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BT Funds Management (NZ) Limited

PRI reporting framework 2020

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

Outputs and outcomes

SAM 08. Percentage of externally managed assets managed by PRI signatories

08.1. Describe how you ensure that best RI practice is applied to managing your assets

Measures

          We encourage managers to disclose any ESG and RI - related work undertaken during quarterly and annual reviews. We have also encouraged all our IMs to being signatories to the PRI, which we are pleased to report that they now are.
        

08.2. Additional information. [Optional]


SAM 09. Examples of ESG issues in selection, appointment and monitoring processes

09.1. Provide examples of how ESG issues have been addressed in the manager selection, appointment and/or monitoring process for your organisation during the reporting year.

Topic or issue
          Manager selection - ESG integration
        
Conducted by
Asset class
Scope and process
  • In our search for a global equity factor-based manager, BTNZ was keen to understand how a largely quantitatively-driven equity manager would integrate ESG factors into their investment decision making process.
  • BTNZ received written responses and discussed in depth with the three short-listed managers their process around integrating ESG factors. The work done by our preferred manager on the optimial level of ESG score uplift versus the benchmark, without compromising the excess return drivers and factor sensitivity was pleasing. This preferred manager is looking to incorporate ESG scores within their Quality factor, to develop their own, in-house, proprietary ESG scoring system, and has a strong focus on company engagement and active voting. 
Outcomes
  • The manager scored highly in our manager selection process for ESG integration (as well as other key selection criteria), with an appointment recommendation due to be presented to the BTNZ Investment Committee in eary 2020.
Topic or issue
          Manager selection - ESG integration
        
Conducted by
Asset class
Scope and process
  • In assessing an exposure to unlisted property, we had a presentation with the manager regarding their ESG implementation. The call covered their screening of ESG in acquisitions and physical asset due diligence of ESG risks and opportunities, as well as operational tracking of environmental metrics and ESG projects. The managers ESG goals include:
    • to assess environmental exposures associated with the location of investments. They look to invest in resilient locations limiting exposure to physical risks from climate change. The manager screens all new acquisitions and current assets on climate and environmental risks (such as flood risk, hurricanes, sea level rise, wildfires, water stress, heat stress, earthquake risk).
    • to improve environmental resource efficiency through implementing innovative technologies and strategies (such as renewable energy sources, irrigation upgrades and recylcing programs).
    • to uphold strong ethical and corporate governance standards through transparency and integrity.
Outcomes
  • The manager scores highly in our assessment of ESG integration in their investment decision making process and their ongoing management of portfolio holdings.
Topic or issue
          Manager monitoring - company voting
        
Conducted by
Asset class
Scope and process
  • The manager was concerned with the proposed increase in director fees for one of their company holdings, and the recommendation from the proxy voting adviser was to vote against this resolution. The manager engaged with the company to discuss the increase. The meeting helped them gain comfort in the reasons for the fee increases, citing that with the company's shift in business focus to Australia this increase in fees would put them on par with comparable Australian companies.
Outcomes
  • The manager voted in favour of the resolution, which ultimately passed.
Topic or issue
          Manager monitoring - collaborative engagement
        
Conducted by
Asset class
Scope and process
  • The manager is participating in a collaborative investor initiative set up to engage with 650+ publicly listed companies with mining-related operations on their tailings dam disclosures. A tailings dam is an earth-filled embankment used to store by products of mining operations that are usually highly toxic and potentially radioactive. 
Outcomes
  • The purpose of the initiative is to ensure investors can better evaluate the risks which tailings dams present, as well as promote efforts to establish an independent tailings dam safety system.
Topic or issue
          Manager monitoring - ESG integration
        
Conducted by
Asset class
Scope and process
  • ESG concerns were highlighted regarding a holding by the manager, whereby from a social perspective, the company has suffered intense public scrutiny following the alleged 400% price increase of their pharmaceutical product. The company has also been subject to ongoing price collusion investigations and it has been targeted alongside other drugmakers for its role in the opioid crisis. The manager also has concerns over the company’s corporate governance in terms of their compensation practices.
Outcomes
  • Taking into consideration these ESG concerns, the manager eliminated a holding in the global pharmaceutical company.
Topic or issue
          Manager monitoring - company engagement
        
Conducted by
Asset class
Scope and process
  • The manager wrote a formal letter to the CEO of the company highlighting concern regarding two incidents of fatality during the fiscal year 2019. As major shareholders, the manager were concerned with the underlying safety practices of the company. The objective in writing was to ensure that the company has plans in place to implement the requisite improvements to prevent such incidents occurring in the future. A response was received confirming the improvement actions that the company is in the process of undertaking. 
Outcomes
  • The manager will continue to monitor this aspect of the company's business closely.

09.2. Additional information.


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