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ClearBridge Investments

PRI reporting framework 2019

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (A) Implementation: Screening

(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

Description

Any negative/exclusionary screening is applied carefully and prudently. Our focus is not as much on what to exclude from the portfolio, but more so on analyzing and investing in high-conviction long-term sustainable listed equity investments.  

On occasion, as warranted, we would exclude based on an internal sector analyst's ESG rating (if an internal "B" rating) which indicates that there is a red flag on the company or the business is not sustainable.

Screened by

Description

We invest in companies that meet our investment criteria while seeking best-in-class ESG characteristics, sustainability strategy, transparency, engagement, etc. Our internal analyst ESG ratings (A, AA, AAA) help us to differentiate the best-in-class status within a given industry.

 

Screened by

Description

While we review the norms that companies may sign up to, we wouldn't select a stock solely based on that norm. If anything, the company's adherence with the norms are a signal that there are international standards are being recognized.

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

While our primary approach is not a "screening" process, the original screening criteria was established at the inception of our ESG investment program, which dates back to 1987. The approach has always been focused on two areas: Investment process and sustainability.

Over the decades, our clients have given attention to a variety of themes/topics in society, e.g., anti- apartheid, diversity, education, environmental stewardship, good governance, and more recently, a focus on impact of their investments as well as the SDGs (sustainable development goals).

We review our ESG integration approach continuously and make adjustments, as appropriate - given the macro, societal and regulatory norms as appropriate. 

We rely on our internal research analysts to analyze and assess the material and relevant ESG factors by industry. Each analyst assigns an ESG rating to all of the stocks under their coverage. The ESG ratings range from "AAA, AA, A, B"

Our analysts also give their views on emerging areas of risk and opportunities within their given sectors throughout the year.

Our general focus is not to take an exclusionary approach, but rather, to identify long-term sustainable investments that have met both our robust financial criteria and material ESG sector-specific criteria.


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.

          In addition to the above, we reach out to all related (and unconventional) and relevant sources to verify information on our companies
        

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.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

For question LEI 05.3 above, just to clarify, we don't control the frequency of the third party research firms' updating schedule. Rather, the annual basis is what they have told us as an investment manager.


LEI 06. Processes to ensure fund criteria are not breached

06.1. Indicate which processes your organisation uses to ensure fund criteria are not breached.

          In addition to our Compliance and oversight teams, each PM on the investment teams also bears responsibility that the fund criteria is adhered to
        

06.2. If breaches of fund screening criteria are identified - describe the process followed to correct those breaches.

If such a situation were to take place, all parties involved would take immediate action to verify the breach and discuss with our compliance team, notify the teams involved, address as needed, discuss with advisor and client, and review systems in place to identify how breach had occurred.

 

06.3. Additional information.[Optional]


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