This report shows public data only. Is this your organisation? If so, login here to view your full report.

RBC Global Asset Management

PRI reporting framework 2019

Export Public Responses
Pdf-img

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
99.9 %
Percentage of active listed equity to which the strategy is applied
0.1 %
Total actively managed listed equities 199.3%

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

We use integration as our primary ESG incorporation strategy since it is a comprehensive method that allows ESG risks and opportunities to be considered in the company specific context. As part of our integration efforts, we engage with companies and provide them with an opportunity to address ESG issues, which we believe will improve the long-term, sustainable performance of our investments.

A combination of screening and integration is applied to our designated socially responsible investing strategies. These strategies have been specifically designed to screen out companies that manufacture products and/or provide services that socially responsible investors may wish to avoid. These strategies also employ a qualitative screen that assesses practices in a number of areas such as environment, employee relations, human rights, etc. In addition to these negative screens, integration is used to assess the remaining companies to ensure the relevant ESG factors are appropriately addressed as mentioned above.

RBC GAM offers a global equity fossil fuel free strategy in the U.S., and the RBC Vision Fossil Fuel Free Global Equity strategy in Canada. Both strategies employ a fossil free screen that eliminates fossil fuel producers from the portfolio, and integrate ESG factors. Additionally, in 2018, RBC GAM launched the RBC Vision Global Horizon Equity strategy in Europe, which eliminates fossil fuel producers from the portfolio, in addition to companies involved in the business areas of adult entertainment, alcohol, armaments, gambling and tobacco.

In 2018, RBC GAM also launched the RBC Vision Canadian Equity Women’s Leadership strategy in Canada, which focuses on companies domiciled in Canada that have demonstrated a commitment to gender diversity as part of their approach to corporate governance.

RBC GAM also offers impact investing strategies, such as the RBC Impact Bond and Access Capital Community Investment strategies, to U.S. investors. These strategies integrate ESG factors and focus on investments making net-positive environmental and social impacts, while simultaneously aiming to deliver competitive returns. 

RBC GAM also employs norms-based screening to all of its investments.  No RBC GAM investment team will knowingly invest in companies associated with the production, use or distribution of anti-personnel land mines or cluster munitions. These exclusions only apply when we control the investment policy for a portfolio. For mandates where we do not control the investment policy, our clients may request different exclusions or no exclusions. We have engaged an independent third party research provider to provide us with a list of companies that should be excluded on the basis of this policy, which is updated monthly.

As a result, the majority of our AUM in Listed Equity falls under the combined 'Screening + Integration' ESG incorporation strategy based on the Reporting Framework's incorporation strategy definitions.

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

See description in LEI 01.2


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.

Some of our investment teams are more systematic in incentivizing brokers to provide ESG research. For example, our Global Equity team has a process whereby portfolio managers can vote on which research to purchase. These portfolio managers specifically allocate their votes towards ESG focused research. Other teams are more focused on specialized ESG research and their own proprietary ESG-related research.

02.4. Additional information.[Optional]

RBC GAM also employs norms-based screening to all of its investments.  No RBC GAM investment team will knowingly invest in companies associated with the production, use or distribution of anti-personnel land mines or cluster munitions. These exclusions only apply when we control the investment policy for a portfolio. For mandates where we do not control the investment policy, our clients may request different exclusions or no exclusions. We have engaged an independent third party research provider to provide us with a list of companies that should be excluded on the basis of this policy, which is updated monthly.  


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]


(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

Our designated socially responsible strategies apply negative screens for products (ex: alcohol, tobacco, and gambling) and against lagging ESG performance. The product-based exclusionary screening criteria are based on percentage thresholds of annual revenues. Any company that meets any of the exclusionary screening criteria will be placed on a prohibited securities list and will not be eligible for inclusion in our designated socially responsible strategies. For our fossil fuel free global equity strategies, we exclude all companies that extract, process, and transport fossil fuels and one strategy also applies SRI screens.

When we control the investment policy for a portfolio, we will not knowingly invest in companies whose business activities would contravene the prohibitions contained in the Anti-Personnel Landmines Convention or the Convention on Cluster Munitions.

Where there are full economic sanctions that prohibit any financial dealings with a foreign state, including investment in entities operating under the authority of the foreign state, we will not invest in securities that fall within the sanctions. Where sanctions have been imposed against foreign countries that do not prohibit financial dealings we will identify and assess any risk and consider whether the investment would still be in the best interests of our clients.

Screened by

Description

Qualitative screening criteria are applied to our designated socially responsible strategies where it is possible for a company to perform both positively and negatively. The application of qualitative criteria involves evaluating each company's overall performance, both positive and negative, in each issue area and balancing strengths and concerns. Our qualitative screening criteria include: community, corporate governance, employee relations, environment, human rights and product/business practices. In the specific areas of occupational health and safety and environmental performance, we apply the qualitative screening criteria using a best-of-sector approach, where each company's record is evaluated relative to that of its industry counterparts. The standards for performance are best industry practices.

In addition, the RBC Vision Canadian Equity Women’s Leadership strategy, launched in 2018, will only invest in companies domiciled in Canada that have demonstrated commitment to gender diversity as part of their approach to corporate governance. As a result, eligible companies must either have three female directors on the board, a combination of two female directors and one woman in an executive leadership role, or have 30% of its board represented by female directors.

Screened by

          Anti-Personnel Landmines Convention and Convention on Cluster Munitions
        

Description

As described above, when we control the investment policy for a portfolio, we will not knowingly invest in companies whose business activities would contravene the prohibitions contained in the Anti-Personnel Landmines Convention or the Convention on Cluster Munitions.

These exclusions apply to direct equity and corporate credit holdings, but do not apply to derivatives or other index exposures where our exposure is indirect and outside of our control and which would not meaningfully impact the ability of these companies to obtain capital.

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

The principles for our screened strategies were developed in consultation with our ESG service providers. In 2017, we merged two families of our screened strategies and removed the exclusionary screen of nuclear power involvement. In 2018, we added an additional screen for involvement in cannabis products, and will review the screen on an ongoing basis as the industry and its revenue disclosure evolve. The investment principles and screening criteria are periodically reviewed. If substantial changes are made, we provide detailed disclosure to our investors describing those changes in advance of those changes being made.

The RBC Vision Global Horizon Equity strategy, available to European investors, applies slightly different exclusionary screens than our other SRI strategies. Specifically, the strategy excludes companies whose primary business is in adult entertainment, alcohol, armaments, gambling and tobacco alongside those companies directly involved in the extraction, processing or transportation of fossil fuels.


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]

External research and data used to identify companies to be excluded/included is subject to an internal review by RBC GAM staff. In addition, portfolio managers of the SRI strategies review new inclusions and exclusions to determine if inaccurate information is included in the providers' analysis.

When we control the investment policy for a portfolio, we will not knowingly invest in companies whose business activities would contravene the prohibitions contained in the Anti-Personnel Landmines Convention or the Convention on Cluster Munitions.

Where there are full economic sanctions that prohibit any financial dealings with a foreign state, including investment in entities operating under the authority of the foreign state, we will not invest in securities that fall within the sanctions. Where sanctions have been imposed against foreign countries that do not prohibit financial dealings we will identify and assess any risk and consider whether the investment would still be in the best interests of our clients.


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.

Should there be a breach of fund screening criteria, ineligible securities would be sold immediately and our error review process would be activated, which includes an assessment of the root cause of the error and taking appropriate steps to prevent similar errors in the future. The client would also be compensated for any loss incurred as a result of the error.

06.3. Additional information.[Optional]


(B) Implementation: Thematic

LEI 07. Types of sustainability thematic funds/mandates

07.1. Indicate the type of sustainability thematic funds or mandates your organisation manages.

07.2. Describe your organisation’s processes relating to sustainability themed funds. [Optional]

RBC GAM offers fossil fuel free global equity strategies in the U.S., Canada and Europe. The strategies do not invest in issuers or vehicles that include issuers directly involved in extracting, processing or transporting coal, oil or natural gas, or issuers included in the Carbon Underground 200.

Additionally, in 2018, RBC GAM launched the RBC Vision Global Horizon Equity strategy in Europe, which eliminates fossil fuel producers from the portfolio, in addition to companies involved in the business areas of adult entertainment, alcohol, armaments, gambling and tobacco.

We also manage fossil fuel free or environmentally-themed strategies for clients on a segregated basis.

In 2018, RBC GAM also launched the RBC Vision Canadian Equity Women’s Leadership strategy in Canada, which focuses on companies domiciled in Canada that have demonstrated commitment to gender diversity as part of their approach to corporate governance. Eligible companies must either have three female directors on the board, a combination of two female directors and one woman in an executive leadership role, or have 30% of its board represented by female directors.

 


(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]


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]

Our investment teams are at varying stages in developing their ESG integration processes. All of our investment teams have access to comprehensive ESG research and are incorporating ESG factors into their investment decision making. We have integrated ESG scores into our standard and proprietary trade management software/applications. 

For example, our Global Equity and Emerging Market Equity teams fully integrate ESG factors in a disciplined, fundamental investment process. Both teams use a robust analysis process and keep records that capture how ESG information and research was incorporated into investment decisions. As another example, our North American Equity team began more systematically tracking material ESG factors at their investee companies in 2018, utilizing sources including third party ESG research and the SASB materiality framework to complement analyst and portfolio manager insights.

Many of our teams also engage in meetings or discussions when reviewing investment decisions. For instance, our Asian Equity team holds regular internal team discussions as part of its investment process, which includes the discussion of material ESG factors.


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

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.

The methods used to integrate ESG information into portfolio construction depend on the particular investment team. For example, our Emerging Markets Equity team uses a scorecard with a wide range of questions as the prime determinant of portfolio weights. ESG questions comprise a significant percentage of the scorecard. Our Global Equity team integrates ESG factors in their portfolio construction. Some of our Canadian equity teams have developed checklists to identify material risks, and these factors are used as a guide to determine materiality of ESG factors. Our European Equity team monitors the ESG performance of investee companies for deterioration which often prompts engagement with management or the board. As part of its approach to ESG integration, material ESG factor performance can affect the team's buy/sell decisions and security weight in a given strategy.

Our socially responsible investment strategies integrate ESG factors as part of the portfolio construction through the selection of qualifying securities.   

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

Some of our investment teams are more advanced in adjusting the income forecast or valuation based on ESG factors. For example, our Emerging Markets Equity team takes into account sustainability factors, which may include, for example, companies that invest in infrastructure or research and development, and may adjust income statements to capitalize on these investments. In addition, the Emerging Markets Equity team makes adjustments where margins are artificially increased in the short-term by factors such as a low tax rate, squeezing suppliers or employees, or overcharging customers. Our Global Equity team adjusts factors in the income statement depending on its scenario analysis.

10.5. Describe how you apply sensitivity and/or scenario analysis to security valuations.

Approaches to sensitivity or scenario analysis using ESG factors differ by investment team. For instance, our Global Equity team will consider an ESG factor's potential impacts on cash flows and incorporate it into its discounted cash flow modelling scenarios. As another example, ESG factors are considered in our North American Equity team's fundamental analysis and will thus contribute to its overall assessment and eventual models.

10.6. Additional information. [OPTIONAL]


Top