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Perpetual Investments

PRI reporting framework 2019

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities

ESG incorporation in actively managed listed equities

Implementation processes

LEI 01. Percentage of each incorporation strategy

01.1. Indicate (1) which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities and (2) the breakdown of your actively managed listed equities by strategy or combination of strategies (+/- 5%)

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied
99 %
Percentage of active listed equity to which no strategy is applied
1 %
Total actively managed listed equities 100%

01.2. Describe your organisation’s approach to incorporation and the reasons for choosing the particular ESG incorporation strategy/strategies.

  • All of the Australian equities managed by Perpetual's Investments internal equities team (the above 99% of FUM) is covered by the ESG incorporation process (Quality Filters exclusion screen and ESG integration process) as described in this module. This is consistent with our approach to responsible investment and ESG issues as described in previous modules.
  • Note that a small (<10%) of this AUM is managed in specialist ESG equities strategies - Ethical SRI Fund and client 'Ethical' mandates, where additional ESG exclusion screens apply.
  • The remaining 1% of our FUM above where no ESG incorporation applies is managed internally by another team in a smaller quant fund (smart Beta) where ESG is not applicable.

01.3. If assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]

Ethical SRI Fund and client 'Ethical' mandates

The general ESG incorporation processes as described in this module also apply to the above two strategies, i.e. all companies must pass our Quality Filters and portfolio managers need to consider ESG risks in their decision-making. However for the above Funds (Ethical SRI Fund and client 'Ethical' mandates) only, the portfolio managers have a reduced opportunity set of companies they may consider for investment, as we exclude a significant number of companies which fail specific additional ESG screens for each strategy. This is an independent process run by the Manager, Responsible Investment, where companies that rate poorly on ESG, ethical and SRI issues (varies by Fund and mandate) are identified and excluded, with the assistance of external research. These Funds suit a range of investors who require a 'higher standard' of ESG/Ethical filtering, e.g. they may not be permitted or have decided not to invest in tobacco, munitions or nuclear companies or those who rank poorly on sustainability or social responsibility measures.

LEI 02. Type of ESG information used in investment decision (Private)

LEI 03. Information from engagement and/or voting used in investment decision-making (Private)

(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by


We negatively screen by:

  • Our Quality Filters (which apply to all the funds/products managed by our equities team) include ESG issues. The first of our Quality Filters, Sound Management, includes an assessment of the governance (G) practices of a company and management, including the Board.  The third of our quality filters, Quality of Business, includes an assessment of issues such as environmental (E) and social (S) factors that may impact the future performance of a company. Companies that fail our Quality Filters are not considered for investment.
  • In addition, a number of portfolios (see LEI 01.3) have additional screens to exclude a further set of companies that rate poorly on ethical/ESG issues.

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

Quality Filters

Our Quality Filters are the bedrock of our equities process and rarely if ever change.

Ethical SRI Fund and client 'Ethical' mandates

The Manager, Responsible Investment has formulated filtering processes for these portfolios to identify and exclude companies that rate poorly on ethical/ESG issues, drawing on external ESG research. The portfolio managers of these strategies are subsequently prohibited from buying these companies, and must divest any such companies that fail these screens that are already held.

The Manager, Responsible Investment is responsible for ensuring these filters are up-to-date (by design) and are regularly re-run (monthly) to capture new companies and new company or external research information.

Any criteria changes are processed through a defined internal approval process and communicated to clients as needed.

LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

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

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.5. Additional information. [Optional]

Please note, some of our responses above apply to the screening processes that apply to our specialist ESG screened strategies (Ethical SRI Fund and client 'Ethical' mandates) only.

The Quality Filters (including ESG) screening that applies across all equities strategies managed by the team is conducted based primarily on internal research. Our more intensive ESG research occurs through the ESG integration process described in this module, which applies to all stocks passing the Quality Filters.

LEI 06. Processes to ensure fund criteria are not breached (Private)

(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




Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

Our Quality Filters and ESG integration processes address these material ESG risks systematically, as do our external ESG research providers who conduct company research.

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.

          Internal analyst input and review of external ESG red flags

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.

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

          Relevant, material information (including ESG risks) are inputs into portfolio decision-making by portfolio managers.

09.6. Additional information.[Optional]

LEI 10. Aspects of analysis ESG information is integrated into (Private)