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PRI reporting framework 2020

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (C) Implementation: Integration of ESG factors

(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




Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

ESG factors are thoroughly considered and definitively incorporated into the investment decision for each investment that we make.

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.

          ESG is crucial to our risk-scoring process, feeding into cost of capital, hence valuation decisions. We ensure we are paid to take risk.

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

09.4. 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]

The following is a summary of the process whereby ESG and other risks are assessed and quantified by the analysts and the team.

  1. The analyst considers the top 10 risk out of all possible risks, scoring each risk (out of 10) for 3 parameters: probability, materiality, and the extent to which the potential impact is priced into the stock price.  The risks are colour-coded according to 4 categories: financial; ESG (environmental, social and governance); operational; and strategic.)
  2. During the stock review, half of which is devoted to discussion of risk, each team member independently scores his or her own top 10 risks.
  3. The team comes together, lead by the analyst, to discuss each risk, placing Post-it notes on a wall-drawn matrix corresponding to the assigned scores, discussing score differences.
  4. The analyst considers new risk ideas to replace his or her preconceived ones, and chooses whether to adjust scores for other risks based on feedback from colleagues.
  5. The revised risk score, equivalent to a beta, drives a cost of capital calculation (Ke) which intern drives a risk-adjusted return calculation (IRR-Ke)

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