This report shows public data only. Is this your organisation? If so, login here to view your full report.

First Sentier Investors (including First State Investments)

PRI reporting framework 2020

Export Public Responses
Pdf-img

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
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

A full description of each team's approach is provided in our annual responsible investment and stewardship report: https://www.firststateinvestments.com/global/responsible-investment/responsible-investment.html 


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.

          ESG ratings from two providers integrated with analyst tools Bloomberg and Factset. Group-wide ESG portfolio monitor tool has been developed.
        

09.6. Additional information. [Optional]

As the investment teams operate independently, ESG analysis is performed by each team and maintained separately. A centralised database and direct access to the research of a number of leading ESG research providers is available to all teams. Teams use multiple ways of collecting and storing and interrogating the information. 

The quality of the ratings we receive from external providers is monitored by the responsible investment team using our ESG Portfolio Monitor tool. This includes feedback from investment teams which is in turn fed back to the providers.

Portfolio monitoring forms part of the quarterly investment (product assurance) committee reporting process.  


LEI 10. Aspects of analysis ESG information is integrated into

New selection options have been added to this indicator. Please review your prefilled responses carefully.

10.1. Indicate which aspects of investment analysis you integrate material ESG information into.

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

10.2. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis.

10.3. Describe how you integrate ESG information into portfolio weighting.

​ESG issues are fully integrated in their investment process in number of ways.The frequency and degree to decision differ based on the type of company and its circumstances.

For example, Stewart Investors stated that portfolios are constructed with a long-term investment horizon in mind, typically increasing exposure as we engage and deepen further our company relationships.

Our FSSA team's portfolio construction and the weights of individual holdings are determined by their level of conviction, which is rooted in the quality of the company and its valuation. ESG is fully incorporated into our assessment of quality and thus is reflected in portfolio weightings.

The Global Listed Property Securities team states that ESG factors are used to screen our investible universe and determine Total Return Expectation of a stock

Global Listed Infrastructure Securities team stated that it is integrated through the Quality Ranking Model which consists of 25 qualitative criteria that they believe influence stock returns in general and infrastructure securities in particular with ESG accounting for 24% of the overall quality score.

Australian Small Cap team stated that ESG and sustainability factors are quantified and can influence other factors, most directly in the valuation and financials of the stock.

10.4. Describe the methods you have used to adjust the income forecast/valuation tool.

​Global Listed Property Securities comment: An ESG score out of 5 is incorporated into the company CAPM beta and discount rate calculation feeding into the company valuation.

Stewart Investors comment:we analyse a broad range of valuation metrics to come up with a sensible estimate of what a share is worth over time to us as long-term investors. ESG information is factored into our assessment of the overall quality of a company's governance and franchise. This in turn determines what price, if any, we are prepared to pay for said company. We undertake a range of different approaches based on earnings, cash flows, book value, replacement cost and physical metrics.

FSSA comment: Quality companies with better ESG credentials will generally merit a higher multiple; conversely, weaker companies may warrant a discount. However, there are no hard and fast rules on the extent to which these might be applied.

Australian Small Companies comment: Where ESG and sustainability factors are determined to have a material impact on profitability, they are quantified and can influence other factors, most directly in the valuation and financials of the stock.

10.5. Describe how you apply sensitivity and /or scenario analysis to security valuations.

The ​Global Listed Infrastructure Securities Team perform scenario/sensitivity analysis on all companies to assess upside and downside scenarios that could eventuate. Given that the future is uncertain we need to be forward thinking about risks and how they could impact our view of the underlying fundamental value of a business. For risks where the valuation impact is less explicit we incorporate this into the qualitative side of our investment process.  

Stewart Investors carry out detailed fundamental research ahead of investing in any company. An important part of our research includes assessing the risks and/or opportunities a company might face. Once invested, we continually monitor the companies we own to understand any changes to their strategies, relevant sector or market related changes and impacts, and movements in their share prices.

Global Listed Property Securities Team comment: We assign a single metric for each variable in our forecasting and valuation process, including assessment of ESG factors.

Australian Small Companies team comment: ESG considerations are part of scenario analysis and impact our view of the underlying fundamental value of a business.

10.6. Additional information. [OPTIONAL]


Top