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Alphinity Investment Management Limited

PRI reporting framework 2020

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities

ESG incorporation in actively managed listed equities

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%
95 %
Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
5 %
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.

The mix determined by client preferences; they choose from four products we offer. To this point, most have chosen the funds which integrate ESG rather than screening. 

The screened fund, the Sustainable Share Fund,  uses the UN Sustainable Development Goals as part of the investment process, in addition to screening out activities and seeking strong ESG performance

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

The portfolios without a Sustainable remit (ie unconstrained general equity funds) utilise ESG in assessing the fundamental value of the company and teh risks/opportunities it faces. This might include specific financial impacts, a risk adjustment to valuation methodologies, or a blanket exclusion based on risk or sustainability.

LEI 02. Type of ESG information used in investment decision

02.1. Indicate what ESG information you use in your ESG incorporation strategies and who provides this information.

Type of ESG information

Indicate who provides this information  

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

02.2. Indicate whether you incentivise brokers to provide ESG research.

02.3. Describe how you incentivise brokers.

We allocate a meaningful amount of commission to brokers providing ESG research (according to quality) to encourage greater efforts and will pay additional commission for bespoke work or instances of excellence

02.4. Additional information. [Optional]

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

03.1. Indicate whether your organisation has a process through which information derived from ESG engagement and/or (proxy) voting activities is made available for use in investment decision-making.

03.2. Additional information. [Optional]

This item seems to be directed at large organisations with separation between the engagement/proxy process and investment decision making. In our case all engagement and proxy voting is initiated by the PMs themselves so all are aware of the information involved and no formal process for sharing that information is required.

When advising institutional clients who exercise their own proxies on how to vote, the information is provided systematically. 

(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


For the Sustainable Share portfolios only - other Funds are not screened other than for companies with serious governance concerns

Screened by


For the Sustainable Share Fund only - other Funds are not formally screened

We do not screen for best in class, purely for positive ESG and the ability to address one or more of the SDGs. 

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

Negative screens are mandated by the Fund's Responsible Entity. Should they change, as happened in 2018 when the fund adopted SDGs, a consultation and notification process was followed as required by the governance structure ofthe Fund. Efforts over and above that are determined by the investment the team as information comes to hand, including using an external data provider to monitor sustainability ratings of all companies in our investable universe.

Positive screen: the team seeks out companies which have a particularly positive impact on E, S, G and/or the ability to address and support achievement of Sustainable Development Goals.

For the Funds without the negative screen, stocks are often excluded from consideration based on specific factors relevant to that stock, for instance a shareholding structure not conducive to good governance (ie dominated by an individual and therefore effectively a private company), poor governance practices (ie we need to vote against directors or remuneration structures consistently, with no result from engagement), poor environmental performance or particularly egregious social impact (for example payday lenders). 

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.

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

The Sustainable Share Fund is also assessed monthly by a committee containing two external experts in sustainability 

LEI 06. Processes to ensure fund criteria are not breached

06.1. Indicate which processes your organisation uses to ensure fund criteria are not breached.

06.2. If breaches of fund screening criteria are identified, describe the process followed to correct those breaches.

Our portfolio management system is pre-loaded with the securities which would breach fund restrictions and will block any trade from being approved that would breach the screens. But if a breach were ever to occur the process would be to rectify it immediately to bring the Fund back into compliance with the rules, and then follow the normal incident/breach procedure of working out how the breach occurred and rectify systems/practices to ensure that it cannot reoccur. 

06.3. Additional information. [Optional]

(B) Implementation: Thematic

LEI 07. Types of sustainability thematic funds/mandates

07.1. Indicate the type of sustainability thematic funds or mandates your organisation manages.

07.2. Describe your organisation’s processes relating to sustainability themed funds. [Optional]

We manage unconstrained equity mandates and Sustainable Share mandates. The client determines which strategy best suits its needs

Alphinity is committed to Responsible Investing across all its activities but Sustainable Investing goes several steps further.

We are committed to supporting those companies we believe do good and avoiding those we believe don’t. By "good" we mean those that help to advance, in a net way, one or more of the Sustainable Development Goals. We seek companies which, along with offering attractive financial returns, rank well on ESG metrics and/or have the capacity to make a positive impact on society in areas of economic, environmental and social development by contributing towards the advancement of the UN SDG agenda, as that agenda evolves.

We avoid companies that are involved in activities we consider harmful to society and are inconsistent with the achievement of the Goals, and/or display poor practices in their management of ESG issues.

Using Alphinity’s investment philosophy and process, we combine Fundamental and Quantitative research to assess stocks to ensure that they are quality, undervalued companies in or about to enter an earnings upgrade cycle.

The result is a balanced portfolio of 35-55 companies with attractive investment fundamentals and prospects. We do not identify with any particular investment ‘style’ as our approach has proven successful through a number of different market cycles, although our process will typically have a slight bias towards growth.

The Alphinity Sustainable Share Fund has a Compliance Committee which meets at least monthly and includes the Portfolio Managers and two high;y-qualified independent sustainability experts. The Committee’s role is to rigorously review the investable universe to ensure compliance with the Charter; adjudicate on “grey areas”; refine the Fund’s Charter and filters as the SDGs evolve; help identify areas of company engagement; and review the external service providers used.

(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




Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

E, S and G issues are considered for all funds but applied most stringently in the Sustainable Share Fund. For unconstrained Funds, considering ESG forms part of the normal research process as there is the potential for these factors to have significant positive or negative impact on value. The degree of stringency for each factor is determined by the nature of the company, although governance is a key consideration for all companies.

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.

          External consultants with deep knowledge of and expertise in Sustainability

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 engage extensively with investee companies about all issues, including ESG as this is a part of our normal investment analysis. Where there are material concerns, companies are given the opportunity to respond and there have been instances of improved practices taking place as a result of raising concerns about non-compliance or inadequate reporting.

We do not produce research notes or record routine processes but do keep a database of relevant insights and interactions

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

10.2. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis.

          in some cases, blanket rejection of companies with inadequate controls or risks that are large and/or not being addressed

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

The method used depends on the nature of the issue involved.

For example, in the case of a potentially stranded asset like a coal mine we would take a pessimistic view of the potential life of the mine and bring forward clean-up costs.

In the case of a company with adverse social impacts or poor corporate governance we would rather tend to increase the discount rate or adjust our valuation to reflect the increased risk our to which investors are being exposed.

In the case of a company with poor governance or critical issues that are not being addressed we would tend to avoid exposure altogether

10.5. Describe how you apply sensitivity and /or scenario analysis to security valuations.

When assessing key value drivers of a company we arrive at a base case, i.e. what we expect to happen, but then typically flex those drivers through a range of potential outcomes in order to see what might happen should things not go according to our expectations. This is an important factor in being aware of what could go wrong (or right) that changes our williness to accept risk.

10.6. Additional information. [OPTIONAL]