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CCLA

PRI reporting framework 2019

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You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (C) Implementation: Integration of ESG factors

(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]

Our experience suggests that conventional financial modelling only gives part of the answer as to what makes a company a good investment. So, before investing, we carefully assess the environmental, social and governance (ESG) standards of all companies.

We believe that companies in the most carbon intensive sectors or with either the poorest standards of corporate governance/other unmitigated ESG risks are likely to underperform over the medium to long-term. For this reason, we have strict processes to identify and then, through integration, remove these companies from all of our portfolios. 

 


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.

Our approach to ESG integration impacts upon portfolio weightings in a number of ways, including but not limited to, the following: 

First, our responsible investment screening approach removes prospective investee companies from our universe. For instance, our climate change and investment policy precludes investments such as BHP and Anglo American due to the revenue that they currently derive from the extraction of thermal coal.

Second, our integration policy identifies companies with the poorest standards of corporate governance and/or the highest levels of unmitigated ESG risks. These companies require the approval of the Chief Investment Officer and the Head of Ethical and Responsible Investment. Again, this acts as a preventative barrier to stop them entering our clients' portfolios.

Third, our climate change and investment policy, informed by routine scenario analysis, identifies sectors and companies that are most at risk from the low carbon transition and has set a maximum portfolio carbon footprint. For this reason, CCLA continues to be significantly underweight the oil and gas sector and other carbon intensive industries.

Finally, the ESG standards of our portfolios are monitored by our bi-annual Ethical and Responsible Investment Committee. 

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

Due to the risk of stranded assets identified within our climate change modelling we alter the anticipated future value of oil, gas and coal companies based upon IEA Scenarios.

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

See answer to 10.4

10.6. Additional information. [OPTIONAL]


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