Perpetual Investments (PI) has a Responsible Investment Policy which is available on our website https://www.perpetual.com.au/Investments/Institutional-Investors/Responsible-Investing/. Our Responsible Investments Policy covers our approach to incorporating ESG considerations into our investment decision-making and ownership practices.
We integrate ESG into our investment decision-making because we believe that ESG issues can impact long-term investment performance. In particular, we focus on identifying material ESG risks which may affect the investment returns of our Funds, which may impact the ability of our Funds to achieve their investment objectives - principally achieving investment performance in excess of Fund benchmarks.
Our approach to integrating ESG into each decision-making process in our Funds is as follows.
- Listed Equities - Active - A key driver of the active (above benchmark) investment performance of the Funds is PI's internal investment capabilities in listed equities (domestic and overseas). Our approach to ESG integration in listed equities is publicly disclosed on our website https://www.perpetual.com.au/Investments/Institutional-Investors/Responsible-Investing/.
- Listed Equities - Passive and Smart Beta - No ESG integration applies to passive listed equities as they are managed under fundamentally different investment processes as active equities.
- Domestic Credit - Our approach to ESG integration in Domestic Credit is publicly disclosed on our website https://www.perpetual.com.au/Investments/Institutional-Investors/Responsible-Investing/.
- Other Asset Classes - Where we outsource to external managers, we do consider aspects of ESG in our due diligence process. However, our ability to integrate ESG into these asset classes may be limited, due to the use of externally-managed pooled vehicles and the absence of well-developed ESG integration standards in certain asset classes such as infrastructure, other unlisted assets, securitised/derivative assets, etc.
- Strategic Asset Allocation (SAA) - The SAA of our Funds is reviewed annually. Integrating ESG into SAA decision-making is a very recent concept and we do not currently incorporate these issues into our allocations at a broad asset-class level (e.g. equities versus bonds). We do however consider country/market (geography) allocation risk issues, such as the governance (i.e. an ESG) risk in investing in emerging or frontier markets.
- Tactical Asset Allocation (TAA) - Integrating ESG concepts (which tend to be long-term) into TAA decision-making (which is normally medium-term) is very difficult. Implementation issues (for example via derivatives) add further challenges.