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AMP Capital Investors

PRI reporting framework 2019

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ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation undertakes scenario analysis and/or modelling and provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe Assessments have included projected carbon price of $100t/CO2e on equity portfolios and preliminary scenario analyses of value at risk from phasing out fossil fuels for major equity benchmarks. AMP Capital's Real Estate division completed portfolio-wide climate risk and resilience assessments using IPCC extreme RCP8.5 projections.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

          Refer Additional information below in SG13.3
        

13.3. Additional information. [OPTIONAL]

AMP Capital may appoint managers in our Responsible Investment Leaders (RIL) range of funds that demonstrate they consider climate change within their investment processes, including securities that may exposed to climate change risk following scenario analysis of affected securities.

The RIL funds asset allocation is tailored for ethical and ESG related exclusions and exclude some asset classes due to ethical and/or ESG concerns, including infrastructure, high yield credit, private equity and hedge funds. This affects asset allocation with fewer asset classes yet the same investment objectives.

Modelling of risk/return and setting of asset allocation is crucial within these funds which may have higher weightings to equities or fixed income. The RIL funds’ dynamic asset allocation involves tilting in sectors, sub-sectors or markets away from strategic asset allocation because of the ESG and ethical position within the Fund Charter.

*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.


SG 13 CC.

13.4 CC. Describe how the organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, the results and any future plans.

Describe

Physical risks of climate change In our Real Estate division, AMP Capital is taking a proactive approach to managing climate risk.  A portfolio-wide evaluation of climate risk and resilience by market and sector and for each asset in Australia has been undertaken using the IPCC's extreme Representative Concentration Pathway (RCP 8.5 scenario).  The study considered over various time scales a number of physical stressors including: impacts of extreme heat; bushfire risk; drought; extreme rainfall; cyclones and severe storm events; impacts of inland and coastal flooding; and sea level rise for major Australian cities and managed real estate assets. 

This preliminary analysis is being used to develop long term asset specific management plans as well as developing climate due related diligence assessments for use in future real estate transactions.

 

Describe

AMP Capital undertakes regular investment research and assessments of climate change risks to its managed investments through its existing ESG frameworks.  This considers factors such as carbon regulation, direct and indirect costs, geographic exposure to climate policy, capacity to adapt and manage risks and transitional government assistance programs.  In 2018 AMP Capital also expanded its carbon footprinting analyses to include its managed listed equity and corporate fixed income portfolios.  This information is available via www.ampcapital.com

In recent years AMP Capital has undertaken a range of preliminary scenario analyses including value at risk of a phasing out of fossil fuels for major equity benchmarks (e.g. ASX200, MSCI World).  Additional assessments include projected carbon price scenarios of $25, $50 and $100/tonne (CO2e) on internally and externally managed equity portfolios.

Details of this analysis are provided in the attached ESG Investment Insights paper available on the AMP Capital website:

https://www.ampcapital.com/content/dam/capital/02-global-files-only/02-esg-resources/201602-insight-paper-esg-climate-change.pdf

 

Describe

The analyses such as those outlined above are used to inform AMP Capital's active ownership and engagement activities with investee companies.  Investors are increasingly paying attention to the recommendations of the Taskforce on Climate-Related Financial Disclosures (“TCFD”) and how to engage with companies on improving such disclosures as well as incorporation of this information into portfolio risk considerations. 

Climate Action 100+ is an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. The companies include 100 ‘systemically important emitters’, accounting for two-thirds of annual global industrial emissions, alongside more than 60 others with significant opportunity to drive the clean energy transition.  To date, 310 investors with more than US$32 trillion in assets under management have signed on to this initiative.  AMP Capital is a member of the initiative and is leading the engagement with two large Australian companies.

 

 

13.5 CC. Indicate who uses this analysis.

13.6 CC. Indicate whether the organisation has evaluated the impacts of climate-related risk, beyond the investment time-horizon, on the organisations investment strategy.

Please explain the rationale

13.7 CC. Indicate whether a range of climate scenarios is used.

Indicate the climate scenarios the organisation uses.
Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other

Other (1) please specify:

          Carbon pricing scenarios including $100tCO2e
        
Other

Other (2) please specify:

          VAR phasing out fossil fuels
        
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

14.4. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

AMP Capital discloses information on climate change and greenhouse gas emissions risks and opportunities through a variety regulatory and voluntary reporting and disclosure frameworks.  This includes through AMP Limited's annual reporting suite; AMP Limited's Carbon Disclosure Project annual submission; annual reporting under the Australian National Greenhouse and Energy Reporting (NGER) Act (2007), and via GRESB ESG performance benchmarking of our flaghship property and infrastructure funds.

Taskforce on Climate-related Financial Disclosures

In mid 2017, the final report of the G20 Financial Stability Board – Taskforce on Climate-related Financial Disclosures (TCFD) provided helpful recommendations for companies and investors on how they can consider climate change risks and how to disclose these risks within their existing financial disclosures. AMP Capital and AMP (parent company) is reviewing the TCFD recommendations, within the context of our existing approach to climate risk and disclosure, with a view to aligning these over time. Our current disclosures align to some elements of the TCFD framework, particularly within AMP Capital where climate risks are a material consideration in investment decisions.  AMP’s full 2018 CDP submission also includes references as to how these disclosures align to the TCFD recommendations.

Investment insights on climate change

Over the past 12 years AMP Capital’s ESG research team has also published and disclosed numerous investment insights covering topics such as the impact of a carbon price on Australia’s aluminium sector, regulatory design considerations for a national emissions trading scheme and how to consider climate change risk in equity portfolios. In 2017, we began to measure and publicly disclose the carbon footprint of equity portfolios and work has started on creating methodologies for other asset classes.  Further information on this recent work can be found at www.ampcapital.com.au/about-us/esg-and-responsible-investment/esg-resources and via the following links:

Portfolio Carbon Footprinting - FAQs

www.ampcapital.com.au/AMPCapitalAU/media/contents/Articles/ESG%20and%20Responsible%20Investment/201702-Carbon-Footprinting_FAQ.pdf

Greenhouse Gas Emissions: Risks and Challenges for Portfolios

www.ampcapital.com.au/AMPCapitalAU/media/contents/Articles/ESG%20and%20Responsible%20Investment/201602-insight-paper-esg-climate-change.pdf

Carbon footprint of Equity Funds

www.ampcapital.com.au/AMPCapitalAU/media/contents/Documents/AMPCESG0023_ESG_Carbon-Footprint_Funds_v3.pdf

 

 

 

 

 

 

 

 

 

 

14.5. Additional information [Optional]


SG 14 CC.

14.6 CC. Please provide further details on these key metric(s) used to assess climate related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Climate-related targets
          Establish a fund specific net zero carbon strategy by 2030 for a flagship commercial property portfolio.  Put in place a long term science based carbon reduction target (based on 2 degree C scenario).
        
          T/CO2e
        
          Annual emissions profile (carbon footprint) of portfolio to be tracked through GRESB, NGER Act and NABERs ratings. Aims to establish a low carbon transition pathway for the fund.  Strategy includes driving increased energy efficiency, allowance for improvement over time in grid electricity carbon intensity as a result of renewable energy penetration, development of renewable energy PPAs and offsetting of remaining emissions.
        
Carbon footprint (scope 1 and 2)
          Annual reporting of Scope 1 and 2 emissions for managed real estate assets under direct operational control.  Regulatory reporting under National Greenhouse and Energy Reporting (NGER) Act. GRESB reporting is undertaken at a Fund and underlying asset level to benchmark ESG performance.
        
          Total energy used. Total Scope 1 and 2 emissions (T/CO2e)
        
          As per NGER Act
        
Portfolio carbon footprint
          Assess exposure and risks to global and Australian equity portfolios of GHG emissions. Measure the exposure of a portfolio of companies to GHG emissions.  Examining the carbon footprint across a portfolio is the first step toward understanding investment risks associated with climate change.
        
          (T/CO2e/$m FUM)
        
          AMP Capital believes when investing into a share fund the investment is into equity in companies and so measuring the amount of CO2e required to produce an amount of equity is the most appropriate measure.
        
Carbon intensity
          To support the portfolio carbon footprinting of equity portfolios above we also calculate the emissions intensity of the investment index against which the fund performance is typically assessed (e.g. ASX 200; MSCI World). Comparing the two numbers (portfolio vs. index) gives an indication of whether the fund is less or more exposed to GHG emissions.
        
          (T/CO2e/$m FUM)
        
          Analysis of GHG emissions risk of MSCI World was undertaken. The estimated GHG intensity of MSCI Index was 156 T/CO2e/$m invested. This enables direct comparisons with individual funds in terms of exposure relative to the index. A similar analysis has been undertaken for ASX200. Emissions data obtained from various sources including Bloomberg, CDP, regulatory and company websites.
        
Exposure to carbon-related assets
          A first task in assessing exposure to GHG emissions risk for any portfolio or fund is to understand the greenhouse gas exposure (e.g. fossil fuels exposure through direct and indirect sources). To understand  how company's scope 1,2 and 3 emissions and to gain helpful insights into the nature of company specific risks.
        
          (T/CO2e/$m FUM)
        
          A metric of tonnes CO2e/yr per $ million of invested funds, based on equity-based emissions of companies, is considered the most appropriate metric to assess the exposure of an equity portfolio and for meaningfully communicating to investors the greenhouse gas exposure of the fund.
        

14.7 CC. Describe in further detail the key targets.

Target type
Time Frame
Description
Attachments
          2017 to 2030
        
          Achieve a target of net zero carbon emissions by 2030. Establish a long term carbon reduction  strategy as part of a Sustainable Property Strategy aligned to scienece based targets and a 2 degrees C scenario. Aims to establish a low carbon transition pathway for the fund.  Strategy includes driving increased energy efficiency, allowance for improvement over time in grid electricity carbon intensity as a result of renewable energy penetration, development of renewable energy PPAs and offsetting of remaining emissions.
        

          Ongoing - Applies to AMP Capital Sustainable Share Fund
        
          Tonnes CO2-e/$m FUM.  Carbon footprint - Reduced and specific carbon footprint objective for the Fund. This will be implementation of a carbon footprint (expressed as tonnes CO2-e/$m FUM). The Fund aims to have a carbon footprint at least 30% 
less than its performance benchmark and the complete exclusion of stocks that have the highest greenhouse gas emission intensity out of the investable universe.
        

          
        
          
        

          
        
          
        

          
        
          
        

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risks management processes for identifying, assessing, and managing climate-related risks.

Please describe

As an investment management business AMP Capital's focus involves understanding how the complexities of climate change may impact upon our company operations, corporate reputation, the marketplace (product demand), how we respond to emerging regulatory, policy and disclosure requirements and most importantly how we manage economic transition and physical risks relating to our client's investments and portfolios.

As an investment manager AMP Capital will consider climate risks when managing investments on behalf of underlying investors. For AMP Capital's investment activities risks and opportunities related to climate change are manifested as a risk to returns of the listed and unlisted companies, property, infrastructure and fixed income instruments in which AMP Capital invests on behalf of its clients. Where a degree of certainty exists on the nature of climate change related opportunities, regulatory and other risks (e.g. pricing, physical impacts) asset classes potentially most affected have undertaken scenario analysis to assess the materiality of financial impacts (e.g. carbon price impact on earnings, value at risk or asset valuations).

AMP Capital undertakes extensive investment research and assessments of climate change risks to its managed investments through its existing Environmental, Social and Governance (ESG) frameworks. Our analysis is undertaken by in-house ESG specialists who have been analysing climate change risks for well over a decade. This analysis typically includes consideration of carbon regulation, direct and indirect costs, geographic exposure to climate policy, capacity of businesses and assets to adapt and manage risks, and transitional governmental assistance programs. This enables assessments of company and portfolio exposures to climate change, including potential risk of stranded assets. This is shared with investment teams to enhance decision-making as well as longer term asset management strategies. Updates may also be provided as required to AMP Capital's Investment Committee who has overall responsibility of management of investment risks.

Where such impacts are considered material, AMP Capital may adjust its investment in a particular sector, company or asset or, for example, vary the weightings of the stock within a particular portfolio. Potential impacts (rising electricity prices, price on carbon) and longer-term risks (e.g. physical, weather related impacts and stranded assets) have also been considered in relation to property and infrastructure investments. Equally, there are new and growing opportunities to cater for increasing demand for low carbon investment products and profiles from individual and institutional investors.

14.9 CC. Indicate whether the organisation undertakes active ownership activities to encourage TCFD adoption.

Please describe

The analyses such as those outlined above are used to inform AMP Capital's active ownership and engagement activities with investee companies.  Investors are increasingly paying attention to the recommendations of the Taskforce on Climate-Related Financial Disclosures (“TCFD”) and how to engage with companies on improving such disclosures as well as incorporation of this information into portfolio risk considerations. 

Climate Action 100+ is an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. The companies include 100 ‘systemically important emitters’, accounting for two-thirds of annual global industrial emissions, alongside more than 60 others with significant opportunity to drive the clean energy transition.  To date, 310 investors with more than US$32 trillion in assets under management have signed on to this initiative.  AMP Capital is a member of the initiative and is leading the engagement with two large Australian companies.


SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

7 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

Asset class invested

1 % of AUM
7 % of AUM

other description (1)

          Includes approximately 3% of total externally managed listed equity invested in diversified funds with a specific 'ESG overlay'.
        
3 % of AUM

Brief description and measures of investment

Includes approx. 7% of total Infrastructure Equity AUM in clean energy technology businesses in Finland, Sweden and Estonia as well as renewable energy equity investments in North America and Ireland.

Includes 1% of total internally managed Fixed Income AUM which is invested in green bonds. 

Other includes approximately 3% of total externally managed listed equity AUM invested in diversified funds with a specific 'ESG overlay'.

Asset class invested

24 % of AUM

Brief description and measures of investment

Includes proportion of Infrastructure Debt total AUM invested in renewable energy assets.

Asset class invested

30 % of AUM

Brief description and measures of investment

Includes Commercial property assets including the AMP Capital Diversified Property Fund (ADPF) and the AMP Capital Wholesale Office Fund (AWOF)*.  These funds have a 4-star NABERS energy rating as well as a 'green star' rating under the Global Real Estate Sustainability Benchmark (GRESB).  AWOF fund strategy includes a Net Zero Carbon by 2030 commitment.

* AMP Capital Funds Management Limited ABN 15159557721, AFSL 426455 is the responsible entity of AMP Capital Diversified Property Fund I and AMP Capital Diversified Property Fund II and issuer of the Information Memorandum (IM) for ADPF. AMP Capital Investors Limited is the trustee of AMP Capital Wholesale Office Fund I and AMP Capital Wholesale Office Fund II and issuer of the Information Memorandum (IM) for AWOF. To invest, investors will need to obtain the current IM from AMP Capital before making a decision to acquire, continue to hold or dispose of units in either ADPF or AWOF.

Asset class invested

1 % of AUM

Brief description and measures of investment

Includes investments in affordable student accommodation.

Asset class invested

1 % of AUM

Brief description and measures of investment

Includes direct investment in schools (including South Australia, NSW SE Queensland and Victoria).

Asset class invested

11 % of AUM

Brief description and measures of investment

Includes direct investments in hospitals, aged care, health care and disability care facilities in Australia, Ireland and UK. 

Asset class invested

2 % of AUM

other description (1)

          Infrastructure debt investments in water treatment including desalination
        
6 % of AUM

Brief description and measures of investment

Includes 2% of total Infrastructure Equity AUM invested in water treatment including desalination.

15.4. Please attach any supporting information you wish to include. [OPTIONAL]



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