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Ninety One

PRI reporting framework 2020

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Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

          Climate change statement
        
          Global application and respecting differences
        

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

From the start, Ninety One has been committed to investing for a better tomorrow. We are a long-term focused business allocating capital on a global basis to meet the future needs of society. Our sustainability activities are organised into three areas of focus:

  • Invest:         On behalf of our clients, we invest responsibly for a more sustainable future (“ESG”)
  • Engage:      Through focused engagement with our clients and stakeholders, we generate insight to shape the global imperative for sustainable development
  • Inhabit:       We believe that change starts at home and therefore take direct responsibility for our environmental and social impact.

Our responsible investing activities fall under the ‘Invest’ and ‘Engage’ buckets. We have identified five core principles which guide our responsible investing activities:

1. Ninety One will disclose how it discharges its stewardship duties through publicly available policies and reporting.

2. Ninety One will address internal governance of effective stewardship including conflicts of interest and potential obstacles.

3. Ninety One will support a long-term investment perspective by integrating, engaging, escalating and monitoring material ESG issues.

4. Ninety One will exercise its ownership rights responsibly, including engagement and voting rights.

5. Ninety One is, where appropriate, willing to act alongside other investors.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

As a firm, we will seek to play a meaningful role in helping to develop and improve the framework for investment and ownership within the various jurisdictions in which we invest. Where appropriate, we will seek to influence the development of policy, regulation and laws, aiming to facilitate the deployment of efficient capital markets and the development of favourable environments for shareholder rights and interests.

Our commitment and approach to stewardship is underpinned by a robust Stewardship Policy which outlines our key priorities and principles, which cover all assets that we manage. Our Stewardship Policy includes the following:

  • Stewardship and our commitment
  • Our stewardship statement
  • Principles setting out our overall approach to responsible investing
  • Integration of the principles
  • Engagement approach
  • (Proxy) voting approach
  • Governance structure
  • Global application
  • Climate change

Our principles, as outlined above, provide guidance on our position on the key aspects of corporate governance. However, not only do we believe that each company should be looked at on an individual basis but also that the managers of our various strategies have the right to implement these principles in a manner that they believe is consistent with the mandates they have from their clients. 

01.6. Additional information [Optional].

          
        

SG 01 CC. Climate risk

01.6 CC. Indicate whether your organisation has identified transition and physical climate-related risks and opportunities and factored this into the investment strategies and products, within the organisation’s investment time horizon.

Describe the identified transition and physical climate-related risks and opportunities and how they have been factored into the investment strategies/products.

Ninety One is an investment management business with a focus on long-term value creation for our clients. By our analysis, climate change represents one of the greatest single long-term investment risk, and the one on which we are the most focussed at this point in time. We were not surprised that the 2020 Global Risks Report from the World Economic Forum had climate change and environmental risks occupying all of the top five spots on the list, specifically extreme weather, climate action failure, natural disasters, biodiversity loss, and human-made environmental disasters. These risks have been hidden in plain sight for a long time.

As a publicly-listed asset manager, we need to think about transition risk and physical risk from climate change in the context of all our stakeholders. This means our staff, our clients, our shareholders and the companies in which we invest. The greatest risk to our business is a material destruction of value in the underlying companies to which we allocate our clients’ capital; for this reason, deep integration of climate change risk in our investment process is the most important protection for our business in the long term.

We categorise transition risk into three main areas: regulatory risk, consumer risk and technology risk. Regulatory risk includes carbon pricing and other aspects of an Inevitable Policy Response. It also includes evolving regulation around the taxonomy of sustainable business activities, for example. Consumer risk – or market risk – can be created by regulatory risk or can arise from a material change in client behaviour or preferences. An example for an asset manager like Ninety One would be a change in the type of investment funds which were commercially successful, driven by changing client perceptions around climate change. Technology risk from climate change for an active asset manager is linked to consumer risk and could include the rise of low-cost passive funds focused on climate change mitigation.

Physical risk from climate change is centred around increased global temperatures, rising sealevels, and the growing prevalence of extreme weather events such as droughts, floods and wildfires. Once again, all of them present a risk to all of our stakeholders – staff, clients, shareholders and the companies in which we invest.

The investment community has historically spent a greater proportion of its time on the risks around climate change. We at Ninety One believe that the opportunities which might be created have been largely overlooked. There are three main categories of opportunity: we can improve our energy and resource efficiency, which will reduce our cost of doing business and have a positive impact on our community and our natural environment. We can develop investment products which will benefit from the move towards a decarbonized economy. Third, we can stand out from the crowd as a financial services organisation with a deep understanding of Sustainability which is a driver of intangible value.

Climate risk is integrated into all our investment strategies and we've also launched specialist Sustainability strategies with direct exposure to decarbonisation.

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

Describe the associated timescales linked to these risks and opportunities.

What we are seeing clearly is that both the transition risks and the physical risks - as well as the opportunities that may arise - are manifesting themselves much more quickly than many people expected. For this reason, we do not typically attribute timescales to the risks and opportunities around climate change; they need to be integrated into decision-making and analysis today even if regulatory, consumer or technology changes have yet to take place. Markets will price assets in expectation of change rather than on the realization of it.

On the physical side, the urgency around temperatures, sea levels and extreme weather events is increasingly well-understood. Of course, the two are inextricably linked; as physical risks manifest themselves in the near-term, so the likelihood increases of regulatory intervention, consumer change or technological development. The 2018 IPCC report, the drought in Cape Town and the wildfires in Australia are all recent examples of physical climate risk which have increased the likelihood of policy or market intervention which would directly reprice assets.

The opportunities around improved energy and resource efficiency, specialist products for decarbonization, and the intangible value derived from a deep understanding of Sustainability are opportunities today, but importantly we regard them as structural opportunities which will persist for a long time. For this reason they are central to our future strategy as a business.

01.8 CC. Indicate whether the organisation publicly supports the TCFD?

01.9 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.

Describe

There is an organisation-wide strategy in place at Ninety One to identify and manage material climate-related risks and opportunities. It has three essential characteristics. First and foremost, it is a holistic and all-encompassing strategy which is integrated throughout the organization from the Board level down to junior members of staff. To be effective it needs to be embraced and sponsored by all parts of the organisation: from investment staff, through operations teams and into distribution. Such is the magnitude of both the risk and the opportunity around climate change that this strategy will affect all stakeholders - our staff, our clients, our shareholders and the companies in which we invest.

The second characteristic of our strategy is that is it investment-led;  we endeavour to identify climate-related risks in our business through our investment analysis, because the greatest risk to our business is a material destruction of value in the underlying companies to which we allocate our clients’ capital. We have been integrating broad ESG analysis across all of our investment teams since 2012 but have developed specific tools more recently to address climate risk. These include our Climate Risk Tool which aims to highlight portfolio companies whose value chains are exposed to the low carbon transition and to the physical risks of climate change. As with any investment or risk metric, the absolute and relative carbon numbers are not an end in themselves; they are a stimulus for further analysis. We have also developed a number of Macro Risk tools to help our investment professionals understand systemic climate risk more fully, particularly with regard to the impact on sovereigns. The other vital tool for our analysts and portfolio managers is engagement: we engage with companies and sovereigns to understand their climate-related risks more fully and where we can to drive positive change. The overarching objective is that every analyst and portfolio manager integrates climate risk fully in the investment decision-making.

The third element of our strategy is a strong commitment to identify the positive opportunities from this transition. The investment community has historically spent a greater proportion of its time on the risks around climate change. We at Ninety One believe that the opportunities which might be created have been largely overlooked. There are three main categories of opportunity: we can improve our energy and resource efficiency, which will reduce our cost of doing business and have a positive impact on our community and our natural environment. We can develop investment products which will benefit from the move towards a decarbonized economy. Third, we can stand out from the crowd as a financial services organisation with a deep understanding of Sustainability, which is a significant driver of intangible value.

1.10 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.

specify

          We are finalising our response and will be publishing in 2020.
        

SG 02. Publicly available RI policy or guidance documents

 

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

Other, specify (1) description

          Climate change statement
        

URL/Attachment

Other, specify (2) description

          Global application and respecting differences
        

URL/Attachment

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

02.3. Additional information [Optional].


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

Ninety One is governed by all the rules and regulations of the relevant regulatory bodies in the jurisdictions in which it operates. Ninety One strongly believes in its fiduciary duty to clients and will always seek to manage any possible conflicts that may occur through its normal business activities so that there is no material risk of damage to clients.

As such, conflict of interests can arise in a number of areas but most notably in the following situations:

1. Nominating directors

2. Engagement

3. Fundamental transactions

The Investment Governance Committee, in cooperation with the Conflicts Committee, will deal with these and other such issues. Where a client needs to be treated individually (e.g. where we own shares in our client and they have specified how to deal with engagement) then this will not affect the decision for other clients.

Ninety One employs companywide measures to eliminate any potential conflicts of interest which may arise and maintains a Conflicts of Interest Policy, Compliance Manual and a Code of Ethics, which incorporate many of our requirements on conflicts of interest. These documents are bound into employees' contracts of employment and a breach would therefore provide grounds for disciplinary action or dismissal.

03.3. Additional information. [Optional]

1. Nominating directors:

Ninety One will endeavour to nominate a candidate that it objectively considers to be independent. Should Ninety One deem it necessary to nominate a candidate that is in any way affiliated to Ninety One or its holding company, Ninety One will ensure that the candidate is not presented with any conflict of interests that may impact their ability to fulfil their responsibilities as a director, or as an employee of Ninety One.

2. Engagement:

In theory, Ninety One may favour some companies in the engagement process where Ninety One has a prior relationship and so would be failing in its duty to treat all its clients equally. Accordingly Ninety One has established a governance structure to ensure that these situations are appropriately identified and managed.

3. Fundamental transactions:

From time to time it is possible that Ninety One and its clients are party to both sides of a fundamental transaction. In such cases, Ninety One will seek to ensure that all appropriate aspects are considered prior to any transaction or recommendation taking place, and if necessary engage directly with its clients to determine an appropriate course of action.


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within investee entities.

04.2. Describe your process on managing incidents

Ninety One recognises that in taking a long-term perspective there are legitimate reasons why material issues of an environmental, social and a governance point of view should form part of fundamental investment analysis. We focus on the integration of ESG factors and believe that the consideration of material ESG risks and opportunities allows us to understand risks better and identify companies that are better placed to create long-term shareholder value.

Each of our investment teams have developed their own unique approach to ESG following a consistent approach to integration analysis. It is via this process that incidents are identified and a course of action is decided. 

As part of our investment team’s fundamental analysis and consideration of ESG factors various data providers are used to support our internal research and to help highlight any ESG related incidents. These include MSCI ESG Manager and RepRisk. MSCI ESG Manager provides a controversy flag for each company and highlights the incidents that have led to this flag. We use RepRisk to highlight negative ESG newsflow for the companies in which we invest. This helps us to remain connected with newsflow across a number of predefined ESG issues, such as child labour, waste issues and tax evasion. The RepRisk platform covers over 70,000 companies, globally, across public listed as well as private unlisted issuers.

The ESG team work closely with each of the individual investment teams and have regular meetings to discuss portfolio holdings and the risks/incidents that relate to these. 

Engagements take place as an integral part of our investment process or as part of a supporting engagement strategy which focuses on ESG themes and specific holdings that are material to Ninety One and our clients. Typically engagements commence as a result of identifying incidents or concerns through our fundamental analysis.

Within our private market work, on a rigorous basis Ninety One identifies, monitors and drives the management of ESG risks through its board participation and legal agreements. The due diligence process is based on the IFC Performance Standards risk categorisation at all stages of the investment cycle. This process is managed by the applicable investment team, including a defined investment team ESG co-ordinator, with technical support from the ESG team. High risk transactions could require a third party consultant to undertake the due diligence.


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