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. 

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. 

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.