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AMP Capital Investors

PRI reporting framework 2019

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Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

AMP Capital believes there are links between an organisation’s environmental and social impacts, quality of corporate governance, and its long-term business success. In line with our overarching investment philosophy, considering ESG factors within our investment decision-making and ownership practices, provides greater insight into risks and opportunities that impact the value, performance (risk/return) and reputation of our clients investments.

As a signatory to the PRI (2007), AMP Capital committed to extending ESG integration activities across our entire investment universe.  We believe adoption of these principles will result in better investment outcomes for our clients, and closer alignment between our own objectives and those of society at large.

As a 'whole' of universe investor and large owner of companies and assets we recognise we have a stake in the effective operation and sustainability of the economy, society, integrity and transparency of markets, good governance and business conduct. We believe responsible investing requires consideration of future market trends and societal expectations of corporate responsibility that affect growth and risk factors within industry sectors or company business models making them increasingly unsustainable. 

Our aim is to consider material ESG issues in the same balanced way we do any other risks impacting an investment's performance.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

The AMP Capital ESG and Responsible Investment Philosophy is available at www.ampcapital.com.au/esg or via the following link:

https://www.ampcapital.com/content/dam/capital/02-global-files-only/02-esg-resources/esg-and-responsible-investment-philosophy.pdf

At AMP Capital, ESG encompasses a broad range of issues that may of themselves, or in combination, have a material impact on the risk/return characteristics of our investments. These issues may be driven by existing or future regulations, reflect issues of significant societal concern, or pose potential operational, financial, strategic, reputational or systemic risks:

Environmental: Natural resource use and degradation (e.g. water scarcity), waste, pollution, greenhouse gas emissions, climate change, clean technology products and services, environmental management practices.

Social: Human capital, workplace health and safety, labour relations and standards, human rights, demographic changes, supply-chain and community impacts.

Governance: Board composition, independence, diversity, executive remuneration and incentive plans, corporate accountability structures, compliance, negligence, bribery and corruption, conflicts of interest and related-party transactions, shareholder rights, accounting and audit quality.

The ESG philosophy applies across the business, providing guidance to AMP Capital's investment teams across the diverse asset classes and geographies in which we invest. This includes equities, fixed income, property, infrastructure and our multi-manager funds.

The philosophy is also linked to other ESG-related policies, procedures, guidelines and proprietary tools at an organisational and asset class level that also form part of AMP Capital's ESG framework and further influence our business and investment decision-making. These include specific policies and guidelines relating to corporate governance, proxy voting, engagement and active ownership and ethical considerations.

The ESG philosophy is approved by AMP Capital's Investment Committee, which has overall responsibility for coordinating and implementing AMP Capital's ESG-related strategy and initiatives. It outlines our approach to ESG and responsible investment including goals and priorities across our investment analysis and decision-making, active ownership and engagement practices. AMP Capital is committed to sharing our progress on ESG integration at the request of our clients and other stakeholders, and in line with our commitments under the PRI. The ESG philosophy reflects our ongoing objectives, aspirations, business strategy and performance measures related to ESG integration. It will be reviewed regularly to ensure ongoing alignment between AMP Capital's corporate objectives and our client's requirements.

AMP Capital's Investment Committee is responsible for monitoring the progress of various investment teams and asset classes in line with the philosophy, approach and objectives outlined in the document. The AMP Capital Investment Committee reports through to the AMP Capital Holdings board and the AMP Limited board (parent company) via AMP Capital's Managing Director.

01.6. Additional information [Optional].

          
        
I confirm I have read and understood the Accountability tab for SG 01 I confirm I have read and understood the Accountability tab for SG 01

SG 01 CC. Climate risk

01.6 CC. Indicate the climate-related risks and opportunities that have been identified and factored into the investment strategies and products, within the organisation's investment time horizon.

AMP Capital acknowledges the transition to a low carbon economy is underway and meeting the Paris Climate Change commitments of < 2 degrees C will require significant decarbonisation over the coming decades across all major sectors of the economy.

AMP Capital has a fiduciary duty to act in the best interests when making investment decisions, including considering climate risks and opportunities. The risks and opportunities related to climate change and a low carbon transition may manifest, over various time horizons, as potential risks to the returns of the listed and unlisted companies, property, infrastructure and fixed income instruments in which AMP Capital invests.  AMP Capital's focus also involves understanding how the complexities of climate change and low carbon transition may impact our corporate reputation in the marketplace, the demand for our investment products, and how we respond to emerging regulatory, policy and disclosure requirements affecting our own industry.

Our analysis of climate risks and opportunities 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 any transitional governmental assistance programs. This information enhances our investment teams understanding of:

  • Potential impact to company valuations arising from governmental policies aimed at reducing greenhouse gas emissions, which can impact companies and their value chains within a portfolio;
  • Impact on company valuations in emissions intensive sectors (e.g. fossil-fuel producers and distributers) from policies to reduce greenhouse gas emissions or which may lead to reduced market demand for products as new low carbon alternatives become available;
  • Impact upon company and asset valuations from long term physical climate change risks.

Where a degree of certainty exists on the nature of climate change related risks and opportunities, asset classes potentially most affected have undertaken various scenario analyses to assess materiality of financial impacts (e.g. carbon price impact on earnings, value at risk or asset valuations).

We are providing low-carbon investment options for clients with a flagship property fund recently establishing a long-term net zero carbon strategy by 2030.  AMP Capital's Responsible Investment Leaders (RIL) range of funds were among the first major Australian diversified funds to adopt a fossil fuel divestment policy and green bond mandate. Through fixed income we are providing clients investment opportunities in the growing market for green bonds, funding projects in renewable energy, energy efficiency, transport, sustainable forestry and climate resilience.

Climate change is also considered through ESG performance benchmarking of our flagship property and infrastructure funds, informing fund and asset management strategies relating to energy efficiency, carbon reductions, resilience, and fostering investment opportunities in low carbon technologies and renewable energy assets.

* AMP Capital Funds Management Limited ABN 15159557721, AFSL 426455 is the responsible entity of the AMP Capital 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 Funds.

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

01.8 CC. Indicate the associated timescales linked to these risks and opportunities.

In terms of timeframes considered for the purposes of strategic business planning, risk management and investment horizon we generally consider short-term risks as those which may materialise over a 1-year time horizon. Medium term is generally considered a 3 - 5-year horizon while long-term risks are generally 5-years and beyond (5-10 years).  Examples of climate-related issues we consider include:

  • Short term (1 year): Policy risks arising from governmental measures to reduce greenhouse gas emissions.  Examples include carbon pricing regimes / taxes which may have an impact on emissions intensive sectors and companies and their value chains within a portfolio.  New investment opportunities in energy efficient and low carbon technologies (e.g. energy efficiency, renewable energy). 
  • Medium term (3-5 years): Changing demand for certain commodities as a result of further technological disruption and changing consumer preferences toward low carbon alternative investments. Potential impact upon company valuations of fossil-fuel producers and distributers as a result of policies to reduce greenhouse gas emissions. 
  • Long term (5-10+ years) Acute / chronic physical risks.  Impact on company and asset valuations arising from physical climate change impacts. 

Over the past 12 years AMP Capital's ESG team has published investment research 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.

Examples of this research can be found at www.ampcapital.com.au/esg or via the links below:

In 2018 AMP Capital's Real Estate division also undertook an initial climate change adaptation risk assessment of its managed Australian property assets and is using this information to inform further asset specific climate change risk assessments and management plans as well as developing climate change due diligence assessments for future transactions.

01.9 CC. Indicate whether the organisation publicly supports the TCFD?

01.10 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.

Describe

AMP Capital undertakes ongoing research and analysis of climate change risks and opportunities related to its managed investments through its existing Environmental, Social and Governance (ESG) frameworks. Dedicated ESG and Sustainability specialists undertake investment research and analysis of risks and opportunities associated with climate change, which may occur at an asset class, company, portfolio or individual asset level. Information is captured in investment insights and sector reports and used for example in company specific ESG scores and in the development of fund and asset level management plans. This facilitates integration into our investment decision-making and active ownership processes, enhancing our decision-making and longer term portfolio and asset management strategies. 

Such analyses allow AMP Capital to assess which material climate related issues may impact our managed investments and portfolio exposures over a range of time horizons and to assess potential risks such as stranded assets.  AMP Capital is also promoting greater transparency and has commenced disclosing the carbon footprints of our main equity funds and corporate fixed income funds via www.ampcapital.com.au

These assessments also inform our active engagement strategies with companies and policymakers on climate change and through our support of a range of investor collaborations and initiatives. This includes as co-founder of the Investor Group on Climate Change (IGCC), an early investor signatory to the CDP, and joining the Climate Action 100+ investor engagement initiative, which aims to engage with leading corporate greenhouse gas emitters to curb emissions and strengthen climate-related financial disclosures.

AMP Capital's Investment Committee (IC) has overall responsibility for ESG-related strategies and initiatives including oversight of climate change investment risks. The IC is chaired by the CEO and includes the Chief Investment Officer(s) and Division Heads of each major asset class. The IC reports through to Board of AMP Capital Holdings Limited via the CEO.  Both the IC and Board of AMP Capital Holdings Limited receive updates from dedicated ESG specialists who carry day to day management responsibility for integrating ESG considerations including climate change across the business and also work closely with investment analysts, portfolio and asset management teams. 

ESG specialists also provide updates on climate change to other executive committees and boards of AMP Limited (AMP Capital's parent company).  This has included recent updates on Paris Climate Change Agreement commitments, an overview of national and international climate policy developments and investment industry initiatives and progress updates of AMP Capital's main climate change related initiatives which may occur at an individual asset, company (stock specific) or portfolio level.

 

1.12 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.

specify

          Refer AMP Limited - Carbon Disclosure Project submission; AMP Sustainability Report www.amp.com.au; insights on climate risk available at www.ampcapital.com.au/esg.
        

SG 02. Publicly available RI policy or guidance documents

New selection options have been added to this indicator. Please review your prefilled responses carefully.

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

02.3. Additional information [Optional].

AMP Capital's ESG and Responsible Investment Philosophy is reflected in other ESG-related policies, procedures, guidelines and proprietary tools at an organisational, asset class level (e.g. real estate, infrastructure) and fund level. Together, our philosophy, policies and guidelines form part of AMP Capital's overall ESG framework and further influence our business and investment decision-making.

Because of AMP Capital's size, geographical coverage, multi-asset class mix and variety of client mandates, we need flexibility in the way we approach responsible investment and integrate material ESG factors. Our decision-making must account for:

  • increasingly complex portfolio construction to meet our client's individual requirements;
  • varying investment styles and time horizons, often within a single asset class, and
  • differences in our level of ownership and influence.

AMP Capital aims to incorporate material ESG issues in the same balanced way we do other key risks which impact an investment's performance. To this extent our investment teams are responsible for developing and implementing ESG integration techniques that appropriately reflect the characteristics of the asset class, client requirements, investment styles and relevant investment time horizons. Some policies and guidelines may therefore apply across the business (all AUM) while others may be specific to a particular asset class or fund as identified in SG 2.1 above. (see also https://www.ampcapital.com/content/dam/capital/02-global-files-only/02-esg-resources/infrastructure-esg-policy-guidelines.PDF

For Australian listed equities, AMP Capital's Corporate Governance Guidelines articulate our standards on corporate governance and responsible investment issues and our approach to company engagement. Our Proxy Voting policy, implemented by a dedicated Corporate Governance Manager, also evidences our commitment to incorporating ESG issues.  The Proxy Voting Policy makes reference to company engagement activities which is then supported by a proprietary Engagement Plan.

Ethical considerations

In September 2018 AMP Capital announced the completion of the full implementation of a new Ethical Framework as part of our overarching ESG Philosophy.  Under this framework, in exceptional circumstances, AMP Capital may choose to exclude particular companies, asset types or industry sectors on ethical grounds across its entire investment universe.  In applying this policy to our investments we have decided that manufacturers of tobacco, cluster munitions, landmines, chemical and biological weapons no longer meet our ethical criteria and will be divested from our portfolios. 

In September 2018, AMP Capital announced the completion of this divestment strategy.  Details of how these exclusions are applied to our investments can be found here:

Responsible Investment Leaders (RIL) Range of Funds

AMP Capital's RIL Range of funds invest with an ESG overlay as described in the RIL Charter shown in 2.1 above.  The Fund also has a fossil fuel exclusions policy as described in the link below:

* AMP Capital Funds Management Limited ABN 15159557721, AFSL 426455 is the responsible entity of the AMP Capital 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 Funds.


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

AMP Capital is an investment manager of the highest integrity, and all our staff must meet the high standards of business practice and ethics. However we recognise the potential for commercial or legal conflicts of interest in our dealings and internal decisions, and we take these potential conflicts seriously.

Policy: The AMP Conflicts of Interest Policy applies to each business unit within the AMP Group. It assists AMP and its representatives to identify how and when conflicts of interest arise, and to manage conflicts of interest in an appropriate and consistent manner. It provides detailed guidance on our conflicts procedures, escalation processes, personal and business conflicts, gifts and entertainment, alternative forms of remuneration, and procedures for related parties.

Database: As soon as any AMP Capital representative identifies any potential, perceived or actual conflicts of interest, they must report it to their immediate manager and to the designated conflicts manager from our enterprise risk management team. Reported incidents are then recorded in the AMP Conflict of Interest database and managed under the Policy.

03.3. Additional information. [Optional]

Proxy voting: Conflicts which could potentially arise in AMP Capital's proxy voting activities are managed by a dedicated corporate governance manager. All voting and engagement activities are conducted in the best interests of our clients. AMP Capital treats all companies similarly and no special consideration is given to companies that may be existing or potential clients of AMP Capital. In practice this means there are examples where AMP Capital has either voted 'against management' on resolutions of 'client' companies' and/or engaged with companies on specific ESG related matters such as supply-chain issues, ethical sourcing practices and health and safety.

AMP Capital does not vote on:

  • Resolutions at meetings of AMP Limited (under the terms of the demutualisation of AMP Limited, AMP Capital is excluded from voting), and
  • Certain resolutions where AMP Capital is a related party or associate and its vote would be disregarded under the Australian Corporations Act or ASX Listing Rules. (For example, Australian shareholders are not permitted to vote on the ratification of a capital raising that the shareholder participated in.) 

SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within portfolio companies.

04.2. Describe your process on managing incidents

AMP Capital's primary source of ESG information, research and analysis is via AMP Capital's in house ESG Research Team. This team is also responsible for engaging with companies on sector-wide and company-specific issues, with the nature of that engagement also 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 research, engagement and proxy voting activity. Our ESG Research Team supplements this proprietary in-house research with data from external providers, to secure greater ESG information coverage.

This information is applied across all ESG incorporation strategies. Where a significant incident arises within a portfolio company (e.g. a major bribery scandal or significant safety accident) our ESG analysts typically undertake a number of steps to ensure the issues are immediately communicated to appropriate members of our investment teams. This includes raising the issue at a daily investment team briefing. An updated research note is then provided direct to the relevant portfolio managers as well as the broader public market investment teams detailing specifics of the incident and related investment implications. The information is also updated within our research database to further inform our view on whether the particular incident alters our view on the individual stock. The incident would also then be captured in our regular weekly ESG wrap distributed to our investment teams. Our ESG team would continue to monitor the incident and may also directly engage the company on its proposed response. Further information on our processes are provided in the LEI module.


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