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Wellington Management Company LLP

PRI reporting framework 2020

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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 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]


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]


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.

10.3. Describe how you integrate ESG information into portfolio weighting.

Our ESG Research Team helps portfolio managers and analysts gather deeper intelligence on ESG topics and integrate these considerations into the investment process. Our ESG team works closely with investment teams to incorporate our research into the investment process - conducting in-depth portfolio reviews with investment teams to discuss holdings with the greatest ESG risks and strengths.

Portfolio managers develop their own investment approaches, whereby ESG considerations are integrated into their research and decision-making processes to the extent that they believe these issues may affect the long-term success of a company and investment returns. This can manifest within the investment thesis or portfolio weighting for a security, as well as within proxy voting and company engagement efforts.

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

In accordance with our ESG integration philosophy, we believe that, all else equal, the quality of companies' performance on key ESG issues increases the probability that they will be able to sustainably create value over time. One way to reflect this higher probability is to apply a valuation premium to these companies relative to their peers or a valuation discount to companies whose ESG risks are underappreciated by the market.

The physical climate change research with Woods Hole Research Center (WHRC) is also leading investors to consider adjusting their growth expectations for markets and companies where we believe that certain climate variables will have a systemic impact on economic growth. Companies with exposure to acute climate events should see this reflected in assumptions about volatility of earnings. As part of these efforts, the Climate Research team is developing a DCF tool that incorporates probability of an event, and then the impact of that event on the terminal value.

10.6. Additional information. [OPTIONAL]


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