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Cardano Risk Management

PRI reporting framework 2020

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Asset class implementation gateway indicators

OO 10. Active ownership practices for listed assets

10.1. Select the active ownership activities your organisation implemented in the reporting year.

Listed equity – engagement

Listed equity – voting

Fixed income SSA – engagement

Please explain why you do not engage directly and do not require external managers to engage with companies on ESG factors.

          All of the SSA bonds that we own directly are either government or quasi-government bonds.  We do not engage with or lobby governments on ESG factors.  We do not allocate assets to external managers for SSA bond portfolios.  However, where we advise clients, we require investment managers of SSA bond portfolios to have an ESG policy, including an engagement policy.
        

Fixed income Corporate (non-financial) – engagement


OO 11. ESG incorporation practices for all assets

11.1. Select the internally managed asset classes in which you addressed ESG incorporation into your investment decisions and/or your active ownership practices (during the reporting year).

Listed equity

Fixed income - SSA

Cash

Other (1)

`Other (1)` [as defined in OO 05]

          Listed equity beta derivatives and rates exposures through derivatives.
        
Select the externally managed assets classes in which you and/or your investment consultants address ESG incorporation in your external manager selection, appointment and/or monitoring processes.
Asset class
ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes
Listed equity

Listed equity - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fixed income - corporate (non-financial)

Fixed income - corporate (non-financial) - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Private equity

Private equity - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Property

Property - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Commodities

Commodities - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Hedge funds

Hedge funds - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Money market instruments

Money market instruments - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Other (1)

Other (1) - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

11.3b. If your organisation does not integrate ESG factors into investment decisions on your externally managed assets, explain why not.

We do not integrate ESG factors into selecting and monitoring externally managed money market funds.  The money market funds we allocate to are "low risk" funds typically targeting 7-day LIBID and managed either by the custodian or a manager who also manages other assets in the portfolio and therefore already subject to scrutiny with regard to ESG policies.  We have recently been able to allocate to "ESG-friendly" money market funds, however, these funds are currently small and therefore we are unable to make large allocations due to our internal risk limits.  As these funds become more popular and grow in size, we will be able to increase our allocation accordingly.

11.4. Provide a brief description of how your organisation includes responsible investment considerations in your investment manager selection, appointment and monitoring processes.

Cardano takes a Responsible Investment approach to investing across all of its portfolios and client mandates. Every investment decision is made on a risk-adjusted return basis. We view environmental, social and governmental risk and return drivers as a critical part in making decisions on risk-adjusted return. 

While we factor in ESG factors into every investment decision that is made to some degree, we acknowledge that these factors may have more of a material impact on financial return in some circumstances and strategies than others. As such, we deliberately structure our process around decision making to ensure that we focus the most time on these more highly effected areas. 

To assist in this process, all invested strategies are given a specific ESG rating based on Cardano's proprietary methodology, to help provide context to how ESG should be taken into account in buy / sell / hold decisions throughout the life-cycle of an investment. 

Timing of when strategies are rated: 

1. Prior to investment: investment proposals for all new investments tabled at the manager review committee (MRC) must contain a dedicated section setting out (i) the ESG rating ; and (ii) a summary of the rationale used to get to that rating. 

2. Post-Investment: (i) all strategies' ESG ratings are formally re-underwritten on an annual basis by the relevant coverage team; and (ii) ESG ratings are updated on an ad-hoc basis: coverage teams speak to all invested managers regularly as part of the overall monitoring process - this will include discussing ESG where relevant. 

Where, either before investment or as part of our monitoring process ESG integration within the manager fails to meet the required standard such that it would effect the overall risk-return we would either pass on the relevant strategy or consider redeeming or re-sizing the exposure. 

Information base: 
Our ESG ratings are assigned by the investment coverage team with day-to-day responsibility for that investment. We feel this encourages accountability and fully integrates ESG thinking into our investment process. 
The information on which ratings are based are as follows: 
1. An ESG questionnaire which is circulated to managers annually, this questionnaire is tailored to reflect the differences in our core manager strategies (e.g. equity, fixed income, multi-asset, private equity etc.)
2. All information provided by managers (and which managers make available online)
3. Ad-hoc information gathered by coverage teams as part of the formal day-to-day investment monitoring (involving regular contact, calls and discussions with managers).
 


OO 12. Modules and sections required to complete

12.1. Below are all applicable modules or sections you may report on. Those which are mandatory to report (asset classes representing 10% or more of your AUM) are already ticked and read-only. Those which are voluntary to report on can be opted into by ticking the box.

Core modules

RI implementation directly or via service providers

Direct - Listed Equity incorporation

Direct - Fixed Income

RI implementation via external managers

Indirect - Selection, Appointment and Monitoring of External Managers

Closing module

12.2. Additional information. [Optional]


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