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Ashmore Group plc

PRI reporting framework 2019

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

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
100 %
Total actively managed listed equities 200%

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

Environmental, social and governance (ESG) risk analysis is explicitly integrated into our bottom up process across all our Fixed Income and Equity strategies. Our process is fundamental driven and our issuer analysis encompasses a multitude of factors, including ESG.

Our assessment of an issuer’s ability to manage ESG successfully is integral to our determination of fair value (equity) and fair spread (credit). Both governments and corporate management teams that can demonstrate strong ESG credentials are more likely to boost economic development and financial performance over time; for example by growing faster, reducing the cost of capital and generally managing risks better compared to their peers. Consequently, ESG factor analysis is integrated into our investment process in the same way as we assess macroeconomic risk, financial performance and credit metrics. It acts as both a form of risk management and a source of alpha generation. We also consider it part of our fiduciary duty as stewards of our clients’ capital.

Portfolio managers / analysts score all issuers using a consistent series of questions and data points to inform their view of an issuer’s current ESG performance alongside their forward-looking prospects. The portfolio manager / analyst explicitly records their view in a dedicated ESG scorecard. Scores are reviewed at a minimum every 12 months.

In keeping with our process, the investment thesis report, including the ESG score, for an issuer is reviewed, challenged and agreed at the relevant theme sub-Investment Committee. The ESG risk / opportunity is incorporated through financial estimates and/or the valuation assessment. Taken in combination with other macro and micro economic risk drivers, investment time horizon, liquidity considerations and the investable universe, ESG risk assessment therefore has a direct impact on our investment decisions and portfolio construction.

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

The ESG integration approach described above is overlaid by Ashmore’s norms-based screening process, where investments that do not meet minimum standards are excluded from client portfolios. Ashmore fully supports the Oslo convention, which prohibits investment in companies manufacturing cluster munitions. Ashmore seeks to comply with applicable government authorities, and at a geographical level, screens across all investment themes for countries that are on the UN Security Council and EU/UK Sanctions and the US Office of Foreign Assets and Control lists.

Moreover, Ashmore is able to customise client portfolios to meet specific requirements for geographic, sector and stock specific restrictions, such as alcohol, animal/food products, armaments manufacturers or dealers, gambling, pornography, tobacco and coal.


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

Description

Examples of investment areas where Ashmore offers screening of portfolios based on (or informed by) client requirements (using recognised investment industry identifiers and coding into Ashmore's portfolio management system) include:‐
• Alcohol
• Animal / food products
• Armaments manufacturers or dealers
• Gambling
• Pornography
• Tobacco

Ashmore screens for, and prohibits, investment in companies manufacturing cluster munitions banned under the Oslo Convention. Ashmore at all times seeks to comply with all sanctions imposed by applicable government authorities, and also at a geographic level; and screens across all investment themes for countries which are on the United Nations and EU/UK Sanctions and the US Office of Foreign Assets and Control (OFAC) lists.

Screened by

          Ashmore screens across all investment themes for countries on the following lists:
• UN and EU/UK sanctions
• US Office of Foreign Assets and Control (OFAC)
        

Description

Ashmore screens for, and prohibits, investment in companies manufacturing cluster munitions banned under the Oslo Convention.

Ashmore screens across all investment themes for countries on the following lists:
• UN and EU/UK sanctions
• US Office of Foreign Assets and Control (OFAC)

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

Ashmore's funds and segregated accounts each have a specific investment mandate which sets out the parameters for investment. Within the Equities theme Ashmore is able to screen client portfolios to meet client requirements for geographic, sector and stock specific restrictions. Stock specific restrictions may include securities which meet clients’ own ESG 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.

          Use of recognised industry identifiers and coding into Ashmore's portfolio management system. Use of UN, EU/UK sanctions and US OFAC country lists.
        

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.

05.5. Additional information. [Optional]

.


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
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

Portfolio managers / analysts score each issuer by: 1/ the issuer’s current level of performance against global best ESG practice and 2/ the quality of their policies and initiatives designed to improve their ESG performance. The issuer is scored for each of the six questions on a scale of 1 – 5 (very poor to very good). The portfolio manager / analyst explicitly records their view in a dedicated ESG section in a standardised Investment Thesis Report. Their comments are structured around the six questions and conclude with a total ESG score.

Portfolio managers / analysts systematically assess a range of environmental, social and governance factors to form a view on a company’s ESG risks, opportunities and performance. The relevance and materiality of each of these factors varies depending on the company, sector and geography. The ESG risk / opportunity is incorporated through financial estimates and valuation, for example it may mean applying a discount/premium to its fair value. Taken in combination with other portfolio construction drivers, including our overall level of conviction, investment time horizon, liquidity considerations and the investable universe, ESG will directly impact our investment in a stock and its position sizing in the portfolio.


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.

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

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

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

09.6. Additional information.[Optional]

In keeping with our process, the Investment Thesis Report is challenged and the ESG score agreed at the relevant theme sub-Investment Committee. The report provides the basis for our final view on a stock and our level of conviction. Portfolio managers/analysts review ESG issuer scores annually at a minimum. The review is conducted at the respective sub-Investment Committee. Additional ESG reviews are triggered on an event-led basis and are led by the portfolio manager/analyst. The quality and consistency of ESG scoring across all portfolios is reviewed on a quarterly basis by the Head of Sustainability and ESG Integration.


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


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