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SBI Funds Management Private Limited

PRI reporting framework 2020

You are in Direct - Listed Equity Incorporation » Outputs and outcomes

Outputs and outcomes

LEI 12. How ESG incorporation has influenced portfolio composition

12.1. Indicate how your ESG incorporation strategies have influenced the composition of your portfolio(s) or investment universe.

Select which of these effects followed your ESG integration.

12.2. Additional information.[Optional]

In the dedicated ESG fund, there is now a segregated investment universe carved out basis the investment criteria laid down. There is a restriction on the sectors as well as on minimum ESG performance. For the fund house as a whole, there is now greater focus on ESG factors, particularly on higher risk companies and their response to material ESG issues. There is now a focus on overall ESG issues like income/pay disparity and climate change and the over-arching impact it has on companies across the board.


LEI 13. Examples of ESG issues that affected your investment view / performance

13.1. Provide examples of ESG factors that affected your investment view and/or performance during the reporting year.

ESG factor and explanation

Controversial ESG Incidents: Our monitoring of controversies and our decision to not include stocks which have been flagged for severe controversies have led to exclusion of an Indian Automobile company from our ESG Fund, despite other favourable financial considerations for the company.

ESG incorporation strategy applied Screening|Integration

Impact on investment decision or performance

The stock has been excluded from the ESG themed fund.

ESG factor and explanation

Sectoral Exclusion: We do not invest in 5 sectors under our ESG Fund viz. Alcohol, Tobacco, Adult Entertainment, Gambling and Controversial Weapons. This sectoral exclusion has led to exclusion of a large Indian FMCG Conglomerate from the ESG based fund due to its Tobacco business despite its above average ESG scores. This approach signifies our view that despite having all favourable policies and initiatives in place, if the product portfolio of the company is controversial or socially unsustainable, then the stock will not be included in our ESG Fund.

ESG incorporation strategy applied Screening

Impact on investment decision or performance

 This sectoral exclusion has led to exclusion of a large Indian FMCG Conglomerate from the ESG based fund due to its Tobacco business despite its above average ESG scores.

ESG factor and explanation

Corporate Governance: All the factors of Corporate Governance are very stringently monitored within the organization. Board Composition, Board Diversity, Executive Remuneration, Audit and Tax Transparency and non-involvement in any fraudulent means or evasion of taxes  are some of the factors that we look at.

ESG incorporation strategy applied Screening|Integration

Impact on investment decision or performance

Impacts including Voting against companies for Compensation Resolutions where we feel that the CEO pay is unjustified and non-coherent with the internally determined factors. We also use the Corporate Governance factors to take voting decisions in Director Election Resolutions. 

We have recently placed a beverage company on Blacklist owing to its poor ESG performance and tax evasion probes on the company.

13.2. Additional information.[Optional]


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