclusion of a stock or sector has a negligible effect on the size of the investable universe. PM CAPITAL is typically looking to hold 55-65 investment positions in its portfolios at any time within it's Fixed Income portfolio. Some examples of sectors that are screened from our investable universe include tobacco manufacturers and weapons manufacturers.

While we exclude certain sectors, we acknowledge that this may in the short term affect investment performance on a relative basis. However, in the long term, we believe that the investment performance of quality business franchises will ultimately prevail and deliver above average shareholder value. Many people believe a negative screening process forces an unacceptable trade-off between ethical criteria and investment returns. For PM CAPITAL, research of sustainability factors within the context of an effective company risk management framework plays a key role in achieving our primary aim - that is, to maximise long-term returns for investors.

04.3. Additional information. [Optional]


FI 05. Negative screening - overview and rationale

05.1. Indicate why you conduct negative screening.

Corporate (financial)

Corporate (fin)

Corporate (non-financial)

Corporate (non-fin)

05.2. Describe your approach to ESG-based negative screening of issuers from your investable universe.

PM CAPITAL has a policy of exclusion when we feel that a company or sector can not as a result of its primary business activities be considered to be a Responsible Investment.

The exclusion of a stock or sector has a negligible effect on the size of the investable universe. PM CAPITAL is typically looking to hold 55-65 investment positions in its portfolios at any time within it's Fixed Income portfolio. Some examples of sectors that are screened from our investable universe include tobacco manufacturers and weapons manufacturers.

While we exclude certain sectors, we acknowledge that this may in the short term affect investment performance on a relative basis. However, in the long term, we believe that the investment performance of quality business franchises will ultimately prevail and deliver above average shareholder value. Many people believe a negative screening process forces an unacceptable trade-off between ethical criteria and investment returns. For PM CAPITAL, research of sustainability factors within the context of an effective company risk management framework plays a key role in achieving our primary aim - that is, to maximise long-term returns for investors over a three to five year period.

05.3. Additional information. [Optional]


FI 06. Examples of ESG factors in screening process (Private)


FI 07. Screening - ensuring criteria are met

07.1. Indicate which systems your organisation has to ensure that fund screening criteria are not breached in fixed income investments.

Type of screening
Checks
Negative/exclusionary screening?

other description

          Our investment positions are regularly reviewed by our analysts and Chief Investment Officer to ensure the reasons why we invested are still relevant.
        

07.2. Additional information. [Optional]


(C) Implementation: Integration

FI 11. Integration overview

11.1. Describe your approach to integrating ESG into traditional financial analysis.

PM CAPITAL incorporate ESG issues through screening out particular sectors or by incorporating into our view of valuation. The valuation reflects our assessment of the quality of the business as well as our assessment of the internal culture, management and Board driving it.

PM CAPITAL recognises the implications of environmental, social and governance factors as integral market forces that ultimately represent components of a company's performance and valuation. Intensive research and analysis is a key component of PM CAPITAL’s investment process and these factors are components of this analysis. We believe that poor practice across these areas will inevitably result in lower investment returns and poorer outcomes for all stakeholders of offending companies.

PM CAPITAL considers factors in ESG issues through:

Screening

PM CAPITAL has a policy of exclusion when we feel that a company or sector can not as a result of its primary business activities be considered to be a Responsible Investment.

The exclusion of a stock or sector has a negligible effect on the size of the investable universe. PM CAPITAL is typically looking to hold 25-45 investment positions in its portfolios at any time. Some examples of sectors that are screened from our investable universe include tobacco manufacturers and weapons manufacturers.

While we exclude certain sectors, we acknowledge that this may in the short term affect investment performance on a relative basis. However, in the long term, we believe that the investment performance of quality business franchises will ultimately prevail and deliver above average shareholder value. Many people believe a negative screening process forces an unacceptable trade-off between ethical criteria and investment returns. For PM CAPITAL, research of sustainability factors within the context of an effective company risk management framework plays a key role in achieving our primary aim - that is, to maximize long-term returns for investors over a three to five year period.

 

Corporate Governance

Proxy Voting

PM CAPITAL has a policy of active engagement in which we use the fund's voting power in general meetings of company shareholders. PMCAPTIAL will generally oppose proposals such as:

election of inappropriate directors, particularly where there is not a majority of independent directors, where board quality is considered an issue, or where there has been excessive turnover of board / senior executives;
 excessive remuneration arrangements, or a lack of alignment of executive incentive structures with that of shareholders and a company's operating performance;
 appointment of auditors who are not independent.

 

Corporate Engagement

PM CAPITAL's investment team regularly meet with and engage operational management of companies that we invest in. We also engage Board members when deemed appropriate. We do not engage third parties to represent our views. The kinds of issues that might be raised with companies are:

Assessed gaps or flaws in a company's risk management framework:;
Assessed weaknesses in Board composition;
Excessive executive remuneration arrangements;
Concerns about corporate governance practices;
Concerns about environmental practices;
Concerns about social issues;

As such, consideration is given to analysing a range of sustainable business practices as well as the financial impact of a company's environmental and societal risks over our investment horizon; in particular, climate change and occupational safety.

11.2. Describe how your ESG integration approach is adapted to each of the different types of fixed income you invest in.

Corporate (financial)

PM Capital's approach to ESG integration is consistent across the assets types we invest in.

Corporate (non-financial)

PM Capital's approach to ESG integration is consistent across the assets types we invest in.

11.3. Additional information [OPTIONAL]


FI 12. Integration - ESG information in investment processes

12.1. Indicate how ESG information is typically used as part of your investment process.

Select all that apply
Corporate (financial)
Corporate (non-financial)
ESG analysis is integrated into fundamental analysis
ESG analysis is integrated into security weighting decisions
ESG analysis is integrated into portfolio construction decisions
ESG analysis is a standard part of internal credit ratings or assessment
ESG analysis for issuers is a standard agenda item at investment committee meetings
ESG analysis is regularly featured in internal research notes or similar
ESG analysis is a standard feature of ongoing portfolio monitoring
ESG analysis features in all internal issuer summaries or similar documents
Other, specify

12.2. Additional information [OPTIONAL]


FI 13. Integration - E,S and G issues reviewed

13.1. Indicate the extent to which ESG issues are reviewed in your integration process.

Environment
Social
Governance
Corporate (financial)

Environmental

Social

Governance

Corporate (non-financial)

Environmental

Social

Governance

13.2. Please provide more detail on how you review E, S and G factors in your integration process.

Corporate (financial)

PM CAPITAL recognises the implications of environmental, social and governance factors as integral market forces that ultimately represent components of a company's performance and valuation. Intensive research and analysis is a key component of PM CAPITAL's investment process and these factors are components of this analysis. We believe that poor practice across these areas will inevitably result in lower investment returns and poorer outcomes for all stakeholders of offending companies.

Corporate (non-financial)

PM CAPITAL recognises the implications of environmental, social and governance factors as integral market forces that ultimately represent components of a company's performance and valuation. Intensive research and analysis is a key component of PM CAPITAL's investment process and these factors are components of this analysis. We believe that poor practice across these areas will inevitably result in lower investment returns and poorer outcomes for all stakeholders of offending companies.

13.3. Additional information.[OPTIONAL]


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