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Yarra Capital Management

PRI reporting framework 2019

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

Our investment strategy can be characterised as a bottom-up, fundamental, style neutral approach with performance driven by stock specific insights in well-constructed, balanced portfolios. Our primary focus is on bottom-up research, which is supplemented by macro research.  

We have a long-term approach to investing, focusing on structural and cyclical changes in industries and companies, which provides tax and transaction cost efficiency. Environmental, Social and Governance (ESG) issues are considered as a mainstream part of our due diligence process as it is central to the investment and risk profile of a company and/or industry. The analysis of ESG issues are integral to our approach and are an important facet of our ongoing research and portfolio construction.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

ESG research is ingrained in how our Australian Equity and Fixed Income analysts invest and are a mainstream part of the ongoing research process.

We take our responsibility as active owners seriously. We been a signatory of the UN PRI since October 2007[1] and continue to strive for improvement of the Principles.

Where ESG issues have been identified, we consider it to be an important part of the process to discretely communicate our concerns to the management or board of the company to seek progress on the issue. We have often found this to be a constructive process which results in more effective outcomes for all shareholders.

At the Australian Equity level, our process is as follows:

  • Firstly, we identify ESG issues through extensive company and industry due diligence including a proactive program of engaging company boards, reviewing board structures/compensation guidelines and engaging third party consultants/brokers to undertake bespoke research.
  • ESG issues which are identified are included in our one-page investment thesis produced for each company, which is an effective tool to monitor these ESG issues.
  • If we assess the ESG issues identified to be sufficiently material and a threshold issue, we will not invest in that company.
  • ESG issues identified and found not to be threshold issues are incorporated into our valuation work. They may be included as a specific charge to the cash flows (e.g. a potential environmental liability) or an adjustment to the weighted average cost of capital calculation.
  • Our policy includes a requirement that we vote on all resolutions put forward by companies that we invest in. We incorporate the advice of an external research firm when deciding on how to vote, however we are not bound to follow their advice if we believe it is inconsistent with the overall objective of voting in our clients' interests.
  • We are committed to including ESG considerations in our brokerage panel structure.

At the Fixed Income level, our process is as follows:

  • Firstly, we identify ESG issues through extensive sovereign, company and industry due diligence including a proactive program of engaging all stakeholders and third party consultants/brokers to undertake bespoke research.
  • ESG issues which are identified are included in our one-page investment thesis produced for each issuer, and factored into our credit assessments.
  • If we assess the ESG issues identified to be sufficiently material and a threshold issue, we will not invest in that company.
  • ESG issues identified and found not to be threshold issues are incorporated into our valuation work. This will typically result in a lower than otherwise credit rating, which will typically require greater compensation/return to justify the investment. 

As part of our research process, we utilise multiple channels to remain abreast of ESG issues:

  • Company and industry contact (as noted above).
  • Meetings with industry experts, consultants and market participants including regulators and government.
  • Meetings with brokers around specific ESG issues (note: our panel vote includes a specific allocation for ESG research).
  • Use of the GLG and Primary Insight expert networks to identify and target meetings around specific topics, particularly in offshore markets.
  • Attendance at industry meetings

[1] Goldman Sachs Asset Management Australia was the UN PRI signatory between October 2007 and December 2016. Yarra Capital Management was established in 2017 following the 2016 management buyout of Goldman Sachs Asset Management’s Australian-focussed investment capabilities, backed by private equity firm TA Associates.

01.6. Additional information [Optional].

          
        
I confirm I have read and understood the Accountability tab for SG 01 I confirm I have read and understood the Accountability tab for SG 01

SG 01 CC. Climate risk (Not Applicable)


SG 02. Publicly available RI policy or guidance documents

New selection options have been added to this indicator. Please review your prefilled responses carefully.

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

02.3. Additional information [Optional].


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

Our Conflicts of Interest Policy requires each employee to identify potential conflicts of interest and escalating them to senior management or Legal & Compliance.  Legal & Compliance is responsible for assessing conflicts, providing advice to the business about how conflicts can be managed and monitoring compliance with Yarra Capital Management’s conflict of interests policy.

03.3. Additional information. [Optional]

In general terms, Yarra Capital Management encounters the following categories of conflict of interests:

Us versus client
Client versus client
Employee versus client

Yarra Capital Management’s conflict of interests policy contains an analysis of potential conflicts which the business might face, how the business is to manage the conflict and how the conflict management is to be monitored.

YCM also has a staff trading policy which includes trading blackout periods and security holding period rules to also manage conflicts of interests.


SG 04. Identifying incidents occurring within portfolios (Private)


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