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AMP Capital Investors

PRI reporting framework 2019

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Outputs and outcomes

FI 17. Financial/ESG performance

17.1. Indicate whether your organisation measures how your incorporation of ESG analysis in fixed income has affected investment outcomes and/or performance.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
We measure whether incorporating ESG impacts portfolio risk.
We measure whether incorporating ESG impacts portfolio returns.
We measure the ESG performance/profile of portfolios (relative to the benchmark).
None of the above

17.2. Describe how your organisation measures how your incorporation of ESG analysis in fixed income has affected investment outcomes and/or ESG performance. [OPTIONAL]

AMP Capital believes our analysis of ESG considerations within Fixed Income has enabled our teams to better identify risk issues and improve overall ESG performance. Decisions have been taken on ESG grounds to narrow down or prioritise the investment universe and in some cases not to proceed with certain investments. Conversely, detailed analysis of ESG issues and engagement with issuers has also helped on some occasions to strengthen our conviction to retain certain investments within our portfolios.

Our ESG country ratings for the AMP Capital Responsible Investment Leaders Diversified Fixed Income Fund* for example, has helped define a better-quality universe of countries for sovereign fixed income investments. This fund also limits material exposures to socially-harmful products or major sources of greenhouse gas emissions, excluding companies:

  • that derive more than 10% of their total revenue from the production, manufacture or sale of tobacco, nuclear power (including uranium), armaments, gambling, alcohol, or pornography; and
  • with more than a 20% exposure (measured by market capitalisation or other appropriate financial metric) to one or more of mining thermal coal, exploring or developing oil sands, transporting oil from oil sands, generating power from brown coal (lignite), or converting coal to liquid fuels/feedstock.

17.3. Additional information.[OPTIONAL]

* AMP Capital Funds Management Limited (AMP Capital) ABN 15159557721, AFSL 426455, is the responsible entity of the Responsible Investment Leaders Funds and issuer of the Product Disclosure Statements (PDS) for the Funds. To invest, investors will need to obtain the current PDS from AMP Capital before making a decision to acquire, continue to hold or dispose of units in the Fund.


FI 18. Examples - ESG incorporation or engagement

18.1. Provide examples of how your incorporation of ESG analysis and/or your engagement of issuers has affected your fixed income investment outcomes during the reporting year.

ESG issue and explanation

AMP Capital's focus on emerging opportunities in Green Bonds has resulted in meetings with supranational issuers with the desire to issue ESG-themed bonds in Australia (A$).

As an example, we participated in the largest ever Green bond issue in Australia, as NSW Treasury Corp issued $1.8 billion of 10-year bonds to fund clean energy projects such as low carbon transport.

AMP Capital achieved a favourable allocation, with the proceeds being used for eligible projects including:

•    The Newcastle Light Rail which will incorporate climate risk into design to ensure infrastructure is climate resilient.

•    Reduce emissions, energy and fuel consumption, waste production

•    Preservation of Aboriginal artefacts in the construction process

•    Improvements in energy efficiency, wastewater treatment and recycling, and receiving water quality as part of the Lower South Creek Treatment Programme. Social benefits include adequate and equitable sanitation.

 

 

 

Impact on investment decision or performance

Diversification of portfolio. Favourable allocations to ESG themed investments in order to meet our client's needs.

ESG issue and explanation

We also participated in a sustainable bond issuance from Australia’s largest provider of nursing, paramedics and teaching students.

AMP Capital achieved a favourable allocation, with the proceeds being used for green and social projects including:

•  5-star green star rated building providing physiotherapy, allied health and learning commons spaces

•  Building health and wellbeing institutes in areas of psychosocial issues and critical public health to help improve health for Australians generally and in particular those from disadvantaged groups

Impact on investment decision or performance

Diversification of portfolio. Favourable allocations to ESG themed investments in order to meet our client's needs.

ESG issue and explanation

Recently, AMP Capital became a participant in Climate Action 100+, including being the lead engager with two manager resources companies in Australia. To support these efforts, AMP Capital seek to participate in dialogue and engage in collaborative initiatives with other investors and credit ratings agencies to further efforts to integrate climate change risks.

Impact on investment decision or performance

Outcomes of these engagements with a number of industries will help to raise the understanding of climate change risks from a creditworthiness perspective.

ESG issue and explanation

In 2018, we participated in an A$2 billion Residential Mortgage-Backed Securities (RMBS) representing Australia’s first green mortgage-backed bond.

It is the world’s first RMBS with an underlying pool of non-green and green residential mortgage securities that has been Climate Bond Certified by CBI (Climate Bonds Initiative).

AMP Capital achieved a favourable allocation, with the proceeds being used for eligible projects including:

•  Debt instruments financing assets that are consistent with a low-carbon future and more specifically Australian low carbon residential buildings.

•  Clean energy, electric vehicles, electrified public transport, and energy-efficient

•  Socially responsible investment ecosystem

Impact on investment decision or performance

Diversification of portfolio. Favourable allocations to ESG themed investments in order to meet our client's needs.

ESG issue and explanation

AMP Capital's ESG research team was requested to provide the Global Fixed Income team with some ESG analysis for a particular issuer in the infrastructure sector.

A coal port terminal company had been looking for solutions to repay its short maturity bonds, as the size of near-term refinancing was putting negative pressure on its credit rating. The company elected to issue a new US$ bond, to pre-emptively fully refinance the 2018 bonds.  We voted in favour of the bond being called at the advantageous make-whole price. But we did not participate and roll into the new bond issuance because based on our forward-looking ESG assessment we were concerned with developments of the coal port and its closer linkage to a construction of a new coal mine project where we have environmental concerns. 

Impact on investment decision or performance

The outcome of this engagement has been to not participate in the new bond issuance. We have also incorporated this analysis into our ongoing company view regarding this issuer

18.2. Additional information.

The Global Fixed Income team sees ESG risks as being a key measure of companies' ability to maintain repayment of debt and so will continue to use engagement on ESG issues as a part of our broader engagement with invested companies.


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