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)