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Resolution Capital Limited

PRI reporting framework 2019

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

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

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

RCL is a specialist global real estate securities manager. Our investment objective is delivering superior risk adjusted long term returns, compared with relevant benchmarks.

This, we believe can be achieved by investing in a concentrated portfolio of carefully selected listed real estate securities with an emphasis on avoiding fundamental flaws, which could reasonably result in permanent impairment of the underlying investments. This aligns our investment process and security selection with clients’ objectives of long term real wealth creation.

Primarily through bottom up research, RCL seeks to identify and invest in a select group of high quality stocks which afford unique characteristics that the market continues to under appreciate.

Our process focuses on identifying and exploiting three key attributes:

  • High barrier property markets where landlords have pricing power;
  • Strong balance sheets which can successfully withstand and exploit market cycles; and
  • Management teams with skill, discipline and alignment.

ESG considerations have always been an integral part of RCL’s investment philosophy. We believe that strong ESG practices of the companies in which we invest are likely to be additive to their performance and that investor’s will ultimately be rewarded through superior investment outcomes. In addition, these initiatives benefit the broader community.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

Environmental

Environmental policies that lead to greater energy, water and waste efficiencies reduce operating expenses, making assets more profitable and environmentally sustainable. Additionally, tenants and consumers are increasingly setting minimum standards for sustainability. Buildings that meet such requirements have higher occupancy. Finally, buildings with high environmental standards may receive better pricing upon sale, due to a wider pool of potential buyers.

Where possible we measure the company’s consumption (per square metre), like-for-like change and targets for:

  • Energy;
  • Greenhouse gas;
  • Water; and
  • Waste.

However, in our opinion, environmental ratings can’t be measured in isolation, for a number of reasons, including:

  • Limited data availability across all REITs;
  • Inconsistent methodology between different regions and sectors; and
  • Does not take into account properties acquired for the intention of retrofitting to raise sustainability ratings.

Hence, we do not think it is always appropriate to rank the environmental rating of the static portfolio, but rather we track how each company is improving.

Whilst we take industry measures of sustainability into account, it is critical to consider the objectives and track record of management. We use meetings with management and property tours to discuss environmental credentials and review how they are incorporated into asset management and development.

Social

Real estate touches many facets of our everyday lives and therefore it’s important to consider how companies interact with all stakeholders. We consider, partly from a risk perspective, a number of the company’s policies and performance, including:

  • Customer and local community relationships/engagements;
  • Safety track record (including fatalities);
  • Adherence to human rights (in the supply chain); and
  • History of illegal activities/corruption.

In terms of company employees we, where practicable, review of the following factors:

  • Employee engagement and training;
  • Staff turnover (treatment); and
  • Diversity.

Governance

We believe that good governance and good management are imperative to an entity’s long term success. We have observed that companies with aligned management typically outperform companies with inferior alignment over the long term. We focus on:

  • Management share ownership;
  • Remuneration structure and KPI’s;
  • Board composition (including diversity);
  • Track record, transparency, integrity;
  • Minority shareholder protection; and
  • Conflicts of interest/related party transactions.

We are active owners and we engage with companies on different ESG issues and seek to improve disclosure where relevant. Please refer to our Proxy Voting and Engagement policies for more details.

Approach

The responsibility of incorporating ESG into the investment process sits with the Investment Team. The team integrates ESG factors in the investment process. Investment Analysts and Portfolio Managers are responsible for identifying and assessing relevant ESG factors. A discussion of these factors is included in stock initiation and research reports and are explicitly factored into valuations via adjustments to the company’s earnings forecasts and / or valuation multiple, where applicable.

ESG is an important component of Investment Team staff variable remuneration.

01.6. Additional information [Optional].

          
        
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SG 01 CC. Climate risk (Not Applicable)


SG 02. Publicly available RI policy or guidance documents

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

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

02.3. Additional information [Optional].


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

Employees and “Access Persons” as defined by the Investment Advisers Act of 1940, are subject to RCLs Personal Dealing Policy. Under the policy staff are not permitted to:

  • Invest in any stock held in our investment universe, other than via our Australian pooled products.
  • Engage the institutional broking services of a broker counterparty outlined in the RCL broker list
  • Transactions that may involve, or appear to involve, a conflict of interest
  • Trade in the same stock again in the opposite direction within a 20-business day period
  • Short sell or trade excessively

RCL & Pinnacle risk and compliance maintain a register of all employee interests in securities, derivatives and any trading activity.

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios (Private)


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