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Eskom Pension and Provident Fund

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

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

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

​In order to achieve our investment objective, we implement our investment strategy largely through a multi-manager arrangement. Value is further added through investment activities performed in-house by the Investment Management Unit (IMU), which is the investment management and operating arm of the EPPF.

We have adopted a "Core/Satellite" approach to structuring the listed asset class mandates (domestic and international). Portfolio mandates are specialised along the lines of asset classes. , This is further refined by selecting the best "Core" and best "Satellite/Aggressive" equity and bond managers.

The IMU manages cash/money market management, listed bonds, listed equities, listed properties, tactical assets allocation and other value-added strategies.

The strategic asset allocation is reviewed by the Strategic Investments Committee and approved by the Board of Trustees, after considering advice and recommendations by the IMU. Other investment-related third party service providers are involved as required.

EPPF subscribes to the CRISA principles and is an active signatory of the PRI. The PRI and CRISA principles are used as a framework for guding the Fund's reponsible investing principles. 

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

01.6. Additional information [Optional].

          
        

SG 01 CC. Climate risk

01.6 CC. Indicate whether your organisation has identified transition and physical climate-related risks and opportunities and factored this into the investment strategies and products, within the organisation’s investment time horizon.

Describe the identified transition and physical climate-related risks and opportunities and how they have been factored into the investment strategies/products.

The Fund is mindful of its fiduciary obligation to members and beneficiares and ensuring that the assets are invested responsibly and generate a long-term rate of return that is sustainable

From an asset allocation point of view, the Fund has an allocation to renewable energy via the Developmental Impact Fund. The rationale for this allocation is that investment into renewable energy will address the negative consequences of over reliance on coal-generated energy.

As part of Manager Selection and Monitoring, we evaluate whether a manager considers climate related risks and other ESG risks in their investment process. The Fund remains committed to applying the principles of resposible investing (incorporating ESG) in our investment process for both internal and external portfolio managers.

We have identified and prioritised engagement on Environmental and Climate Change issues in our annual Corporate Engagement plan, which is approved by the Strategic Investment Committee of the Fund.

Further, as per our Proxy Voting Policy, we leverage our proxy voting power to engage investee companies on environmental disclosure and corporate impact on the environment (ie high pollution, acid water, air pollution by coal fired power stations).

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

Describe why your organisation has not yet assessed the likelihood and impact of climate risks

We have not assessed the impact of climate risk on our total portfolio. However, several of our underlying managers have run such assessments on the portfolios which they manage on our behalf. The Fund will incorporate these analyses when it has internal capacity to do so. It is the aim of the Fund to asses the likelihood and impact of climate risks before 30 June 2021.

01.8 CC. Indicate whether the organisation publicly supports the TCFD?

Explain the rationale

The Fund has not publicly supported the TCFD, however, several of the underlying managers who manage portfolios on our behalf have expressed public support of the TCFDs. However, the Fund is in the process of updating its policies with a view to including the principles of TCFD by 30 June 2020.

01.9 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.

Describe

The Fund is mindful of its fiduciary obligation to members and beneficiary and ensuring that the assets are invested responsibly and generate a long-term rate of return that is sustainable

From an Asset Allocation point of view, the Fund has an allocation to renewable energy via the Developmental Impact Fund. Investment into renewable energy will address the negative consequences of over reliance on coal-generated energy. Currently, we are in the process of developing an Impact Policy which will measure the impact of these investments.

The Fund is signatory to the Principles of Responsible Investment and regularly refers to PRI material in order to stay abreast of the latest climate-related risks. We monitor the portfolios, which are managed externally, on a daily, monthy, quarterly and annual basis with consideration of ESG risks.

We have identified and prioritised engagement on Environmental and Climate Change issues in the Engagement plan.

Further, as per our Proxy Voting Policy, we will leverage our proxy voting power to engage investee companies on environmental disclosure and corporate impact on the environment (ie high pollution, acid water, air pollution by coal fired power stations).

1.10 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.


SG 02. Publicly available RI policy or guidance documents

 

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

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02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

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02.3. Additional information [Optional].


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

Conflict of interest is managed across three levels; Board Level, Investment Management (Internal and External)

Board Level:

Each individual Trustee and the Board as a collective owe a fiduciary duty to the Fund to act in good faith, with due diligence and care, to avoid conflicts of interests and act with impartiality in respect of all its members and pensioners, being ultimately accountable and responsible for the performance and affairs of the Fund. The Board is responsible for directing, controlling and overseeing the operations of the Fund in accordance with all laws applicable to the Fund, and in accordance with the Rules of the Fund. It further provides strategic guidance, direction and leadership, ensuring good corporate governance and ethics, determining policy, agreeing on performance criteria and delegating the detailed planning and implementation of policy and decisions to management.

Investment Management (external)

The Fund reviews and ensures that each external asset manager appointed by the Funds has a policy to manage potential conflicts of interest in the investment process. 

Investment Management (internal)

Conflicts of interests are covered in the Employee code of Conduct, Anti-bribery and Corruption policy as well as the Trustee Code of Conduct.

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within investee entities.

04.2. Describe your process on managing incidents

EPPF leverages off its ESG Research providers (ESG INSIGHT and MSCI ESG) to identify ESG risks across its portfolio companies. The ESG Ratings identify ESG incidents and events and reflects them for possible engagement and intervention.The Fund concentrated on companies that slipped below the average ESG rating. Engagement efforts on companies that face acute rating deterioration during the engagement season are targeted for intensive engagement. The efforts are intended to understand from the investee companies the cause of deterioration and measures being put in place to remedy the situation. 


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