This report shows public data only. Is this your organisation? If so, login here to view your full report.

AMP Capital Investors

PRI reporting framework 2019

Export Public Responses
Pdf-img

You are in Direct - Listed Equity Incorporation » Outputs and outcomes

Outputs and outcomes

LEI 12. How ESG incorporation has influenced portfolio composition

12.1. Indicate how your ESG incorporation strategies have influenced the composition of your portfolio(s) or investment universe.

Describe any reduction in your starting investment universe or other effects.

The screening process for the AMP Capital Sustainable Fund screens out approximately 25-30% of stocks (15-20% by market capitalisation) from the relevant index

Specify the percentage reduction (+/- 5%)

30 %

Select which of these effects followed your ESG integration:

12.2. Additional information.[Optional]

AMP Capital's portfolio analysis tools allow the ESG Research Team to provide meaningful ESG input across our equities teams and further influence our investment decision-making. The tools allow us to rank stocks based on key ESG risks and identify issues for further investigation. It helps us in identifying companies within a portfolio that present significant downside / upside ESG and accounting risks within the relevant industry sector and portfolio weightings.


LEI 13. Examples of ESG issues that affected your investment view / performance

13.1. Provide examples of ESG issues that affected your investment view and/or performance during the reporting year.

ESG factor and explanation

Nearmap Limited (NEA) is a provider of geospatial map technology and high-resolution aerial imagery. NEA primarily works with small and large organisations across the building & construction, architectural, defence and utility industries, as well as with local and municipal governments throughout Australia.

NEA provides services to the solar industry which has the potential to make a significant contribution in the transition to a more sustainable economy. NEA has a diversified customer portfolio across a range of industries, demonstrating the range of application of Nearmap’s content and the lack of reliance on any one economic sector. 

NEA's services are being used when it comes to assessing natural disasters such as floods and bush fires. With the likely increase in severe weather episodes as a result of climate change, NEA's services will be increasingly required.

ESG incorporation strategy applied Integration

Impact on investment decision or performance

Our Sustainable Investments Team undertook an ESG analysis of Nearmap in February 2018. The team found positive sustainability drivers which meant that the stock was held in an overweight position in the fund. Since this rating the company’s share price has almost tripled in value. The fund’s performance has benefitted significantly from this decision.  

ESG factor and explanation

This company is an Australian Financial Services company which offers a range of products and services across 4 divisions – financial advice and distribution, platform management, investment management and trustee services.

The company suffered severe brand and earnings damage as a result of a various incidences of mis-conduct stemming from the Royal Commission. The company’s governance structure resulted in a lack of demonstrable oversight by the board that has favoured the interests of shareholders over the beneficiaries of superannuation funds under trusteeship. It appears that the company continues to misunderstand its duty to superannuation members and fails to take steps to properly recognise and manage conflicts of interest, constitutes conduct falling below community standards and expectation.

ESG incorporation strategy applied Integration

Impact on investment decision or performance

Our Sustainable Investments Team undertook an ESG analysis of this company last year. The team scored the company poorly on ESG management as well as the external sustainability drivers facing the company and industry more broadly. The team decided to divest of this company from the Sustainable Share Fund as a result of this rating. Since the divestment, the company’s share price has fallen rapidly. The fund’s performance has benefitted significantly from this decision.  

ESG factor and explanation

We have been monitoring the underpayment of wages at an Australian fast food company for quite some time.

It appears that the company’s handling of the Fair Work Ombudsman’s allegations have been below the standard we expect of a listed company. There has been very little transparency, ongoing delays, and very little evidence that the company is prepared to encourage those who have been underpaid to come forward so that the full extent of the issue can be detected, redressed and resolved.

Nor was there any evidence that the company was prepared to accept responsibility for franchisees’ underpayment of wages irrespective of legality. We were concerned that those who are entitled to backpay may not receive it, particularly because the workers affected may not feel comfortable speaking up or alerting the company to the extent of the issue if there is a risk of visa or other regulatory consequences. We understand that underpaid workers are often temporary migrants including international students and backpackers.

 

ESG incorporation strategy applied Integration

Impact on investment decision or performance

The Sustainable Investments Team decided to divest from the company and it will  remain uninvestable for the for a period of two years, at which point we will review the company’s handling of the allegations, the remediation process, the evidence that this issue has been thoroughly dealt with and resolved, and the openness of the company to receive and support wage complaints from franchisees’ employees, contractors or casual workers. Since the underpayment allegation arose, the share price of this company has decreased. These issues continue to play out and we expect further revelations will negatively impact the performance of the company over the medium to long term.

ESG factor and explanation

AMP Capital’s Sustainable Investment Team reviewed one of the major Australian banks last year. The company suffered significant compliance, culture and conduct issues - demonstrating how important less-tangible factors such as culture, compliance, incentives, leadership succession, governance and transparency are in driving company value. There are also many structural changes occurring in the broader sector and long-standing problems embedded in the industries within which the company operates. These may reduce the flexibility of the newly appointed executives to make much of a difference to shareholder returns. Margins will come under intense pressure from regulatory tightening, changes to taxation and increased competition.

The team concluded that the cause of the fraudulent and unethical conduct was a culture which prioritised profit over customers best interests. A lack of accountability and ownership was also pervasive among the leaders at the company and the board appears to be in denial about these issues for quite some time.

ESG incorporation strategy applied Integration

Impact on investment decision or performance

Our Sustainable Investments Team undertook an ESG analysis of this company last year. The team scored the company poorly on ESG management as well as the external sustainability drivers facing the company and industry more broadly. The team decided to divest of this company from the Sustainable Share Fund as a result of this rating. Since the divestment, the company’s share price has been flat. The issues mentioned will continue to play out and we expect further revelations will negatively impact the performance of the company over the medium to long term.

ESG factor and explanation

AMP Capital’s Sustainable Investments Team undertook an ESG review of a large Australian insurance / wealth management company.

The company has been shrouded in controversies over the last few years. There were a few main issues which were examined at the Financial Services Royal Commission (RC) in 2018 which include inappropriate advice, investment platform fees, fee for no service, misleading statements to ASIC.

Transparency has been an issue for the company over the last few years, with secrecy around executive and board member departures, and refusal to disclose LTI hurdles ahead of time.

Risk and compliance has also been a key issue for the company which was identified at the RC. It didn’t seem like there were sufficient processes to elevate problems to the board level.

There are also significant structural changes occurring in the broader market and long-standing problems embedded in the industries within which AMP operates. Margins will remain under intense pressure from regulatory tightening, changes to taxation are likely and increased competition are imminent.

ESG incorporation strategy applied Integration

Impact on investment decision or performance

Our Sustainable Investments Team undertook an ESG analysis of this company last year. The team scored the company poorly on ESG management as well as the external sustainability drivers facing the company and industry more broadly. The team decided to divest of this company from the Sustainable Share Fund as a result of this rating. Since the divestment, the company’s share price has been flat. The issues mentioned will continue to play out and we expect further revelations will negatively impact the performance of the company over the medium to long term.

13.2. Additional information.[Optional]

 

 

 


Top