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ClearBridge Investments

PRI reporting framework 2019

You are in Strategy and Governance » Objectives and strategies

Objectives and strategies

SG 05. RI goals and objectives

05.1. Indicate if and how frequently your organisation sets and reviews objectives for its responsible investment activities.

05.2. Additional information. [Optional]

  • The firm tracks the performance of each of the ESG-integrated strategies on a daily basis.
  • The performance reviews of the analysts on ESG integration occurs on a semi-annual basis
  • The investments in the ESG-integrated models are monitored by the Compliance team and the analysts and PMs on a daily basis, so any changes that would impact the responsible investment objectives would be flagged, investigated and then communicated to all of the respective investment teams.
  • The company engagements are tracked on a company research calendar
  • The research notes (fundamental and ESG) are tracked on our internal research portal
  • The proxy policy guides our proxy voting along with the firm's Proxy Voting Committee
  • The company enagement reports are published annually
  • The impact report is published annually

SG 06. Main goals/objectives this year

06.1. List the main responsible investment objectives that your organisation set for the reporting year.

Responsible investment processes

Key performance indicator

          Semi-annual performance reviews of sector analysts
        

Progress achieved

Analysts continually improve in their ESG integration practices. Each analyst assigns an internal ESG rating to each company under coverage. The analysts are expected to review their ratings on a continual basis througout the year and put forth an upgrade or downgrade as needed.

In 2018, the analysts upgraded their internal ESG ratings on 1 company and downgraded 3 companies under coverage for a variety of timely reasons.

Key performance indicator

          Tracking of all ESG engagements at the firm per year
        

Progress achieved

Analysts continually improve in their ESG integration practices. The firm has hosted over 1,000 meetings with companies in our office in 2018.

The number of engagements can rise per year and are integrated into the fundamental meetings. The engagements are typically conducted by the sector and portfolio analysts and will include senior management (CEO, CFO), but can also include the business segment heads, suppliers, stakeholders, non-profits, and/or other investment firms in a collaborative format.

All engagements (in the office or via conference call) are tracked on the Central Research Calendar and all investment professionals are invited to participate in any engagement or read the follow-up notes on the research portal by the analyst who hosted the engagement.

Key performance indicator

          Publish engagement reports by strategy per year
Integrate internal ESG ratings across the firm and all research notes include ESG rating (and rationale if changes)
        

Progress achieved

Publish impact report at the beginning of 2019 (representing 2018 calendar year)

Posted all ESG research notes to internal research portal

Intranet web portal for employees have daily posts and blogs and new submissions of content

Increased ESG ratings integration to 93% of AuM by end of 2018

 

Key performance indicator

          Publish engagement reports by strategy per year
Tracked Impacts from listed equities
        

Progress achieved

Expanded engagements to portfolio analysts (in addition to sector analysts) to track company engagements and store ESG notes in research portal.

Published Impact Report for full firm and engagement reports by strategy

Expanded methodologies of carbon footprint by strategy

Ongoing engagements on shareholder and management proxy proposals

Key performance indicator

          Portfolio performance and stock selection
Sector analyst performance evaluations on ESG integration
        

Progress achieved

Continuous tracking of performance of investment strategies (all with ESG integration) to external benchmarks and peer strategies outside the firm.

Upgrades and downgrades of any ESG ratings are communicated to all PMs in timely manner

Tracking of ESG ratings distribution by strategy on a quarterly basis

 

 

 

Financial performance of investments

Key performance indicator

          Portfolio performance and stock selection
Sector analyst performance evaluations on ESG integration
        

Progress achieved

While we have observed a high correlation between attractive financial characteristics and strong ESG sustainability characteristics, we would not claim that the increase in portfolio performance was due soley to considerations of ESG factors, but rather from a combination of solid fundamental research inclusive of ESG considerations and investment manager experience.

That said, we continue to examine through internal tracking of correlations between higher ESG ratings and favorable portfolio characteristics

ESG characteristics of investments

Key performance indicator

          Portfolio characteristics (quality metrics and factor analysis)
Internal scoring methodology based on financial and ESG metrics
        

Progress achieved

From our historical observations of our financial screening process, the characteristics that make the stock results attractive have also been attractive from an ESG standpoint.

That said we do not dictate our portfolio weightings based on ESG ratings; we follow our disciplined portfolio construction process of the specific equity strategy.

 

Key performance indicator

          Distribution of ESG ratings by strategy
Tracking investment performance and ESG ratings
        

Progress achieved

We have increased the percentage of stocks that are ESG integrated (i.e., ESG analysis,  engagement and internal communication has been conducted on the stock by a fundamental analyst) at the firm to 93% of total AuM, or 727 stocks.

We continue to monitor the performance of our strategies with the varying distributions of A, AA, AAA (and B, if applicable) ratings. 

Key performance indicator

          Carbon footprint analysis
stock-specific and sector allocation relative to the benchmark
        

Progress achieved

Through the various carbon footprinting methodologies, we have been able to get a general sense of where each strategy falls relative to the benchmark in terms of overall carbon emissions by revenue or intensity (again, the current methodologies are not ideal). 

We have also begun exploring TCFD reporting for the firm's portfolios.

Other activities

Key performance indicator

          We continue to increase and support a variety of RI initiatives across the industry and globe (for more details, please see later sections)
        

Progress achieved

ClearBridge has been an inaugeral investor signatory or long-standing investor member of over a dozen RI initiatives and networks. We believe this is an important part of our process - to share best practices and learn from peers and support ESG issues that are relevant to our investment analysis.

In addition to a number of Investor-supported collaborative engagements (many hosted and organized by ClearBridge), we are also keen to help educate the general investing public on RI benefits, outcomes, goals, performance, fiduciary duty, etc.

Key performance indicator

          General ESG education in the marketplace and amongst industry peers
        

Progress achieved

Last Fall, ClearBridge was a speaker at the PRI in Person conference in San Francisco. We joined other speakers to discuss the report results from the CFA Institute/PRI listed equity advisory group workshops project to increase awareness and understanding of ESG factors into the investment analysis process by CFA charterholders around the world. Part of this discussion was to review the importance of the PRI listed equity work for global investors.

In addition to this, the firm's sector analysts and PMs have continually provided ESG education to the general public to raise the standards around the ESG investment process, and to help asset owners, managers and consultants get further understanding around RI.

One of the most requested presentations is to debunk the myths on integrating ESG factors (i.e., hurts performance or is values based only) and after such presentations by our firm's investment professionals, the resistance to joining an RI initiative by other investors seems to decline.

We also regularly receive requests from consultants and other asset managers to explain the PRI and provide our views.

We co-presented with the PRI for a public pension board in CA in 2018, specifically for our perspectives on the PRI.

Key performance indicator

          Publishing or contributing to best practice case studies
        

Progress achieved

Through our involvement in RI membership or signatory groups, we have supported the publication of reports around best practices in ESG and Listed Equities.

In addition, ClearBridge has continually documented and published case study literature in the forms of: white papers, quarterly commentaries, annual engagement reports, blogs, podcasts, videos.

Key performance indicator

          Engagement reports
Webinars, videos and podcasts
        

Progress achieved

ClearBridge has published numerous engagement reports by strategy. Each engagement report lists a variety of indiviudal company case studies 

We also record ESG podcasts, webinars, and videos for clients (on our web site or via client distribution)

We have published an Impact Report available to the public.

06.2. Additional information.


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