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Adelphi Capital LLP

PRI reporting framework 2020

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 which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities; and the breakdown of your actively managed listed equities by strategy or combination of strategies.

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
100 %
Total actively managed listed equities 100%

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

Adelphi's 'Responsible Asset Ownership' policy forms the basis of the Firm's approach to ESG incorporation. It is a process we will continue to develop over time, in order to enhance our current prcess, with no intention of launching dedicated ESG compliant fund products. However, we will adopt certain processes and procedures to ensure that ESG issues are fully considered and evaluated, where possible, when we make investment decisions.

Adelphi's imbedded approach to ESG

Since inception in 1997, Adelphi Capital’s investment strategy has implicitly incorporated elements of ESG into its process.

  • We regard strong management ethics and good corporate governance as a pre-requisite for investing in any company and have a long history of voting on corporate actions and direct engagement with boards in situations where we believe they are not acting responsibly. 
  • We are long term shareholders and central to our investment philosophy is the concept of responsible ownership. 
  • We continually evaluate those companies we own and those we are considering, to assess a wide variety of issues that include the fundamentals of ESG. 
  • On environmental issues, our tendency to avoid capital intensive, highly cyclical and commoditised companies means that we almost never invest in fossil fuels, mining, chemicals, steel, utilities and other heavy industries. We prefer knowledge and brand intensive businesses and innovators that bring new more efficient ways of doing business.  
  • On social issues, we also exclude stocks with direct exposure to controversial weapons (cluster bombs, landmines, depleted uranium and chemical and biological weapons) and have been signatories of the Cluster Munitions Statement since 2013 and will screen for these companies. 

Formalising this approach

The Firm has now decided to integrate ESG issues more formally into our investment process and our business. We will use a combination of in-house expertise and external resources (e.g. third party data providers, training providers and analysts) to evaluate whether those ESG issues identified represent risks or competitive advantages. Where we believe a company is operating below best practise we will actively engage with company management to seek a better outcome.

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

Adelphi Capital's funds invest exclusively in listed European equities and are overseen by the Firm's 'Responsible Investment Policy'. 


LEI 02. Type of ESG information used in investment decision (Private)


LEI 03. Information from engagement and/or voting used in investment decision-making (Private)


(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

The Firm’s investment strategy does not have any pre-defined investment restrictions for ESG reasons, but will ordinarily not invest in commoditised businesses such as mining, chemicals, metals, utilities and other heavy industries. The strategy routinely screens for those businesses listed in the AFM's Cluster Munitions Statement.

 

 

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

If the list of banned companies on the AFM's Cluster Munitions Statement changed we would update the strategy's screen and the Firm's Cluster Munitions Statement. We would notify clients only if the information is requested. The ban on investment applies to companies that produce, sell or distribute cluster munitions, or essential parts thereof.


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure ESG screening is based on robust analysis.

05.5. Additional information. [Optional]

If the list of banned companies on the AFM's Cluster Munitions Statement are entered into the Firm's live portfolio monitoring tool that the traders and risk manager use to actively monitor the Funds’ portfolios. It also acts as a pre-trade compliance tool. Any attempts to buy those 'blacklisted' companies shall be flagged to the Complaince Officer and Operations teams. 


LEI 06. Processes to ensure fund criteria are not breached (Private)


(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the proportion of actively managed listed equity portfolios where E, S and G factors are systematically researched as part of your investment analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

Enviromental - The strategy routinely avoids highly commoditised industries. That said, the Firm will be developing our approach to how we capture Environmental data from companies and how we can integrate this into our current process in order to enhance position risk management and returns, where applicable.

Social - Social issues are something we intrisically incorporate into our consideration of a company's long-term success. 

Corporate Governance - We have long been responsible asset owners and have a record of engaging with boards where we deem our participation effective and appropriate. 


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 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]

We have/will develop a policy, procedures and programmes to assist the analysis, monitoring and development of relevant ESG considerations throughout its investment process. We seek to monitor our portfolio exposure as follows:

  1. Weekly meetings in which the Risk Manager reports on any 'top-down' ESG considerations and changes in ESG scores for our portfolio companies.
  2. Annual reviews between the co-PMs and analysts.
  3. Annual ESG broker training to develop a toolkit for analysts to conduct ESG research.
  4. Ad-hoc meetings and position inception meetings where analysts present a stock case to the co-PMs.
  5. Firm-wide ESG issues shall be discussed at Partnership Committee meetings, and those risk reviews collated by the head of Compliance shall include a section on ESG matters - so any “high” ESG risks/issues (at both a 'firm' and 'investment' level) would be captured. The risk reviews for the assets are reported to the Board on an annual basis and any urgent issues are reported to the Board on an ad hoc basis.
  6. An ESG task force will ensure that this implementation process, as well as third party service providers, remains relevant and is in line with ESG best practise. 

LEI 10. Aspects of analysis ESG information is integrated into (Private)


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