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UniSuper Management Pty Limited

PRI reporting framework 2020

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (A) Implementation: Screening

(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

> We screen out tobacco across the entire fund.

> We don't invest in frontier markets.

> We also screen out alcohol, gaming, weapons and fossil fuel producers and explorers from our sustainable options.

> Our Global Environmental Opportunities portfolio screens out poor ESG performers

> We use an ESG research provider to identify companies in breach of the UN Global Compact (for our Sustainable Options)

Screened by

Description

> With the equities component of our sustainable options, we also adopt a positive screening process whereby we seek to only include those companies that rate well from an ESG perspective (and therefore exclude those companies with poor ESG ratings)

> Our GEO option screens in companies that receive more than 50% of their revenues from environmental themes - renewable energy, energy efficency, water and waste management, and green buildings. 

 

Screened by

Description

Our sustainable and GEO portfolios screen out companies that have breached the UN Global Compact

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

Formal screens are established infrequently.

  • tobacco manufacturers are screened out and have been since 2012. 
  • alcohol, gaming, weapons and fossil fuel exploration and production was screened out of the Sustainable options in 2014, with members notified both electronically and via letters of the changes to the options. 
  • The Global Environmental Opportunities option (positive/thematic investment) has had consistent themes/approach since inception. 

While there are many sectors/regions that UniSuper is not active in (i.e. hedge funds, frontier markets, emerging market debt, municipal bonds etc) we do not consider these to be screens, and reserve the ability to invest in these sectors if situations change. 

When making such changes, we make various disclosures within regulatory disclosure documentation, on our website and in CIO newsletters which are sent to our members on a monthly basis.


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure ESG screening is based on robust analysis.

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

The tobacco screen is based on an industry classification applied by the fund managers and monitored at the custodian level as part of the compliance monitoring processes. It is a hard coded screen / exclusion - the custodian would be automatically alerted if a breach of this screen occurred and would notify us in accordance with their contractual obligation to do so.

The additional screens that apply to the sustainable options are, per the above, also hard coded into the custodian's systems.There are additional checks that are done that consider revenue sources as identified from an external data provider. 

The screens applied to the equities component of the sustainable options (managed internally) are based on GICS codes, the MSCI ESG research tool and individual stock consideration - from this, a black list is prepared, and the companies on this list are then hardcoded into Bloomberg and the custodian's systems for compliance monitoring purposes. These lists are prepared by the ESG team and then reviewed by the PM and the appropriate Head (Australian or Global equities where appropriate) prior to the portfolio being constructed. Once the portfolio has been determined, a final review is conducted. 

Fund holdings are also manually reviewed on a periodic basis to ensure that they comply with the screens in place. 


LEI 06. Processes to ensure fund criteria are not breached

06.1. Indicate which processes your organisation uses to ensure fund criteria are not breached.

06.2. If breaches of fund screening criteria are identified, describe the process followed to correct those breaches.

The tobacco screen is monitored by the custodian and is hard wired into their systems. So, if a breach occurred and a screened company was held, the custodian would be notified and they in turn would notify us.

For our Sustainable options, the list of blacklisted (or whitelisted) stocks is loaded into our trading system and will alert and prevent the trader from executing a trade on a blacklisted stock. 

We would seek to identify why the the breach occurred and identify how to prevent any similar breach from occurring, and would remedy where appropriate.

We would also raise the issue with the fund manager in question as they would have committed a breach of the investment management agreement, and if relevant seek remediation should any losses to the fund have arisen

The funds Sustainable Options will be audited as part of the RIAA certification process. 

06.3. Additional information. [Optional]

Please note that all investment management agreements (IMA) prohibit investing in tobacco  (as applicable to the IMA in question).

Our custodian undertakes daily compliance checking for all portfolios.


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