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UEthical

PRI reporting framework 2020

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes

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.

To ensure compliance with our ethical and environmental values, qualitative esg analysis is conducted across all new holdings prior to investment. Companies are screened for their performance against material environmental, social and governance factors prior to investment. Along with internal research, U Ethical utilises MSCI ESG research, broker reports, ISS governance platform, news sources and other relevant sources. The relevant ESG factors will vary by industry and company, we use the MSCI ESG scorecard data for each security to ensure the most material risks for each individual company are considered. Qualitative ESG analysis also helps us to ascertain whether the company has any practices or products which could breach our negative screening policy.

We choose this strategy to ensure that only companies with strong ESG credentials come through in our investable universe - that is companies with ESG ratings BBB in the International context, B in the domestic Australian context. This is the most appropriate strategy for us - due to limited resource we lean on available, quantifiable ESG ratings where possible.

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

We incorporate ESG analysis and also ESG controversy screening. U Ethical monitors ethical controversies to ensure that companies continue to comply with the Ethical Investment Policy. The team uses a range of sources to monitor controversies including MSCI ESG Manager alerts, ISS governance research, broker reports, news publications, Factset, industry bodies (RIAA, PRI, ACCR) and relationships with non-for-profit organisations such as the Uniting Church of Australia Justice for International Mission Unit. 

All companies with a 'Very Severe' MSCI controversy rating either ongoing, or within the last 3 years, are likely to be screened out. If a current holding receives a Very Severe controversy rating this is discussed in our Portfolio Management Meeting. Any proposed addition of a company to the U Ethical exclusion list is subject to Investment Committee approval, although companies may be divested following discussion at the quarterly Portfolio Management Meeting.

We also run daily alerts on controversies - both holdings and the wider investable universe. This is monitored by both the Investment Team and Ethics & Impact Manager.
We publish an excluded stock list on to the website alongside the reason for exclusion, which includes companies excluded due to either their industry, practices or controversies. 


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)


(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

Our negative screen evaluates a company’s products, services and practices to ensure they are not detrimental to society or the environment. U Ethical avoids investing in companies that:

- cause unacceptable damage to the natural environment

- infringe on human rights

- support oppressive regimes

- cause or perpetuate injustice and suffering

- have unacceptable occupational health and safety practices including disregard for minimum wage laws.

U Ethical also systematically excludes companies with operations in the following areas due to their inherent negative impacts:

- Oil, coal, gas (power generation, exploration, extraction)

- Uranium for non-medical uses

- Armaments

- Predatory lending

- Gambling

- Pornography and adult entertainment

- Animal cruelty

- Alcohol production

- Tobacco manufacturing

We recognise that there are occasions when companies inadvertently violate these principles and make genuine efforts to rectify this. Furthermore, we may choose not to exclude a company where a contravention of the principles constitutes less than 5% of the company’s revenue or earnings. In such instances, the contravention may be outweighed by significantly positive factors.

Screened by

Description

U Ethical screen out companies with below average ESG ratings across all portfolios. U Ethical recognises that ESG ratings are relative to sector peers and can be driven by policies and reporting capabilities rather than specific actions. Therefore, external ESG ratings are complemented by internal assessments to ascertain whether the company meets our ethical standards.

U Ethical also excludes a number of products and practices from its investable universe, which are deemed to be harmful to either society or the environment.

Positive companies are assesss through a UN Sustainable Development Goals framework. All portfolios strive for at least 10% exposure (although often it's much higher) to companies significantly contributing to the achievement of the goals.

Screened by

Description

Our portfolios are screened via MSCI ESG Manager for compliance with UN Global Compact Principles.

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

We do not currently advise clients directly when there is an update to our investment policy/screening. We indirectly notify through a number of mediums:

Updating website pages with the most current investment policy
Sharing updates on our website in the form of blog posts
News shared across our LinkedIn page
As part of quarterly newsletters with feature articles on this
Calls with clients 


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure ESG screening is based on robust analysis.

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

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

The investment team receive daily alerts from third-party providers on the following

- Controversies related to current holdings

- Changes to ESG ratings

- Screening criteria is reviewed on a quarterly basis at the U Ethical Investment Committee. Any updates are subject to Investment Committee approval


LEI 06. Processes to ensure fund criteria are not breached (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
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

Companies are screened for their performance against relevant environmental, social and governance factors prior to and throughout investment. Along with internal research, U Ethical utilises third-party provider research, broker reports, governance platforms, news sources and many other relevant sources. The relevant ESG factors will vary by industry and company, we use a materiality scorecard for each security to ensure the most material risks for each individual company are considered. 


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.

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]


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


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