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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 » (C) Implementation: Integration of ESG factors

(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the ESG factors you systematically research as part of your investment analysis and the proportion of actively managed listed equity portfolios that is impacted by this analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

AMP Capital has invested in the ESG resources needed to comprehensively review the significance and materiality of a broad range of ESG factors. Our approach in reviewing material ESG issues is detailed in our public research papers and reports.

ESG issues covered:  ESG factors encompass a broad range of issues that may, in isolation or in combination, have a material impact on the risk/return characteristics of our investments. They may be driven by regulations, reflect issues of significant societal concern, or pose potential operational, financial, strategic, reputational or systemic risks. ESG issues we systematically investigate include:

  • 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 and independence, 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.

Published ESG insights: The diversity of AMP Capital's ESG research and analysis is demonstrated by our regular Corporate Governance Reports (twice per year) and ESG Insights available at www.ampcapital.com.au/esg.


LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on a robust analysis.

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

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information.[Optional]

Example of specific issue review and integration: We continue to consider the implications of climate change on our portfolios. In this process, we analyse the potential impact of climate change on the funds' portfolio mix, qualitatively assess risks and opportunities, and conduct a quantitative scenario analysis of the potential impact on the portfolio. The process is informed by our regular analysis of climate change impacts on sector, stock and portfolio risks and opportunities, taking into account policy, technology, physical impacts, carbon intensity and potential liabilities. This includes independent and collaborative engagement with policy-makers and companies on regional and international frameworks and on emerging carbon markets.


LEI 10. Aspects of analysis ESG information is integrated into

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

10.1. Indicate which aspects of investment analysis you integrate material ESG information into.

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

10.2. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

10.3. Describe how you integrate ESG information into portfolio weighting.

ESG at the portfolio level: Portfolio managers are responsible for converting our ESG and fundamental research into the most appropriate client portfolio. Proprietary portfolio risk management tools (e.g. holdings, carbon risk etc) are also used to monitor exposure and benchmark ESG-related investment performance.

10.4. Describe the methods you have used to adjust the income forecast / valuation tool

Factors considered include liquidity, macro themes, sector exposure and specific stocks. AMP Capital applies standard risk management processes which allow us to manage unintended risk exposures and biases. Peer review is a key element of the process with questions encouraged, challenge welcomed and numbers debated.

10.6. Additional information. [OPTIONAL]

AMP Capital considers the company or asset, the industry sector, and market or economy in which it operates. ESG analysis adds insights at each of these levels.

AMP Capital is a 'whole of universe' investor and asset manager. We have a stake in the sustainable operation of the global economy, the integrity and transparency of markets, and in good governance and business conduct. At this macro level, sustainability drivers influence a company's sector, operating or competitive environment. We assess growth and risk factors, the impact of new technologies, consumer preferences, resource constraints, demographic changes, new regulation or systemic issues such as climate change.

Our process includes:

  • Macro review: Weekly / fortnightly ESG wraps investment insights; and regular meetings with investment teams to develop conviction and idea generation.
  • Systematic review: Regular meetings with the Systematic Australian Equities team on screening methods and enhancements.
  • Sector review: Detailed sector reports, including analysis of ESG growth and risk drivers.
  • Stock selection: ESG SWOT analysis, reviews of high ESG risk companies and IPOs; ESG database (200 metrics) summarising stock ratings; and scores combining industry sustainability scores with ESG performance scores.
  • Portfolio review: Risk management tools to monitor exposure and benchmark ESG-related investment performance.

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