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Perpetual Investments

PRI reporting framework 2019

You are in Organisational Overview » Asset class implementation gateway indicators

Asset class implementation gateway indicators

OO 10. Active ownership practices for listed assets

10.1. Select the active ownership activities your organisation implemented in the reporting year.

Listed equity – engagement

Listed equity – voting

Fixed income SSA – engagement

Please explain why you do not engage directly and do not require external managers to engage with companies on ESG factors.

          We integrate consideration of ESG factors into our investment processes because we believe they can constitute material investment risks. Engagement with a security issuer may be part of this process if we believe we can influence how the issuer approaches this risk. So it would only make sense for us to engage if 1) we identify a material ESG credit risk (i.e. that meaningfully increases default risk); and 2) we believe engagement with the issuer would be productive in addressing this risk. Such a situation would occur very rarely. Also, our SSA fixed income exposure represents only a small portion of our funds under management, and we are a relatively small fixed income investor (i.e. with less influence).
        

Fixed income Corporate (financial) – engagement

Please explain why you do not engage directly and do not require external managers to engage with companies on ESG factors.

          We integrate consideration of ESG factors into our investment processes because we believe they can constitute material investment risks. Engagement with a security issuer may be part of this process if we believe we can influence how the issuer approaches this risk. So it would only make sense for us to engage if 1) we identify a material ESG credit risk (i.e. that meaningfully increases default risk); and 2) we believe engagement with the issuer would be productive in addressing this risk. Such a situation would occur very rarely. Also, our corporate (financial) fixed income exposure represents only a small portion of our funds under management, and we are a relatively small fixed income investor (i.e. with less influence).
        

Fixed income Corporate (non-financial) – engagement

Please explain why you do not engage directly and do not require external managers to engage with companies on ESG factors.

          We integrate consideration of ESG factors into our investment processes because we believe they can constitute material investment risks. Engagement with a security issuer may be part of this process if we believe we can influence how the issuer approaches this risk. So it would only make sense for us to engage if 1) we identify a material ESG credit risk (i.e. that meaningfully increases default risk); and 2) we believe engagement with the issuer would be productive in addressing this risk. Such a situation would occur very rarely. Also, our corporate (non-financial) fixed income exposure represents only a small portion of our funds under management, and we are a relatively small fixed income investor (i.e. with less influence).
        

Fixed income Corporate (securitised) – engagement

Please explain why you do not engage directly and do not require external managers to engage with companies on ESG factors.

          We integrate consideration of ESG factors into our investment processes because we believe they can constitute material investment risks. Engagement with a security issuer may be part of this process if we believe we can influence how the issuer approaches this risk. So it would only make sense for us to engage if 1) we identify a material ESG credit risk (i.e. that meaningfully increases default risk); and 2) we believe engagement with the issuer would be productive in addressing this risk. Such a situation would occur very rarely. Also, our securitised fixed income exposure represents only a small portion of our funds under management, and we are a relatively small fixed income investor (i.e. with less influence).
        

OO 11. ESG incorporation practices for all assets

11.1. Select the internally managed asset classes in which you addressed ESG incorporation into your investment decisions and/or your active ownership practices (during the reporting year).

Listed equity

Fixed income - SSA

Fixed income - corporate (financial)

Fixed income - corporate (non-financial)

Fixed income - securitised

Cash

Select the externally managed assets classes in which you and/or your investment consultants address ESG incorporation in your external manager selection, appointment and/or monitoring processes.
Asset class
ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes
Property

Property - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

11.4. Provide a brief description of how your organisation includes responsible investment considerations in your investment manager selection, appointment and monitoring processes.

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.

OO 12. Modules and sections required to complete

12.1. Below are all applicable modules or sections you may report on. Those which are mandatory to report (asset classes representing 10% or more of your AUM) are already ticked and read-only. Those which are voluntary to report on can be opted into by ticking the box.

Core modules

RI implementation directly or via service providers

Direct - Listed Equity incorporation

Direct - Listed Equity active ownership

Direct - Fixed Income

RI implementation via external managers

Indirect - Selection, Appointment and Monitoring of External Managers

Closing module

12.2. Additional information. [Optional]


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