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BT Funds Management (NZ) Limited

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

ESG Objectives

          We provide IMs with securities exclusions list on a quarterly basis that the IMs must adhere to. While we believe that positive outcomes are a function of ESG risk management and company engagement, rather than blanket screening of certain types of investments, we also recognise the importance of taking into account New Zealand laws as well as international conventions to which New Zealand is a signatory.  In addition, we will give special consideration to companies/industries involved in certain activities or breaches of accepted best practice standards where engagement with the company/industry does not achieve desired outcomes.  Consequently we currently restrict our IMs from investing in companies that are involved in the manufacture of nuclear weapons, cluster munitions or anti-personnel mines (together, "controversial weapons"), the manufacture of assault weapons for civilian use, the manufacture of tobacco, or the processing of whale meat. This is monitored by the IM through their pre-trade compliance systems, and by BTNZ by our post-trade compliance systems.
        
          We expect IMs to take ESG factors into consideration when making investment decisions, both for risk mitigation and for return seeking purposes. This involves incorporating environmental (e.g. carbon emissions, waste, environmental policies), social (e.g. modern slavery, diversity, stakeholder relations), and governance (e.g. board composition, executive remuneration, anti-competitive practices) factors into their company research, analysis and decision making process. IMs are required to provide examples of ESG integration through their quarterly reporting to BTNZ.
        
          We expect our IMs to engage with the companies in which they invest to encourage them to improve their ESG practices, both for risk mitigation and return seeking purposes. IMs are required to provide examples of ESG company engagements through their quarterly reporting to BTNZ.
        
          IMs are required to vote their proxies on behalf of BTNZ, and report their voting activity quarterly. This enables BTNZ to have greater visibility on the voting activity for company resolutions.
        
          We have encouraged our IMs to become signatories to UN PRI. We are pleased that all our underlying investment managers are now signatories.
        

Incentives and controls

Reporting requirements

Benchmark

          Bloomberg Barclays Global Treasury 1-20y Index (100% hedged to NZD) or Bloomberg NZBond Composite 0+ Yr Index
        

ESG Objectives

          We provide IMs with securities exclusions list on a quarterly basis that the managers must adhere to. We currently restrict our IMs from investing in companies that are involved in the manufacture of nuclear weapons, cluster munitions or anti-personnel mines (together, "controversial weapons"), the manufacture of assault weapons for civilian use, the manufacture of tobacco, or the processing of whale meat. While we note that this is not relevant for our SSA allocations, these restrictions are still sent to them.
        
          We expect IMs to take ESG factors into consideration when making investment decisions, both for risk mitigation and for return seeking purposes. This involves incorporating environmental (e.g. carbon emissions, waste, environmental policies), social (e.g. modern slavery, diversity, stakeholder relations), and governance (e.g. board composition, executive remuneration, anti-competitive practices) factors into their company research, analysis and decision making process. IMs are required to provide examples of ESG integration through their quarterly reporting to BTNZ. An example is one of our global sovereign fixed interest IMs assess ESG factors as part of their financial stability assessment for all countries. The IM believes that countries with better governance, healthier and better educated workforces, and higher environmental standards tend to product better economic outcomes, more stable balance sheets and better financial outcomes. ESG factors therefore impact valuations and inform their risk assessment of a country's sovereign debt. The IM penalises weak ESG factors, thereby reducing a country's financial balance sheet assessment, which is used as an input into the investment decision making process.
        
          We expect our IMs to engage with the companies in which they invest to encourage them to improve their ESG practices, both for risk mitigation and return seeking purposes. IMs are required to provide examples of ESG company engagements through their quarterly reporting to BTNZ. However we note the engagement with SSA's is limited given the nature of the issuers.
        
          We have encouraged our IMs to become signatories to UN PRI. We are pleased that all our underlying investment managers are now signatories.
        

Incentives and controls

Reporting requirements

Benchmark

          Bloomberg Barclays Global Corporate 1-10y Index (100% hedged to NZD) or Bloomberg NZBond Credit 0+ Yr Index
        

ESG Objectives

          We provide IMs with securities exclusions list on a quarterly basis that the managers must adhere to. We currently restrict our IMs from investing in companies that are involved in the manufacture of nuclear weapons, cluster munitions or anti-personnel mines (together, "controversial weapons"), the manufacture of assault weapons for civilian use, the manufacture of tobacco, or the processing of whale meat. This is monitored by the IM through their pre-trade compliance systems, and by BTNZ by our post-trade compliance systems.
        
          We expect IMs to take ESG factors into consideration when making investment decisions, both for risk mitigation and for return seeking purposes. This involves incorporating environmental (e.g. carbon emissions, waste, environmental policies), social (e.g. modern slavery, diversity, stakeholder relations), and governance (e.g. board composition, executive remuneration, anti-competitive practices) factors into their company research, analysis and decision making process. IMs are required to provide examples of ESG integration through their quarterly reporting to BTNZ.
        
          We expect our IMs to engage with the companies in which they invest to encourage them to improve their ESG practices, both for risk mitigation and return seeking purposes. IMs are required to provide examples of ESG company engagements through their quarterly reporting to BTNZ.
        
          We have encouraged our IMs to become signatories to UN PRI. We are pleased that all our underlying investment managers are now signatories.
        

Incentives and controls

Reporting requirements

Benchmark

          Bloomberg Barclays Global Corporate 1-10y Index (100% hedged to NZD) or Bloomberg NZBond Credit 0+ Yr Index
        

ESG Objectives

          We provide IMs with securities exclusions list on a quarterly basis that the managers must adhere to. We currently restrict our IMs from investing in companies that are involved in the manufacture of nuclear weapons, cluster munitions or anti-personnel mines (together, "controversial weapons"), the manufacture of assault weapons for civilian use, the manufacture of tobacco, or the processing of whale meat. This is monitored by the IM through their pre-trade compliance systems, and by BTNZ by our post-trade compliance systems.
        
          We expect IMs to take ESG factors into consideration when making investment decisions, both for risk mitigation and for return seeking purposes. This involves incorporating environmental (e.g. carbon emissions, waste, environmental policies), social (e.g. modern slavery, diversity, stakeholder relations), and governance (e.g. board composition, executive remuneration, anti-competitive practices) factors into their company research, analysis and decision making process. IMs are required to provide examples of ESG integration through their quarterly reporting to BTNZ.
        
          We expect our IMs to engage with the companies in which they invest to encourage them to improve their ESG practices, both for risk mitigation and return seeking purposes. IMs are required to provide examples of ESG company engagements through their quarterly reporting to BTNZ.
        
          We have encouraged our IMs to become signatories to UN PRI. We are pleased that all our underlying investment managers are now signatories.
        

Incentives and controls

Reporting requirements

Benchmark

          65% Bloomberg Barclays Global Government 1-20y Index: 35% Bloomberg Barclays Global Corporate 1-10y Index (100% hedged to NZD) or Bloomberg NZBond Composite 0+ Yr Index
        

ESG Objectives

          We provide IMs with securities exclusions list on a quarterly basis that the managers must adhere to. We currently restrict our IMs from investing in companies that are involved in the manufacture of nuclear weapons, cluster munitions or anti-personnel mines (together, "controversial weapons"), the manufacture of assault weapons for civilian use, the manufacture of tobacco, or the processing of whale meat. This is monitored by the IM through their pre-trade compliance systems, and by BTNZ by our post-trade compliance systems.
        
          We expect IMs to take ESG factors into consideration when making investment decisions, both for risk mitigation and for return seeking purposes. This involves incorporating environmental (e.g. carbon emissions, waste, environmental policies), social (e.g. modern slavery, diversity, stakeholder relations), and governance (e.g. board composition, executive remuneration, anti-competitive practices) factors into their company research, analysis and decision making process. IMs are required to provide examples of ESG integration through their quarterly reporting to BTNZ.
        
          We expect our IMs to engage with the companies in which they invest to encourage them to improve their ESG practices, both for risk mitigation and return seeking purposes. IMs are required to provide examples of ESG company engagements through their quarterly reporting to BTNZ. However we note the engagement with SSA's is limited given the nature of the issuers.
        
          We have encouraged our IMs to become signatories to UN PRI. We are pleased that all our underlying investment managers are now signatories.
        

Incentives and controls

Reporting requirements

Benchmark

          S&P/NZX All Real Estate Gross Index and FTSE EPRA/NAREIT Developed Index
        

ESG Objectives

          We provide IMs with securities exclusions list on a quarterly basis that the managers must adhere to. We currently restrict our IMs from investing in companies that are involved in the manufacture of nuclear weapons, cluster munitions or anti-personnel mines (together, "controversial weapons"), the manufacture of assault weapons for civilian use, the manufacture of tobacco, or the processing of whale meat. This is monitored by the IM through their pre-trade compliance systems, and by BTNZ by our post-trade compliance systems.
        
          We expect IMs to take ESG factors into consideration when making investment decisions, both for risk mitigation and for return seeking purposes. This involves incorporating environmental (e.g. carbon emissions, waste, environmental policies), social (e.g. modern slavery, diversity, stakeholder relations), and governance (e.g. board composition, executive remuneration, anti-competitive practices) factors into their company research, analysis and decision making process. IMs are required to provide examples of ESG integration through their quarterly reporting to BTNZ.
        
          We expect our IMs to engage with the companies in which they invest to encourage them to improve their ESG practices, both for risk mitigation and return seeking purposes. IMs are required to provide examples of ESG company engagements through their quarterly reporting to BTNZ.
        
          IMs are required to vote their proxies on behalf of BTNZ, and report their voting activity quarterly. This enables BTNZ to have greater visibility on the voting activity for company resolutions.
        
          We have encouraged our IMs to become signatories to UN PRI. We are pleased that all our underlying investment managers are now signatories.
        

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]

          All IMs are required to adhere to our securities exclusions list as well as report on all relevant ESG activity on a quarterly basis. ESG activity is discussed with the IMs during quarterly review sessions.
        

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