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Shell Contributory Pension Fund

PRI reporting framework 2020

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

ESG incorporation in actively managed listed equities

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 200%

01.2. Describe your organisation’s approach to ESG incorporation and the reasons for choosing the particular strategy/strategies.

SCPF uses custom ESG benchmarks for a significant part of its listed equity portfolio. ESG considerations specific to SCPF are integrated in the construction methodology of these benchmarks.

Furthermore, all SAMCo Equity portfolio managers have access to MSCI ESG data. This includes ESG Ratings, Controversy Scores, Climate Change Metrics and Research. The data is used as input for portfolio monitoring - with both internal & external portfolios in scope - and is considered as part of the risk/return analysis when making investment decisions. Practical implementation differs depending on the type of equity portfolio. For fundamental portfolios, this will entail a review and discussion of available data points and research reports, potentially combined with company engagement. For quantitative portfolios, the focus will be on data analyses. As an example, quant portfolio managers use SAMCo-developed rebalancing software to analyse the ESG positioning impact (loadings ‘before’ and ‘after’) of a potential trade.

In addition, Hermes EOS monitors the companies in which SCPF invests in order to ensure that they are taking appropriate steps to produce sustainable financial returns for shareholders. Hermes EOS also seeks to identify any situation where long-term shareholder value may be compromised due to unsatisfactory environmental, social and ethical performance or the risk of governance or strategic failure. Hermes EOS also takes account of the extent to which companies are demonstrating alignment with the general principles of the United Nations Global Compact. Where concerns are raised through the monitoring processes, or through another channel, Hermes EOS considers engagement with the company in question.

Finally, SCPF has an exclusion list that consists of companies involved in the manufacture, sale or distribution of cluster munitions and anti-personnel landmines as well as companies that are divested/excluded because of controversial conduct/UNGC non-compliance combined with unsuccessful engagement (or direct divestment in case of overtly unacceptable activities).

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


LEI 02. Type of ESG information used in investment decision (Private)


LEI 03. Information from engagement and/or voting used in investment decision-making (Not Completed)


(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

SCPF does not invest in companies involved in the manufacture, sale or distribution of cluster munitions and anti-personnel landmines.

Screened by

Description

Governance positioning is taken into account in the custom ESG benchmark methodology that is used for a significant part of the listed Equity portfolio.

Screened by

          Shell General Business Principles (SGBP), aligned with UNGC.
        

Description

Hermes EOS assesses all companies in SCPF's portfolios for breaches of generally recognised responsibilities and norms under UN treaties (with an explicit reference to the UN Global Compact/SGBP) and for other behaviours which are deemed unsustainable. The screening process will be supplemented by an in-depth assessment of a company’s activities by a member of the Hermes EOS team. Where a company’s activities are found clearly to conflict with English law or with international treaties ratified by the British parliament, this will be reported by Hermes EOS to SAMCo on behalf of SCPF. This may result in one of two outcomes:

-A decision to engage with the company with a view to having the company desist from that activity. Unsuccessful engagement (after a reasonable time) can lead to divestment; or

-In exceptional circumstances where conduct is overtly unacceptable, an immediate decision to divest from the company. 

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

The screening criteria, as well as the international codes/principles used as guidelines, are described in the RI policy, which is available on the SCPF website.


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]


LEI 06. Processes to ensure fund criteria are not breached (Not Completed)


(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]


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.

09.5. 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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