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Royce & Associates, LP

PRI reporting framework 2020

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ESG incorporation in actively managed listed equities

Implementation processes

LEI 01. Percentage of each incorporation strategy

01.1. Indicate which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities; and the breakdown of your actively managed listed equities by strategy or combination of strategies.

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
100 %
Total actively managed listed equities 100%

01.2. Describe your organisation’s approach to ESG incorporation and the reasons for choosing the particular strategy/strategies.

We believe a better way to invest is to take a holistic view that seeks to fully integrate ESG factors into the investment research process. We do not look to exclude companies or sectors from our universe, but rather aim to analyze and monitor the ESG issues that may have material impact on the financial performance of our portfolio companies in the near and long term. In our minds, ESG issues should be viewed as risk factors that contribute to the balance between potential risk and expected return, and should be examined alongside traditional financial and operational risk factors. By identifying and incorporating relevant ESG risk factors into our research process, we can potentially minimize the impact of negative ESG related developments and uncover investment opportunities that may benefit from ESG related trends.

As a further enhancement to our process, we have formally included a review of ESG integration into our risk management meetings. In partnership with State Street Bank, we have become early adopters of ESGX,  a platform that allows you to assess ESG profiles and risk factors at the portfolio level. With the ESGX tool, we can generating reporting that enables us to visualize and gain better insight into ESG exposures at the sector, region and company level, and help identify and highlight potential sources of ESG risk that may be overlooked when deploying traditional financial analytics.

01.3. If assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]

LEI 02. Type of ESG information used in investment decision (Private)

LEI 03. Information from engagement and/or voting used in investment decision-making (Private)

(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the proportion of actively managed listed equity portfolios where E, S and G factors are systematically researched as part of your investment analysis.

ESG issues

Proportion impacted by analysis




Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

Responsible investment forms an integral part of our investment process, as such we will systematically consider those ESG factors that we believe could have a material impact on the ability of a company to generate long-term sustainable returns. These factors are essentially those that can have a material impact on a company's cash flows, balance sheet, durability and ultimately, corporate value and may be environmental, social or governance related. We believe that governance is the starting point in this analysis as it sets the foundation for accountability, for how decisions are made and sets the tone for the corporate culture.

LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on robust analysis.

          A review of ESG integration has been formally incorporated into our regularly scheduled Risk Management reviews. This conversation is supported by reporting output from ESGX.

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

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information. [Optional]

Each PM teams takes their own approach to collecting ESG information. Some teams choose to include it as a standard section in their research notes for each company, others retain ESG information by topic. All this information is centrally available and tagged in the shared research database, Mackey. ESG ratings information at the portfolio level is available quarterly through ESGX. The ESGX tool provides comprehensive analytics and visualizations of ESG exposures at the portfolio level over time and relative to benchmarks. This offers better insight at the sector, region and company level, and helps you identify and highlight potential sources of ESG risk that may be overlooked when deploying traditional financial analytics.

LEI 10. Aspects of analysis ESG information is integrated into (Private)