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Cardano Risk Management

PRI reporting framework 2020

You are in Indirect – Manager Selection, Appointment and Monitoring » Outputs and outcomes

Outputs and outcomes

SAM 08. Percentage of externally managed assets managed by PRI signatories (Private)


SAM 09. Examples of ESG issues in selection, appointment and monitoring processes

09.1. Provide examples of how ESG issues have been addressed in the manager selection, appointment and/or monitoring process for your organisation during the reporting year.

Topic or issue
          Lack of clear ESG policy or internal procedure guidance
        
Conducted by
Asset class
Scope and process

The Coverage Team identified that the manager had weak ESG policies and subsequently rated the manager Poor.

Following multiple conversations with the manager, the manager acknowledged the feedback. 

Outcomes

The Manager has formed a dedicated internal committee to focus on ESG. As part of this the Manager engaged external consultants to help them better understand the landscape, deficiencies, understand where training may be beneficial to internal investment staff. 

The Manager is currently working on the formalisation of a firm wide policy and we expect this to be published shortly. 

Topic or issue
          Not a UNPRI signatory. Tier 2 Stewardship status. No written ESG policy.
        
Conducted by
Asset class
Scope and process

The Coverage Team identified the short comings set out above, feeding back to the manager and flagging the risk of material redemptions over the medium term should standards not improve. 
 

Outcomes

As a direct result of our engagement: 

  • Stewardship Rating improved to Tier 1 Status 
  • Formal written ESG policy issued
  • Multiple examples provided of ESG factors being accounted for in portfolio decision-making
  • Willing to re-consider UNPRI signatory status

We have since improved the ESG rating, although it remains only average and below what we would like. We have though acknowledged the positive momentum and increased the momentum score in our ESG Rating. 

Topic or issue
          Overall engagement and response
        
Conducted by
Asset class
Scope and process

The overall Manager Research team carried out over 25 separate targeted engagement processes with managers in 2019. 

Outcomes

There have has subsequently been at least 4 "Recorded Changes" (meaning a manager has instigated an improvement to its approach to Responsible Investment, following Cardano engagement), over 10 "Expected Changes" (meaning change(s) a manager has indicated they will be making / are working on, following Cardano engagement) and 11 "Works-in-Progress (where managers are considering Cardano's feedback). 

Topic or issue
          Mining exposure and ESG practices
        
Conducted by
Asset class
Scope and process

We hold one alternative financing manager in the mining space. We have consistently monitored the overall environmental and social risks of holding this position from a macro perspective. We have also consistently monitored the manager's practices and procedures of ESG integration within the portfolio. 

Outcomes

We have included specific side letter restrictions on which countries the manager is entitled to make investments. We have ensured the manager shares with us detailed external consultant ESG reports on each large exposure within the portfolio. The manager now actively reports to us where ESG issues arise and how they have been managed. 

Topic or issue
          ESG Screen utilised in segregated CDI mandate
        
Conducted by
Asset class
Scope and process

In a dedicated mandate with a large asset manager, the team worked on putting in place a large segregated account to follow a CDI strategy which includes an environmental, social and governance screen. 

Outcomes

This has been successfully established 

Topic or issue
          ESG policy and written process
        
Conducted by
Asset class
Scope and process

Through our rating process and monitoring work, we identified that a distressed for control strategy was below expectations on articulation of ESG within the strategy. 

Outcomes

Since engagement, the manager has worked with us to publish a full ESG policy to cover each of their strategies. 

Topic or issue
          ESG at Manager Research Committee
        
Conducted by
Asset class
Scope and process
  • Investment team brought a new fund idea in the healthcare space to investment committee for the first stage of discussion

  • Even at this early stage of the process, the team had identified and raised a potential risk in terms of ESG integration in their process

  • Manager had no formal ESG policy so we shared with them an educational document we put together. We then discussed ESG issues in the healthcare space more specifically with the CIO and he provided a range of sensible answers where they had considered ESG.

  • We asked the manager to provide documented evidence of ESG in their due diligence. Questions/challenges were also raised at the investment committee around their ESG policy

Outcomes

Investment diligence on the manager is ongoing with ESG a key area of focus - on the basis that if we do not see sufficient comfort on ESG integration, we will not invest

09.2. Additional information.


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