Sustainability considerations are an important component of both the initial due diligence and screening process as well as the ongoing monitoring of investments. PEG’s standard investment process for all investments includes due diligence on sustainability, a written investment memorandum and ongoing discussions with the portfolio managers of PEG with respect to sustainability issues.
PEG integrates ESG considerations into the investment process and every investment memo and discussion through a practical implementation method of questions based on JPMorgan Asset Management and PRI principles. This ensures that the investment process is clear and consistent with the clients’ and portfolio’s investment objectives. This includes developing guidelines and an approach which are adaptable to market conditions, investment performance expectations, geographic regions, sectors, portfolio construction, client requirements and investment opportunities. This process includes clarification and assessment of all material risk factors of Sustainability including ESG considerations.
ESG considerations are used in both short and long-term assessments of risk and reward for investments. ESG factors could, for example, impact the financial projections and return assumptions of an investment. At times, ESG factors could cause PEG to invest or pass on an opportunity.
PEG encourages the portfolio companies and the managers with which it invests to advance the principles of sustainability investing in a practical manner consistent with return objectives and fiduciary duties, which include:
- Considering environmental, public health, safety and social issues and their impact on investment returns
- Positively impacting communities, including, for example, promotion of health, wellness, and advancement
- Using governance structures that provide effective management, including in the areas of audit, risk management, and potential conflicts of interest
- Implementing procedures and processes to ensure compliance with laws and to prohibit bribery, inducements and other improper payments or non-competitive behavior
- Promoting and protecting human and social rights, including confirming that underlying portfolio companies comply with labor laws and do not maintain discriminatory policies or engage in illegal work practices
The incorporation of ESG considerations and client mandates is considered for all PEG investments during the due diligence process. As an additional client and ESG screen, if PEG decides to proceed with an investment, there is a separate Allocation Process where client mandates and appropriateness are reviewed based on specific guidelines.