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Element Investment Managers

PRI reporting framework 2019

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 100%

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

Integration requires detailed bottom-up analysis. This analysis positions Element to identify relevant ESG issues that are material to the valuation of the investment, and at the same time, to identify those that can benefit the valuation of the investment through effective engagement.

We manage a few Islamic funds which are, by definition, screened funds based on the principles of Shari'ah law.

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

See above for explanation


LEI 02. Type of ESG information used in investment decision

02.1. Indicate what ESG information you use in your ESG incorporation strategies and who provides this information.

Type of ESG information

Indicate who provides this information  

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

02.2. Indicate if you incentivise brokers to provide ESG research.

02.3. Describe how you incentivise brokers.

ESG is a specific factor that we build into our Broker selection and allocation process

02.4. Additional information.[Optional]


LEI 03. Information from engagement and/or voting used in investment decision-making

03.1. Indicate if your organisation has a process through which information derived from ESG engagement and/or (proxy) voting activities is made available for use in investment decision-making.

03.2. Additional information. [Optional]

Investment analysts responsible for a specific company's fundamental analysis have responsibility for the proxy voting and are included in any engagement activity that is focused on the company they are responsible for. The analyst's fundamental analysis and valuation is presented to the Investment Committee for investment decision- making.


(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

Some of our funds are managed in accordance with Shari'ah law.  A Shari'ah Supervisory Board ("SSB") approves the portfolio, after completion of a Shari'ah compliance audit, every six months. Some share are excluded from our investable universe if the ESG risks are deemed to great.

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

See above.  Certain companies are excluded as a result of their nature of business (e.g. sells alcohol), but others can be excluded or included depending on the financial structure (e.g. debt level is (under)/over a certain limit). Clients are notified where portfolio universe changes are material. When we do our feedback to our clients we indicate which company/ies we have excluded due to ESG considerations.


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.

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]

Internal Shari'ah screens and research are updated every month.

The Shari'ah Supervisory Board conducts a Shari'ah compliant audit of the portfolio universe every six months.

Whenever an analyst initiates or reports on a company he/she revies the ESG status.


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.

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

Shariah Advisory Board would require sell out of non-compliant investment over a reasonable period (usually a quarter). 

06.3. Additional information.[Optional]

External audit by independent Shariah Advisory Board every six months.


(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]

Relevant and material E, S and G factors are identified by the analyst responsible and integrated into the investment committee report (the report includes the intrinsic value of the company). The integration may take the form of an adjustment to anticipated future earnings, the discount rate where quantification of the timing is difficult to estimate or a discount to our estimated intrinsic value of the company. The Investment Committee helps ensure the completeness of the integration process and the reasonableness of the intrinsic value.


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.

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

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]


LEI 10. Aspects of analysis ESG information is integrated into

New selection options have been added to this indicator. Please review your prefilled responses carefully.

10.1. Indicate which aspects of investment analysis you integrate material ESG information into.

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

10.2. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

10.3. Describe how you integrate ESG information into portfolio weighting.

Relative valuations within a sector may be influnced by ESG factors (e.g. investing in one platinum share vs another based on social criteria around labour relations and working conditions)

10.4. Describe the methods you have used to adjust the income forecast / valuation tool

We adjust the discount rate or earnings in a forecast.

We further apply a company specific ESG discount to intrinsic value.

10.6. Additional information. [OPTIONAL]


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