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Australian Capital Territory

PRI reporting framework 2020

You are in Indirect – Manager Selection, Appointment and Monitoring » Appointment

Appointment

SAM 04. Appointment processes (listed equity/fixed income)

04.1. Indicate if in the majority of cases and where the structure of the product allows, your organisation does any of the following as part of the manager appointment and/or commitment process

04.2. Provide an example per asset class of your benchmarks, objectives, incentives/controls and reporting requirements that would typically be included in your managers’ appointment.

Asset class

Benchmark

          The MSCI World ex-Australia Custom ESG index and the MSCI Australia IMI Custom ESG index.
        

ESG Objectives

          ESG investment restrictions include business activity exclusions for tobacco producers, cluster munitions and land mine manufacturers, and companies where their primary business activity is the mining of coal. Additional ESG related investment restrictions include companies that have large fossil fuel reserves (coal, oil and gas), companies that have high carbon emissions and companies that have high carbon intensity of business operations.  Investment managers are restricted from investing in companies that have been excluded from the allowable investment universe.
        
          ESG integration in the investment decision-making process includes non-investment in companies which are assessed as having unacceptably high ESG risk, that breach global norms, principles or conventions or that are involved in a very severe ESG controversy.
        
          As part of the appointment process proxy voting responsibilities are removed from the investment manager and undertaken by Treasury utilising the services of a global proxy voting advisor.
        
          ESG integration includes non-investment in companies that breach global norms, principles and conventions.
        

Incentives and controls

Reporting requirements

Benchmark

          Bloomberg Barclays Global Treasury Index (International) and Bloomberg AusBond Composite All Maturities Index (Australia)
        

ESG Objectives

          Performance history, risk and volatility, and portfolio characteristics including number of issuers, number of holdings, yield to maturity, duration, weighted average duration, weighted average coupon, weighted average credit quality, running yield, region exposures and market allocations, distribution by credit quality and credit maturity and holding details.
        

Incentives and controls

Reporting requirements

Benchmark

          Bloomberg AusBond Bank Bill index
        

ESG Objectives

          Approach to ESG is integrated within the overall security selection process and are included in the context of broader issuer factors such as business risk, management and industry risk.
        

Incentives and controls

Reporting requirements

Benchmark

          Bloomberg AusBond Bank Bill Index
        

ESG Objectives

          Approach to ESG is integrated within the overall security selection process and included in the context of broader issuer factors such as business risk, management and industry risk.
        

Incentives and controls

Reporting requirements

Benchmark

          Bloomberg AusBond Bank Bill index
        

ESG Objectives

          Approach to ESG is integrated within the overall security selection process and are included in the context of broader issuer factors such as business risk, management and industry risk.
        

Incentives and controls

Reporting requirements

Benchmark

          S&P/ASX300 Accumulation Index
        

ESG Objectives

          Non investment in companies that have a direct interest in the manufacture of tobacco and/or the manufacture of cluster munitions and/or landmines, or that are instructed by Treasury as investment exclusions.
        
          The Investment Management Agreement (IMA) specifies that the fund manager will have regard to specific ESG considerations as directed. In accordance with the IMA and the investment objectives of the Portfolio, and subject to compliance with the Relevant Law, the fund manager shall take into account the impact of environmental, social and governance (ESG) issues. In accordance with the IMA, a report must be drafted and delivered within 30 Business Days of the end of each financial year on corporate governance and ESG issues relating to investments held within the Portfolio. The reporting is to cover: current policy and guidelines on corporate governance; the extent to which the Investment Manager has adopted appropriate industry guidelines on corporate governance; ESG integration in the investment decision making processes; material ESG factors for underlying investments; ESG risk mitigation; and portfolio engagement activity undertaken on environmental, social or governance issues.
        

Incentives and controls

Reporting requirements

Benchmark

          Mercer / IPD Unlisted Pooled Property Fund Index - Office, Retail
        

ESG Objectives

          Fund managers are required to report on the asset portfolio in regards to individual property asset NABERS ratings for energy and water efficiency, the annual Global Real Estate Sustainability Benchmark (GRESB) results, community engagement activity and asset initiatives, as well as on improvements to governance frameworks and related activities.

Property managers have made a number of ESG commitments including achieving zero net carbon emissions by 2030, achieving an average NABERS energy rating of 5 stars by 2020 and 5.5 stars by 2030, achieving an average NABERS water rating of 4 stars by 2020, undertaking habitat creation and biodiversity improvements on selected assets, incorporating Green Lease clauses into leases, implementing a sustainable supply chain policy and audit process including modern slavery, and achieving 6 Star Green star ratings for new developments and major refurbishments.
        

Incentives and controls

Reporting requirements

Benchmark

          Australian Consumer Price Index + 5 per cent.
        

ESG Objectives

          Consideration of long term ESG factors in making investment decisions and encouraging better management of ESG factors and associated risks. ESG issues are considered through each step of the investment process, from the preliminary due diligence stages, to a dedicated section in the Investment Committee papers, and continually through the ongoing management of assets. ESG is approached from the perspective of risk mitigation and value creation.
        
          Infrastructure managers have made a number of ESG commitments including improved land management and rehabilitation, ongoing erosion control being undertaken to help mitigate against damage due to major flood events, development of comprehensive asset environmental checklists, participation in GRESB surveys, implementation of community liaison committees and community grants funding programs, launch of women's scholarship program to promote a pathway for women to study and be employed in engineering, launch of a beyond zero program (safety, people, environment) across portfolio companies to improve safety and employee wellbeing, key asset safety initiatives, as well as the development of standard ESG, modern slavery and diversity clauses to be inserted into existing and new service contracts.
        

Incentives and controls

Reporting requirements

04.3. Indicate which of these actions your organisation might take if any of the requirements are not met

04.4. Provide additional information relevant to your organisation`s appointment processes of external managers. [OPTIONAL]

          Treasury includes an assessment of ESG capabilities and methodologies in determining best value for money in all relevant procurement activity when selecting and appointing external investment management services providers, including whether the service provider is a signatory to the PRI.

Treasury also includes ESG-related clauses in contractual arrangements as a requirement of the relationship. Investment mandate agreements, where relevant, require the service provider to regularly provide details of ESG policies, report on ESG activities over the relevant period, including related research and engagement activity, and to report the extent of integration of ESG risks and issues into the investment decision-making or due diligence processes.
        

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