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Pendal

PRI reporting framework 2019

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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

Fixed income Corporate (financial) – engagement

Fixed income Corporate (non-financial) – engagement


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)

Cash

Other (1)

'Other (1)' [as defined in OO 05]

          Structured
        
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
Listed equity

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

Hedge funds

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

11.3b. If your organisation does not integrate ESG factors into investment decisions on your externally managed assets, explain why not.

The only externally managed asset class where we do not integrate ESG factors into investment decisions is hedge funds.

The majority of our hedge funds investments are quantitatively based. To incorporate a new factor into a quantitative investment process requires a sufficient back history of objective data with availability on an ‘as released’ basis to avoid ‘look back bias’, as well as for the insights from this data to be proven to add value when tested in a statistically rigorous fashion. ESG has not yet reached the point where this is able to be done, however we expect that as more data history becomes available this could change. Furthermore, our hedge fund investments frequently employ trading strategies that are more short term in nature. Most ESG risks are expected to manifest over much longer horizons. This makes incorporation of ESG factors less relevant in this asset class. 

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

Responsible investment considerations are included in Pendal's investment manager selection, appointment and monitoring as outlined in our "Investment Manager Due Diligence Guildelines".

Investment due diligence oversight is done by the Investment Boutique and operational due diligence oversight is done by Investment Operations, although both are conducted in consultation with area experts, such as Risk and Compliance, Responsible Investments, Operations and IT. 

The due diligence process can involve a combination of site visits (recommended for all new appointments and for annual monitoring purposes) and desktop reviews. Where relevant desktop reviews include detailed questionnaires on ESG-related areas (such as investment philosophy, governance structures, strategies, investment approach, engagement and proxy voting practices), risk management framework and reporting. In addition to reviews of manager performance reports, policies and procedures, as well as manager presentations, conference calls and external consultants.

Our latest ESG questionnaires also included specific questions to assist us in assessing overall alignment with our approach to the implementation of TCFD guidelines and other climate related risk management initiatives. 

All of our external managers are PRI Signatories. 

Our external manager for our sustainable international equity mandate follows a Sustainability Policy for the fund’s proxy voting framework. The manager's service provider, ISS, has developed proxy voting guidelines that are consistent with the objectives of sustainability-minded investors and fiduciaries. On matters of ESG import, ISS' Sustainability Policy seeks to promote support for recognised global governing bodies promoting sustainable business practices advocating for stewardship of environment, fair labour practices, non-discrimination, and the protection of human rights.

Generally, ISS' Sustainability Policy will take as its frame of reference from internationally recognised sustainability-related initiatives such as the PRI, the United Nations Environment Programme Finance Initiative (UNEP FI), United Nations Global Compact, Global Reporting Initiative (GRI), Carbon Principles, International Labour Organization Conventions (ILO), CERES Principles, Global Sullivan Principles, MacBride Principles, and environmental and social-related European Union Directives. Each of these efforts promote a fair, unified and productive reporting and compliance environment which advances positive corporate ESG actions which in turn promote practices that present new opportunities or that mitigate related financial and reputational risks. On matters of corporate governance, executive compensation, and corporate structure, the Sustainability Policy guidelines are based on a commitment to create and preserve economic value and to advance principles of good corporate governance.

ISS notes there may be cases in which the final vote recommendation at a particular company varies from the voting guidelines due to the fact that it closely examines the merits of each proposal and considers relevant information and company-specific circumstances in arriving at decisions. To that end, ISS engages with both interested shareholders as well as issuers to gain further insight into contentious issues facing the company. ISS updates its guidelines on an annual basis to take into account emerging issues and trends on ESG topics, as well as the evolution of market standards, regulatory changes and client feedback.

As we are an active investment manager ourselves, we have a very small allocation to external managers (<10% AUM)


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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