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Ninety One

PRI reporting framework 2020

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Asset class implementation not reported in other modules

SG 16. ESG issues for internally managed assets not reported in framework

Describe how you address ESG issues for internally managed assets for which a specific PRI asset class module has yet to be developed or for which you are not required to report because your assets are below the minimum threshold.

Asset Class

Describe what processes are in place and the outputs or outcomes achieved

Property

Ninety One partners with Growthpoint Properties to manage a pan-African Real Estate Investment Trust which was seed funded by the IFC – the GrowthPoint Investec African Properties Fund (GIAP). In accordance with Ninety One’s commitment to sustainable investing, Ninety One considers the successful integration of ESG into its investment process a fundamental sustainability objective. Ninety One implements the World Bank/IFC Performance Standards through its investment process. Proposed investments are screened, due diligenced and managed against these performance standards. Other developmental aspects that are considered include:

  • Job Creation/retention;
  • Access to social real estate;
  • Gender Equalization; and
  • Climate Action

16.2. Additional information [Optional].


SG 17. ESG issues for externally managed assets not reported in framework

17.1. Describe how you address ESG issues for externally managed assets for which a specific PRI asset class module has yet to be developed or for which you are not required to report because your assets are below the minimum threshold.

Asset Class

Describe what processes are in place and the outputs or outcomes achieved

Listed equities - ESG incorporation

In 2016, the Firm began implementing its Corporate Governance Checklist Questionnaire, which yields a numeric rating of various criteria and now covers almost all companies owned by the Firm’s equity and fixed income strategies. The checklist is currently composed of 100+ questions covering the following topics:

− Shareholders and ownership structure

− Board composition, independence, and diversity

− Related-party transactions

− Management

− Disclosure and financial transparency 

The quantitative results of this questionnaire are then incorporated into bottom-up reports, which directly feed into the company's internal credit rating system, and accordingly strengthen or weaken each individual investment case. Understanding the relationship between ESG factors and financial materiality, the Firm is formalizing the inclusion of environmental and social risk factors that may become relevant within the forecasting period.

In 2019, the Firm updated its valuation guidelines to incorporate proprietary research that shows a clear correlation between governance scores and cost of capital. In accordance with these guidelines, analysts are required to consult a proprietary database in order to factor governance score differentials as an additional input in an issuers discount rate based on how the issuer fares against industry peers.

Listed equities - engagement

A critical component of Compass’ bottom-up analysis is to meet frequently and engage with issuer management teams at different levels. The meetings serve to better understand their businesses and allow us to pass on our views about the companies, including views on the companies’ ESG management, performance, and disclosures. Many companies in our universe are not sufficiently covered by brokers and banks; as a result, companies appreciate Compass’ independent views.

The team intends to meet each company that is part of the portfolio 3-4 times a year, and companies that are not part of the portfolio but are part of the investable universe 1-2 times a year. In general, minutes, participants, locations, and dates of these meetings are kept in a centralized location and shared across the Firm.

Company visits are a key component for idea generation and analyses performed on each company. These meetings enable the analysts and portfolio managers to gain a better understanding of the fundamental factors underlying a company’s investment potential. The portfolio managers are therefore in a better position relative to its competitors to assess the strategic and financial strengths and weaknesses of issuers, enabling a more prudent determination of asset values.

Listed equities - (proxy) voting

Compass Group’s proxy voting practices follow the regulatory framework of each of the markets in which it operates. The Firm recognizes that it invests in various jurisdictions and, as such, there are instances in which it must account for local considerations and individual issuer situations when determining its strategic approach as a shareholder. The Firm seeks to exercise its shareholder rights in order to maximize value on behalf of its beneficiaries’ investments, however, investment professionals have the option to abstain or pass on voting on uncontested matters.

Each portfolio manager, along with the coverage analyst, reviews the company on a case-by-case basis to prepare for voting. Compass Group seeks to vote at all times that it is entitled to vote. Compass Group is an active voter on corporate actions when its vote matters or when the Firm believes it needs to make a statement. Most Latin American companies have a defined control group, making minority votes carry little weight. The Firm does not follow benchmark policies from third-party proxy advisors. 

Fixed income - Corporate (financial)

In 2016, the Firm began implementing its Corporate Governance Checklist Questionnaire, which yields a numeric rating of various criteria and now covers almost all companies owned by the Firm’s equity and fixed income strategies. The checklist is currently composed of 100+ questions covering the following topics:

− Shareholders and ownership structure

− Board composition, independence, and diversity

− Related-party transactions

− Management

− Disclosure and financial transparency 

The quantitative results of this questionnaire are then incorporated into bottom-up reports, which directly feed into the company's internal credit rating system, and accordingly strengthen or weaken each individual investment case. Understanding the relationship between ESG factors and financial materiality, the Firm is formalizing the inclusion of environmental and social risk factors that may become relevant within the forecasting period.

In 2019, the Firm updated its valuation guidelines to incorporate proprietary research that shows a clear correlation between governance scores and cost of capital. In accordance with these guidelines, analysts are required to consult a proprietary database in order to factor governance score differentials as an additional input in an issuers discount rate based on how the issuer fares against industry peers.

Fixed income - Corporate (non-financial)

In 2016, the Firm began implementing its Corporate Governance Checklist Questionnaire, which yields a numeric rating of various criteria and now covers almost all companies owned by the Firm’s equity and fixed income strategies. The checklist is currently composed of 100+ questions covering the following topics:

− Shareholders and ownership structure

− Board composition, independence, and diversity

− Related-party transactions

− Management

− Disclosure and financial transparency 

The quantitative results of this questionnaire are then incorporated into bottom-up reports, which directly feed into the company's internal credit rating system, and accordingly strengthen or weaken each individual investment case. Understanding the relationship between ESG factors and financial materiality, the Firm is formalizing the inclusion of environmental and social risk factors that may become relevant within the forecasting period.

In 2019, the Firm updated its valuation guidelines to incorporate proprietary research that shows a clear correlation between governance scores and cost of capital. In accordance with these guidelines, analysts are required to consult a proprietary database in order to factor governance score differentials as an additional input in an issuers discount rate based on how the issuer fares against industry peers.

17.2. Additional information.


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