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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 » 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]

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]


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