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Element Investment Managers

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]


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

          New and existing team members are guided on what questions to ask management, and thereby ensuring a focus on materiality and relevance to the company.
        

Progress achieved

Positive feedback from the companies that Element has engaged with. Ongoing progress. Increased focus on mining companies Social Labour Plan (SLP) as this is integral to it maintaing its mining rights.

Key performance indicator

          Particular relevant to new investment team members.
        

Progress achieved

Ongoing. Daily (shorter) and weekly (longer) investment meetings ensure that the entire team is aware of our ESG activities.

Key performance indicator

          Management of companies effect change in their organisations as a result of Element's engagement.
        

Progress achieved

Ongoing. Critical to ensure engagement focuses on relevant and material issues to the compnay concerned and management can understand that effecting change will benefit the company in a tangible way over the long-term.

Example: Engagement with the management team of Astrapak (APK), Astrapak Pref (APKP) and Master Plastics (MAP)

Element engaged with management relating to sale of APK’s core assets to RPC and subsequent listing of MAP (APK’s non-core assets) in 2017. The engagement involved numerous management interaction both in 2016 and 2017 relating to the business operations and potential transaction (meetings, conference calls and emails) as well as potential options for non-core assets. Element further attended the General Meeting in Johannesburg to approve transaction for both APK and APKP in Johannesburg on 12 May 2017. This was at the request of management as they required a quorum for the meeting to approve the transaction.

Key performance indicator

          Analysts and Portfolio Managers adjust valuation measures to incorporate material ESG issues into their models.
        

Progress achieved

Ongoing. Healthy and robust debate on quantum of valuation adjustments for material ESG issues occurs in investment meetings. A number of valuations were further adjusted for ESG issues based on the collective experience of the investment team.

          Ensure Element is seen as remaining a leader in RI in South Africa
        

Key performance indicator

          Positive media articles highlighting Element's work.
        

Progress achieved

Ongoing. A number of articles / quotes from Element on our RI and ESG work, for example highlighting numeous Corporate Governance issues in the largest listed company on the JSE, Naspers: http://moneyweb-2.instantmagazine.com/investor/the-moneyweb-investor-issue-38#!/buyer-beware

Financial performance of investments

Key performance indicator

          Long-term outperformance of benchmarks and peers.
Avoidance of "train smashes" as a result of ESG work.
        

Progress achieved

Element's performance have turned around materially since 2016.

An example of the impact of incorporating ESG factors and engagement with managment is as per the previously discussed engagement with the management team of Astrapak (APK), Astrapak Pref (APKP) and Master Plastics (MAP). For calculation purposes:

  • APK share price started reacting from Nov 2016 to the news of a possible deal.
  • All payments were completed in Aug 2017. 
  • We calculated the total return for the 12 months from 31 Aug 2016 to 31 Aug 2017. 
  • Included distributions made during the period and MAP share price on 31 Aug 2017.
  • APK returned 132% over the period, compared to the JSE All Share Index's return of 10%.

Furthermore, a number of examples of "train smashes" were avoided as a result of ESG work. 

 

 

ESG characteristics of investments

Key performance indicator

          Adjusted portfolio weights of companies as a result of positive or negative ESG factors.
        

Progress achieved

Ongoin. Many of our underweights, or where we do not own the company, is as a result of ESG factors taken into account by Element, but seemingly ignored by the market.

Other activities

Key performance indicator

          Specific company engagement
        

Progress achieved

Key performance indicator

          Company case studies are produced regularly highlighting ESG focus, engagement with companies and subsequent company management action.
        

Progress achieved

Ongoing. We produce the case studies on a regular basis.

Key performance indicator

          Clients understand how engagement and ESG incorporation can ad value and/or reduce risk of their overall investment portfolios.
        

Progress achieved

Ongoing. Clients invariably want to see tangible effects of engagement via a rising share price, but many remain very short-term focused while engagement, by its nature, is more long-term.

06.2. Additional information.


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