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PRI reporting framework 2019

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Outputs and outcomes

LEI 12. How ESG incorporation has influenced portfolio composition

12.1. Indicate how your ESG incorporation strategies have influenced the composition of your portfolio(s) or investment universe.

Describe any reduction in your starting investment universe or other effects.

CCLA's investment universe is reduced by our company-wide screening. Examples include restrictions upon companies manufacturing weapons (or key components for weapons) that have been banned by international treaties and, due to our concerns about stranded assets, companies that generate more than 5% of their revenue from the extraction of coal and tar sands

Specify the percentage reduction (+/- 5%)

1.71 %

Select which of these effects followed your ESG integration:

12.2. Additional information.[Optional]

LEI 13. Examples of ESG issues that affected your investment view / performance

13.1. Provide examples of ESG issues that affected your investment view and/or performance during the reporting year.

ESG factor and explanation

Climate Change

CCLA recognises that climate change, and associated changes in governmental policy, pose a threat to shareholder value over the medium to long-term. We view climate change as the largest threat to our planet, ecosystems and communities, as well as a being a critical issue for long-term investors. We also recognise that the transition to a low carbon economy presents investment opportunities. For these reasons we have long supported efforts to limit global temperature rises to substantially below two degrees Celsius above pre-industrial levels. 


ESG incorporation strategy applied Screening|Integration

Impact on investment decision or performance

As investors we have a duty to manage our financial exposure to climate related risk and to maximise the opportunities arising from the low carbon transition for our clients. We do this in five ways. First, informed by scenario analysis and qualitative investigation by our investment analysts and ESG experts, we conduct an annual review of the major risks and opportunities associated with climate change. Second, informed by this analysis we seek to avoid investing in the companies, in the most exposed sectors, who are not properly preparing, or are not able to prepare, for the transition to a low carbon economy. Third, we engage with our holdings to support them in addressing and mitigating the risks that the low carbon economy poses to their business. Fourth, we seek to promote proactive climate regulation and legislation through interaction with public policy makers. Finally, we seek to identify investments that meet our risk and return objectives and dedicate capital to accelerating the low carbon economy.

ESG factor and explanation

Corporate Governance

CCLA believe that the poorest standards of corporate governance place invested value at risk

ESG incorporation strategy applied Integration

Impact on investment decision or performance

Understanding companies’ corporate governance and assessing their behaviour is the starting point of our approach to responsible investment. Our approach begins with rigorous due diligence. This uses data from MSCI, supplemented by inhouse analysis, to rate companies as having high, medium or low governance risk. This assessment is based upon 96 different corporate governance factors, including companies’ board composition, ownership and accounting quality. If a company’s corporate governance or accounting standards are in the bottom 20% of global or home market rankings they are not allowed to be purchased without detailed further work. This often includes fact-finding calls and meetings. The very worst rated companies, the bottom 5%, are not investible without the permission of both CCLA’s Chief Investment Officer and Head of Ethical and Responsible Investment. High or medium governance risk companies, held within CCLA portfolios, are prioritised for engagement.

13.2. Additional information.[Optional]