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AMP Capital Investors

PRI reporting framework 2019

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Outputs and outcomes

LEA 09. Number of companies engaged with, intensity of engagement and effort

Indicate the proportion of companies from your listed equities portfolio with which your organisation engaged with during the reporting year.
We did not complete any engagements in the reporting year.

Number of companies engaged

(avoid double counting, see explanatory notes)

Proportion of companies engaged with, out of total listed equities portfolio

Individual / Internal staff engagements

50
25

Collaborative engagements

2
1

09.2. Indicate the proportion breakdown of engagements conducted within the reporting year by the number of interactions (including interactions made on your behalf)

No. of interactions with a company
% of engagements
One interaction
2 to 3 interactions
More than 3 interactions
Total
100%

09.3. Indicate the percentage of your collaborative engagements for which you were a leading organisation during the reporting year.

Type of engagement

% Leading role

  Collaborative engagements

09.5. Additional information. [Optional]

These engagement figures include engagements via direct meetings and do not include all letters/emails sent in relation to voting decisions. 


LEA 10. Engagement methods

10.1. Indicate which of the following your engagement involved.

10.2. Additional information. [Optional]


LEA 11. Examples of ESG engagements

11.1. Provide examples of the engagements that your organisation or your service provider carried out during the reporting year.

ESG Topic
Company leadership issues
Conducted by
Objectives

In 2018, AMP Capital's ESG Investment Research Team met with companies on 73 occasions and at most of these meetings corporate governance related issues were specifically discussed

Scope and Process

The 'two strikes rule' introduced in Australia in 2012 means that if a more than 25% of shareholders vote against a company's remuneration report two years in a row they are given the opportunity to vote to spill the board. This has led to a focus on remuneration but has also led to companies being more inclined to engage with shareholders on broader topics. Discussion topics have included gender diversity and cyber security, human rights and supply chain, climate change, the culture in the banking and the finance sectors and improved ESG reporting.

 

Outcomes
ESG Topic
Company leadership issues
Conducted by
Objectives

The physical impacts from climate change are predicted to be significant. To mitigate the potential impact, regulators around the world are introducing policies designed to reduce emissions. Some of these are likely to have a direct impact on the valuation of assets, others will require broader economic restructuring that will create both investment opportunities and risks. The timing and magnitude of the investment impact will vary between and within asset classes.

AMP Capital is part of Climate Action 100+ and is actively involved in this collaborative engagement with the world's largest emitters of greenhouse gases.  We are leading the engagement on two large resources companies based in Australia.

Scope and Process

In 2017, the Taskforce on Climate Related Financial Disclosures (TCFD) released recommendations on improving company disclosure on climate change across four key areas including Governance, Strategy, Risk Management and Metrics and Targets.

One of the Task Force's key recommended disclosures relates to the potential impacts of climate-related risks and opportunities on an organization's business, strategy, and financial planning under different potential future states (scenarios), including a 2° Celsius scenario.

The recommendations provide a useful framework by which to engage companies on climate change risks. As with other years, our engagement has focussed on policy and meetings with companies.

AMP Capital continued our involvement in the IGCC’s policy, adaptation and research committees. AMP Capital is Deputy Chair of the IGCC. The policy committee’s focus has been the government’s proposed National Energy Guarantee (NEG), While more detail is required to fully assess the impacts of the NEG, our analysis suggests it could be politically acceptable and provide an effective framework for companies and investors. Through our involvement in the research and adaptation working groups, AMP Capital has provided input into the IGCC report on Investing in Climate Adaptation and research on economic and social consequences of coal-fired power generation shutdowns.

Outcomes
ESG Topic
Company leadership issues
Conducted by
Objectives

AMP Capital has engaged on human rights in supply chains for over six years. We continued to focus on this issue in 2018.

Scope and Process

The themes previously identified are still important, with increasing cost pressures from rising wages making Chinese garment firms less competitive.

AMP Capital is a signatory to the Bangladesh Accord which commits global brands, retailers, investors and other parties to ensuring a safe and healthy Bangladeshi garment industry. This was established following the Rana Plaza building collapse in April 2013 which caused over 1,100 casualties and led to greater scrutiny of the industry’s supply chain. AMP Capital has more recently signed the Bangladesh investor statement which encourages the Accord to extend its work beyond the May 2018 endpoint.

Outcomes
ESG Topic
Company leadership issues
Conducted by
Objectives

AMP Capital is actively researching the earnings risks posed by exposure to sugar and engaging with Australian food and beverage manufacturers and retailers on the need to diversify earnings streams, reduce sugar content, and reduce advertising to children and young adults.

Scope and Process

There is rising consumer and political awareness about increasing sugar consumption because of the scientific link to obesity and the health and wellness thematic. The structural decline in sugar consumption presents earnings challenges but there are also ethical issues. Some companies may be tempted to respond by undermining public health bodies with funded research and/or political lobbying, and more aggressive marketing strategies, particularly targeting children and young adults.

A 20 per cent tax on sugary drinks is being proposed by Australia's leading health organisations which will have significant impacts on many company's strategy and earnings. 

Manufacturers of sugary drinks have been trying to prepare for the likely change in regulation by reducing sugar content, replacing sugar with artificial sweeteners and decreasing package sizes. Their strategies also include diversification by bringing other drinks such as flavoured milk, iced coffee, protein drinks and juices to the market, many of which have their own health concerns.

Outcomes
ESG Topic
Company leadership issues
Conducted by
Objectives

This objective has been addressed in two ways: working directly with companies to help them to improve their ESG reporting and working with larger groups such as the Australian Investor Relations Association (AIRA) to the same end.

Scope and Process

During 2018 we engaged with several companies directly to help them improve their ESG reporting. Examples include:

  • Providing feedback on existing ESG reporting and material issues.

  • Running a workshop to assist a utilities company with their ESG reporting and integrated reporting with existing annual report.

Outcomes
ESG Topic
Company leadership issues
Conducted by
Objectives

AMP Capital has focused its engagement on payday lending for several years now, recognising that this sub-sector presents a number of ethical and legal problems. There are extensive laws designed to protect consumers from taking out loans that they cannot afford at interest rates that they do not understand but these disclosures are not always clear and the consumers are sometimes too desperate to make rational decisions.

Scope and Process

AMP Capital continued to address payday lending and widened the scope of this work to include consumer leases which our research indicates has similar issues arising. We are monitoring legislative reform on payday lending and consumer loans which the Australian Government committed to in 2016 but has yet to implement.

AMP Capital is particularly focussed on culture at major banks, given mis-selling and customer mistreatment which can follow when employees prioritise sales targets over a customers’ best interests. The Sedgwick report released in April made recommendations advising banks to overhaul their incentive structures for staff selling products. This report recognises a “trust deficit” in the banking industry and encourages banks to repair relationships with consumers. These recommendations will force banks to drop incentives based on sales for front-line staff and force introduction of balanced scorecards where financial measures are not the sole component. Most banks have stated that they will comply with the report recommendations. 

Outcomes
ESG Topic
Company leadership issues
Conducted by
Objectives

In March 2017 AMP Capital launched a new ethical investment policy which means that AMP Capital will be ending investment in almost $600 million-worth of assets in companies that make tobacco products, cluster munitions, chemical and biological weapons, and landmines.

Scope and Process

AMP Capital furthered its commitment to responsible investing by introducing a new decision-making framework where, in exceptional circumstances, it may exclude companies or sectors on ethical grounds within its entire investment portfolio.

The new framework has been incorporated into AMP Capital’s existing ESG and Responsible Investment Philosophy, which is applied across the business.

Under the framework, AMP Capital considered all sectors in which it invests and concluded that manufacturers of tobacco, cluster munitions, landmines, biological and chemical weapons do not meet the minimum ethical standards required and will be excluded from its investable universe.

AMP Capital completed the full implementation of this divestment in September 2018.

Outcomes
ESG Topic
General ESG
Conducted by
Objectives

AMP Capital's Responsible Investment Leaders Funds (RIL funds) appoint engage external fund managers who also undertake company engagements on the funds behalf.  Depending on the issue, the managers might ask a company to pay their workers more, to ensure their supply chains are ethical, or to map and disclose their path to a lower carbon economy. They meet with chairs and CEOs of the world’s largest companies, whether or not they have invested in that company on behalf of the RIL funds.

 

Scope and Process

The following is a snapshot of the engagement issues that the RIL funds’ equity managers prioritised.

  • Ethical sourcing and human rights in supply-chains
  • Climate change
  • Gender Diversity
  • Sugar and obesity
  • Factory farming and human resistence to antibiotics
  • Green and social bonds

More information is contained in the annual RIL engagement report available via the AMP Capital website:

https://www.ampcapital.com/content/dam/capital/02-global-files-only/02-esg-resources/amp-capital-ril-engagement-report.pdf

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

Outcomes

11.2. Additional information. [Optional]


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