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AMP Capital Investors

PRI reporting framework 2019

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You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (A) Implementation: Screening

(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

The AMP Capital Sustainable Share Fund avoids companies operating within sectors that have high negative social impacts. The fund avoids exposure (directly or indirectly) to companies with material exposure to production or manufacture of tobacco, nuclear power (including uranium), armaments, gambling, alcohol and pornography. A company deriving more than 10% of total revenue from these industries constitutes material exposure.

For companies involved in the production of tobacco or “controversial weapons”, or essential components of them, a zero revenue materiality test applies. Controversial weapons include land mines, cluster munitions, biological or chemical weapons.

With combustion of fossil-fuels being the main source of global greenhouse gas emissions, the AMP Capital Sustainable Share Fund limits exposure to companies which have a material exposure to the most carbon intensive fossil fuels, excluding any company with more than a 20% exposure (measured by percentage of market capitalisation, or other financial metric) to one, or a combination of, mining thermal coal, exploration and development of oil sands, brown-coal (lignite) coal-fired power generation, transportation oil from oil sands or conversion of coal to liquid fuels/feedstock.

The Fund aims to have a carbon footprint at least 30% less than the Fund’s performance benchmark.

Screened by

Description

AMP Capital recognises that some sectors pose considerably greater ESG risks than others, and so the long-term opportunities and threats to the sector are considered in the company SWOT analysis. Companies in industries with high sustainability risks or poor governance practices need to demonstrate strong ESG risk management to be considered investment grade. If the risks are extreme and the business constitutes a material part of the firm's operations, the stock will not be considered investment-grade – including those excluded by the ESG screen. Conversely, companies and industry sectors may be well positioned to prosper from longer-term social and sustainability drivers (e.g. healthcare and renewable energy sectors).

Screened by

Description

International norms such as International Labour Organisation (ILO) standards and Human Rights Conventions are also considered.  

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

The AMP Capital Sustainable Share Fund uses a combined ESG screen and ESG integration approach to define its investible universe from its primary investment universe, the S&P/ASX200. The screening and best-in-class combination creates a bias (tilt) toward a portfolio of companies with stronger ESG practices, relative to the relevant benchmark and a lower carbon footprint exposure. It also reflects our clients' overall investment objectives and the mandate for the Fund, as clients invested in the Fund seek to limit their exposure to the screened sectors.

ESG screening applies if 10% or more of the company's earnings are derived from alcohol, tobacco, gambling, pornography, nuclear (including uranium mining) or armament activities. AMP Capital's ESG Research Team closely liaises with the portfolio manager to highlight which stocks (if any) are close to the 10% threshold, and these stocks are actively monitored during reporting season. For those companies involved in the production of tobacco or “controversial weapons”, or essential components of them, a zero revenue materiality test applies. Controversial weapons are considered to be land mines, cluster munitions, nuclear weapons and biological or chemical weapons. If the threshold is breached, the portfolio manager must divest the stock within 6 months

Regular reporting on these issues is provided to our clients in accordance with the Fund's mandate. Additional relevant information including ESG investment insights, corporate governance (proxy voting) statistics, and company engagement reports are publicly available via AMP Capital's website at www.ampcapital.com/esg.

Further information on AMP Capital's recently announced ethical decision-making framework are available at www.ampcapital.com.au/esg

*AMP Capital Funds Management Limited (AMP Capital) ABN 15159557721, AFSL 426455 is the responsible entity of the AMP Capital Sustainable Share Fund and issuer of the Product Disclosure Statement (PDS) for the Fund. 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 relevant Fund.


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

AMP Capital engages with companies on sector-wide and company-specific issues, with the nature of that engagement often reflected in our proxy voting. Insights from engagement and proxy voting can directly inform our investment decisions. Communication of ESG information to our investment teams is constant, and we maintain systems and databases for all ESG engagement and proxy voting activity. Annual company engagement plans are developed for particular funds.

Our proxy voting flows from our company engagement and is undertaken through AMP Capital's Corporate Governance Manager. Regular Corporate Governance Reports, Engagement Reports, and ESG Insights inform our clients and the public about our ESG research and engagement efforts, and how ESG influences our overall investment thinking.

Company engagement meetings are typically attended by both industry and ESG analysts, so that any discussion on material ESG factors is directly shared with and reviewed by the broader investment teams. Information from engagement is also shared with all equity investment teams through meeting notes and weekly ESG updates. This information also influences our ESG research priorities.

More detail is provided elsewhere in this survey (other modules) or can be found at www.ampcapital.com.au/esg


LEI 06. Processes to ensure fund criteria are not breached

06.1. Indicate which processes your organisation uses to ensure fund criteria are not breached.

06.2. If breaches of fund screening criteria are identified - describe the process followed to correct those breaches.

AMP Capital's Sustainable Investments Team notify Enterprise Risk Management of any stock that may become non-investment grade due to established screening criteria. This is acknowledged by Enterprise Risk Management and IT systems then prevent portfolio managers from buying the particular stock.

All stocks that are close to the (screening) materiality thresholds are monitored regularly during the reporting season. For example, a particular company may be close to the 10% earnings restriction threshold for a number of years and each reporting season AMP Capital calculates the alcohol and tobacco exposure. If this then eventually reached 10% the stock would become excluded from the investable universe.

The AMP Capital Sustainable Investments Team closely liaises with portfolio managers to highlight which stocks (if any) are close to the established materiality thresholds. The experience of the team which has covered the stocks for several years and regular stock reviews, mean there have been no cases of materiality breaches identified. If such breaches were to occur and a non-investable grade stock was held within the portfolio, the portfolio manager is required to divest from the stock within 6 months.

Similar process requirements are also being developed to facilitate the implementation of AMP Capital's recently announced ethical decision-making framework (ethical exclusions) which will apply across the business.

06.3. Additional information.[Optional]

AMP Capital's proxy voting activities are regularly reviewed by AMP Capital's internal audit function.


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