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BT Financial Group

PRI reporting framework 2020

You are in Strategy and Governance » ESG issues in asset allocation

ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation carries out scenario analysis and/or modelling, and if it does, provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe The BTIS Investment team has commenced investigation into the use of modelling, including scenario analysis to improve understanding in our portfolios.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]

BT uses a number of sources to inform our apporach to climate change, this includes carbon data from S&P Trucost Ltd. to perform portfolio analysis and demonstrate the portfolio exposure to emissions-intensive sectors and companies.

 


SG 13 CC.


SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

other description

          In 2019, the BTIS Investment team continued to encourage investment managers to consider climate risk in their investment process.
        

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

14.4. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

BT is committed to improving our understanding and management of climate-related impacts across our business, considering the transition risks, physical risks and opportunities, and their impacts on our products and portfolios. We seek to provide our customers and other stakeholders with information on our approach to measuring and managing these impacts to support them in making informed choices. This information is provided in line with the recommendations of the Financial Stability Board's (FSB) Task Force on Climate-Related Financial Disclosures (TCFD). Our reporting is publicly available at https://www.bt.com.au/sustainability

BT's climate-related disclosures are made up of key metrics including, weighted average carbon intensity and exposure to carbon-related assets.

The weighted average carbon intensity metric illustrates our portfolios' exposures to carbon-intensive companies as compared to a benchmark portfolio and takes into consideration the intensity of the carbon emissions (scope 1 and scope 2) as well as the value of the investment as a portion of the overall portfolio. This metric is calculated consistently across the diversified funds BT manages with the guidance for Asset Owners outlined by the TCFD. Portfolio exposures not covered by the analysis may include, for example, cash holdings and derivatives as well as other asset classes such as fixed interest, listed property and emerging market securities.

The exposure to carbon-related assets metric demonstrates the portion of the portfolio exposed to the most carbon-intensive sectors. This metric is calculated consistently with the guidance for Asset Owners contained in the TCFD, however the sectors that constitute the carbon-related assets have been adjusted for characteristics of the Australian benchmark. The Global Industry Classification Standard (GICS) sectors that have been included in the analysis include Energy, Utilities and Materials. BT has excluded the Water Utilities industry and Renewable Electricity sub-industry from this analysis, as neither are major sources of carbon emissions. BT has expanded on the guidance of the TCFD by including the Independent Power Producers and Energy Traders sub-industry in the analysis of our portfolios. This sub-industry includes fossil fuel based power production and is one of the of the higher intensity sub-industries in the international benchmark.

14.5. Additional information [Optional]


SG 14 CC.

14.6 CC. Provide further details on the key metric(s) used to assess climate-related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Weighted average carbon intensity
          This metric illustrates the portfolios’ exposures to carbon intensive companies as compared to a benchmark portfolio.
It takes into consideration the intensity of the carbon emissions (measured as Scope 1 and Scope 2 carbon emissions relative to revenue) and the value of the investment as a portion of the overall portfolio.
        
          It is expressed in tonnes of carbon dioxide equivalents (tCO2e)
per million Australian dollars of revenue.
        
          Carbon intensity data is provided by S&P TruCost Ltd.
The weighted average  carbon intensity is based on the investment portfolios’ exposures to Australian and international equities. Portfolio exposures not covered by the analysis may include, for example, cash holdings and derivatives as well as other asset classes such as fixed interest, listed property
and emerging market securities.
This metric is calculated consistently across the funds BT manages with the guidance for Asset Owners outlined by the TCFD.
        
Exposure to carbon-related assets
          This metric demonstrates the portion of the portfolio exposed to the most carbon-intensive sectors.
        
          Exposure to carbon-related assets as a % of the total portfolio.
        
          This metric is calculated consistently with the guidance for Asset Owners contained in the TCFD, however the sectors that constitute the carbon-related assets have been adjusted for characteristics of the Australian benchmark. The following Global  Industry Classification Standard (GICS) sectors have been included in the analysis: Energy, Utilities and Materials. BT has expanded on the guidance of the TCFD by including the Independent Power Producers and Energy Traders sub-industry in the analysis of our portfolios. This sub-industry includes fossil fuel based power production and is one of the of the higher intensity sub-industries in the international benchmark.
Each metric is provided at a portfolio level relative to a benchmark portfolio composed of globally recognised indices. A negative variance against benchmark means the individual investment option is less emissions intensive as compared to its benchmark.
        

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risk management processes used for identifying, assessing and managing climate-related risks.

Please describe

Responsibility for the management of climate-related risks and opportunities through investment portfolios is cascaded from the BT Boards to the appointed investment managers. For portfolios where BT acts as investment manager, including our MySuper Lifestage Funds, climate-related risk is addressed through two channels. Firstly, by reviewing the ability of our external portfolio managers to integrate ESG considerations in their investment process, depending on their investment strategy and capabilities. We encourage our external portfolio managers to consider and report on climate risks within the portfolios.

Secondly, through our engagement and proxy voting activities which seek to address material impacts and issues in the companies in which we invest. At this stage BT’s preference is to influence companies to address material ESG issues, including climate change, through engagement and proxy voting, rather than blanket screening. We will continue to consider other risk management strategies, and our approach may alter over time.

More information on our approach is provided in BT's climate-related disclosure available at bt.com.au/sustainability 

14.9 CC. Indicate whether your organisation, and/or external investment manager or service providers acting on your behalf, undertake active ownership activities to encourage TCFD adoption.

Please describe

Asset stewardship, through company engagement and exercising voting rights, is an integral part of BT’s approach to managing investment risk associated with climate change. When considering companies’ approaches to climate change, our focus is on encouraging the companies we invest in to understand, address and disclose climate-related risks in their business. This is a critical step in the low carbon transition.

Proxy Voting

Where BT holds voting rights, we believe we have the responsibility to cast votes to influence the corporate governance of the companies in which we invest. Participation in the voting process allows BT to impact companies to protect our customers’ interests. In regards to proxy voting on company resolutions, we provide our underlying portfolio managers with the authority to vote on our behalf, and require votes to be cast in the best interests of investors. For contentious issues, such as shareholder proposals, including those related to climate change, we may choose to direct external portfolio managers on how votes are to be cast. In these cases we may consider the views of our customers and expert external views, including those of our engagement providers and proxy advisers, when we decide how a proxy should be voted across our holdings.

As part of our commitment to transparency, we disclose our voting results on our website bt.com.au/sustainability.

Engagement

BT uses a combination of engagement approaches. We primarily engage through EOS (global companies) and Regnan – Governance Research & Engagement (Regnan) (domestic companies). EOS and Regnan’s engagement approaches use pooled assets, meaning they act on behalf of multiple managers, to provide a higher level of influence, along with economies of scale. We also engage through our external portfolio managers, in their direct discussions with companies. At a corporate level, BT is also playing an active role in collaborative engagement efforts, such as Climate Action 100+. This is a five-year initiative led by investors to engage systemically important greenhouse gas emitters and other companies across the global economy that have significant opportunities to drive the clean energy transition and help achieve the goals of the Paris Agreement. Participating investors are calling on companies to improve governance on climate change, curb emissions and strengthen climate-related financial disclosures.

We seek to influence how companies manage their climate-related risk and to drive positive outcomes across industries.

More information on our approach is provided in BT's climate-related disclosure available at bt.com.au/sustainability 


SG 15. Allocation of assets to environmental and social themed areas (Private)


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