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PRI reporting framework 2020

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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.

Describe any reduction in your starting investment universe or other effects.

The impact of the LGS investment restrictions on the ASX universe is small, with approximately 1% of the benchmark by market cap excluded from investment. The impact of LGS’ for the international index benchmark MSCI ACWI is more significant with approximately 9% of the index removed. The 9% exclusion does not bring excessive tracking error risk (approx. 30 bps).

Specify the percentage reduction (+/- 5%)

9 %

Describe any alteration to your investment universe or other effects.

LGS allocates 4% of our international equities FUM to a specialist environmental themed manager, Impax Asset Management. This mandate seeks to achieve sustainable, above market returns over the longer term by investing globally in companies active in the growing resource efficiency and environmental markets. Investments are made in 'pure-play' small and mid cap companies which have >50% of their underlying revenue generated by sales of environmental products or services in the energy efficiency, renewable energy, water, waste and sustainable food and agriculture markets.

Select which of these effects followed your ESG integration.

12.2. Additional information.[Optional]


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

In 2019 we had ongoing discussions with an international equities manager holding an industrial company. This is a company with high ESG risk, ongoing and unresolved litigation.  We engaged with the fund manager to raise our concerns and effects on the performance or our portfolio.

 

ESG incorporation strategy applied Screening

Impact on investment decision or performance

We placed the security on our restrictions list after engaging with the fund manager on company developments.

ESG factor and explanation

In 2019, we reviewed the culture of a specific international medical instruments company. We considered metrics applied and measurements by the fund manager. 

ESG incorporation strategy applied Integration

Impact on investment decision or performance

Meetings with the fund manager and review of the company including social metrics led to an initiated position in the company.

ESG factor and explanation

A domestic fund manager identified remuneration inconsistencies supporting a disconnect between pay and performance. 

ESG incorporation strategy applied Integration

Impact on investment decision or performance

Whilst the manager did not divest, we will continue to engage with the company on this issue.

ESG factor and explanation

A domestic fund manager identifies mega trends and routinely reports these. (e.g. plastics, data security, data privacy, royal commission, dam failures and emissions policies. 

ESG incorporation strategy applied Thematic

Impact on investment decision or performance

Detailed research on these thematics contributes to the addition of these companies to our mandate. 

13.2. Additional information.[Optional]


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