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Australian Capital Territory

PRI reporting framework 2020

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Asset class implementation not reported in other modules

SG 16. ESG issues for internally managed assets not reported in framework (Not Applicable)


SG 17. ESG issues for externally managed assets not reported in framework

17.1. Describe how you address ESG issues for externally managed assets for which a specific PRI asset class module has yet to be developed or for which you are not required to report because your assets are below the minimum threshold.

Asset Class

Describe what processes are in place and the outputs or outcomes achieved

Cash

Cash holdings for daily operational liquidity are held with the ACT Government's transactional banker.

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

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

All external asset class investment management service providers are monitored on an ongoing basis in relation to contracted deliverables and adherence to stated investment objectives and mandate risk-constraints. This monitoring includes information on the incorporation of ESG risks and issues in the investment decision making process and the ongoing long term sustainable management of assets.

Money market instruments

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

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

All external asset class investment management service providers are monitored on an ongoing basis in relation to contracted deliverables and adherence to stated investment objectives and mandate risk-constraints. This monitoring includes information on the incorporation of ESG risks and issues in the investment decision making process and the ongoing long term sustainable management of assets.

17.2. Additional information.

The vast majority of Treasury's investment exposures to Fixed Income corporate (financial and non-financial) securities, Fixed Income securitised securities, money market securities and cash are held with one investment manager in an actively-managed cash enhanced or cash plus mandate. The Fund invests in Australian overnight cash facilities, term deposits, bank bills, negotiable certificates of deposit and short duration floating-rate debt securities and asset-backed securities including mortgage-backed securities.

As a signatory to the PRI the investment manager has recognised the importance of ESG issues for many years and the potential impacts they may have on the overall credit quality of the portfolio.  The management of these assets by the investment manager is focussed on capital preservation, credit and liquidity risk. The investment manager considers ESG issues throughout the credit selection process to recognise the potential for an ESG risk to negatively impact creditworthiness and liquidity. ESG considerations are integrated in the security selection process and are considered in the context of broader issuer factors such as business, management and industry risk. Active consideration of current and emerging ESG issues is consistent with their investment philosophy of maintaining a capital preservation bias by avoiding issuers that may suffer credit quality deterioration.  

The management of these assets is based on prescribed investment limitations, duration limitations, and issuer limitations including single and aggregate exposure limitations, as well as credit rating (both short and long term) and credit exposure limitations.


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