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AMP Capital Investors

PRI reporting framework 2019

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Pre-Investment (Selection)

INF 05. Incorporating ESG issues when selecting investments

05.1. Indicate if your organisation typically incorporates ESG issues when selecting infrastructure investments.

05.2. Describe your organisation's approach to incorporating ESG issues in infrastructure investment selection.

AMP Capital's Global Infrastructure Team considers ESG issues as a core component of our mainstream investment process. This is reinforced by:

•           AMP Capital's overarching investment philosophy (that ESG integration provides greater insight into the risks and opportunities affecting the value and performance of investments we make on behalf of our clients); and

•           AMP Capital's integrated corporate responsibility framework (that commits our organisation to making responsible investment decisions on behalf of our clients).

Explicit protocols include ESG factors at each stage of investment selection, regardless of sector, fund, investment style or geography.

Stage 1 - Pre-investment

For new investment opportunities, we apply both a qualitative and quantitative approach in assessing the risks, opportunities and potential impact of ESG issues. ESG issues are considered in the very early stages of investment analysis, setting them up to be addressed throughout the investment approval process.

Opportunities pipeline report: a regular report on investment opportunities, with an overview of investment characteristics, deal metrics, key risks and status. ESG risks are included in the key risks sections, advancing from sector to transaction-specific as the deal advances.

Stage 2 - Concept paper approval. The investment concept paper for the Infrastructure Investment Committee(s) must contain a prescriptive list of transaction-specific ESG issues for the investment team to explore during detailed due diligence. It must also include a nominated ESG work stream manager and identify any ESG resources required (i.e. collaboration and/or secondment of internal expertise and/or specialist external consultants).

Stage 3 - Due diligence. Given the complex nature of infrastructure transactions, the investment team may appoint external advisors where specialist skills or technical knowledge are required, e.g. engineering and environmental consultants. The ESG work stream manager is responsible for allocating transaction-specific ESG issues to internal or external specialists and for deciding whether to 'Price, Transfer or Monitor' any ESG factors associated with the transaction.

Pricing of ESG factor(s)

•           Quantify the financial impact of potential ESG events

•           Integrate material ESG issues and impacts into valuation model sensitivities

•           Consider insurance for ESG issues that are difficult to mitigate

Transfer accountability to manage specific ESG factors

•           Identify the counterparty best positioned to manage specific ESG factors (given transparency and influence)

•           Formally commit investee company management or relevant counterparties to agreed process or standards of performance

•           Formally commit and/or incentivise performance through contractual and financial arrangements

Monitor ESG performance for lead indicators

•           Identify metrics that are highly correlated to financial performance and/ or risk profile

•           Formally commit investee company management and/or relevant counterparties to provide transparency of key ESG metrics and clear accountability for specific ESG factors at senior management level

•           Ensure board is actively managing key ESG risks and opportunities through standardised processes and reporting

•           Seek periodic appraisal of ESG monitoring practices and adherence to policy

Stage 4 - Final approval paper: A detailed investment paper is submitted for the Infrastructure Investment Committee(s) final investment approval. Explicit price, transfer and monitor strategies are required for all material ESG risks. Pricing sensitivities on specific ESG issues highlight their commercial relevance.

Stage 5: Completion paper and investment pack: (consisting of all due diligence research and data room materials, internal approvals and transaction documentation). The completion paper and investment pack, with all ESG due diligence materials, are submitted to the Infrastructure Investment Committee(s) within 28 days of the transaction completion and are retained for future reference.

Further details on the above are contained in our Infrastructure ESG Policy Guidelines available at the following link:

INF 06. ESG advice and research when selecting investments

06.1. Indicate whether your organisation typically uses ESG advice and research sourced internally and/or externally when incorporating ESG issues into the infrastructure investment selection process.

          Infrastructure investment managers (70 FTEs)
          Regional ESG Champions
          ESG specialists across AMP Capital

06.2. Additional information. [Optional]

Our investment team may draw on the experience of sector specialists within the Global Infrastructure Team, AMP Capital's ESG Specialists and Regional ESG Champions. AMP Capital's ESG Specialists develop and deliver proprietary insights using a range of approaches and tools, as well as drawing on relevant external research.

AMP Capital's internal ESG expertise

AMP Capital was one of the first global investment managers to genuinely integrate ESG factors into traditional financial analysis. That has given us the time to develop, test and improve our proprietary approaches, to build the data sets and relationships that allow a richer understanding of ESG issues, and to build the team to act on those insights. AMP Capital's team of ESG specialists is one of the largest and most experienced of its kind in the Asia-Pacific. It has the bandwidth to pursue active international ESG stewardship with investees and other investors, to develop proprietary tools and analyses, and to integrate those insights across all major asset classes and investment teams.

AMP Capital Infrastructure ESG Database

The ESG database captures specialist knowledge on ESG factors across a range of infrastructure sectors and regions. It supplements existing investment policies and is used throughout the investment decision-making and on-going asset management process, including:

•           conducting due diligence of new investment opportunities

•           completing internal ESG audits for existing assets

•           assessing the ESG practices of an investee company's supply chain

•           integrating ESG practices in strategic planning and operations

•           managing ESG issues that arise as a Board Director.

The ESG database is organised into sectors, regional and environmental, social and governance specific sections to provide intuitive navigation to relevant resources. Sources of information may include:

•           Internationally recognised best practice codes and guidelines

•           ESG specific frameworks and checklists (both external and proprietary resources)

•           Contemporary thought leadership and research papers

•           In-house proprietary research and insights

•           Government, regulator and community stakeholder portals

•           On-line training resources

The ESG database is continually refined to provide access to the most relevant and contemporary resources. Each new due diligence process, internal ESG asset audit or active management activity typically identifies new resources that are earmarked for future use when considering new investment opportunities. This continuous refinement ensures coverage of a comprehensive range of ESG-related issues and reflects the increasing sophistication of ESG integration techniques, not to mention changing industry trends and standards, regulatory requirements and social sensitivities.

ESG training and staff development

Continuous training on ESG and responsible investment is provided in a variety of forms across the organisation. On-going executive training and knowledge sharing is provided through transaction-focused learning, sector-focused research, asset-management analysis and bespoke staff education programmes.

INF 07. Examples of ESG issues in investment selection process

07.1. Indicate which E, S and/or G issues are typically considered by your organisation in the investment selection process and list up to three typical examples per issue.

ESG issues

List up to three typical examples of environmental issues

          Due diligence on the environmental management of operations and maintenance activities, Environmental Management System (EMS) for an electricity grid operator.
          Due diligence on the Environmental Management System (EMS) and ISO compliance of an UK airport.
          Due diligence on the contamination risks and compliance of additional developments for a potential sports stadium PPP.

List up to three typical examples of social issues

          Due diligence on the Safety, Health and Environmental Security (SHES) management system and review of the Lost Time Incidents of an energy company.
          Due diligence on the labour relations and applications for the Investors in People certification of a regional airport.
          Due diligence on the employee safety management procedures that cover recurring activities including acquisition of rolling stock, delivery, and maintenance monitoring of a rolling stock.

List up to three typical examples of governance issues

          Due diligence on current policies and governance arrangements such as code of conduct, bribery & corruption policies to meet regulations & community expectations for an energy distributor.
          Due diligence on the current management structure, talent management and succession plans of desalination plant re-investment.
          Due diligence on the negotiations, terms, and implementation of the next long-term incentive plan for the management of a rail company.

07.2. Additional information. [Optional]

Determining Materiality

When considering the key ESG issues likely to impact our infrastructure investment portfolios, we assess the physical location of a facility or service, environmental impact and constraints, community and social implications, the dynamics of a sector or industry in which they operate and the business practices of related counterparties. We also consider the governance arrangements in place to protect the long-term interest of investors.

INF 08. Types of ESG information considered in investment selection

08.1. Indicate what type of ESG information your organisation typically considers during your infrastructure investment selection process.

08.2. Additional information.

The information analysed in the investment selection process will depend on the nature of the assets and method of acquisition. All material ESG risks are identified during the due diligence process, and those risks and their management strategies are assessed and presented to the Investment Committee. They are then documented in the completion paper and investment pack within 28 days of transaction completion.

INF 09. ESG issues impact in selection process (Private)