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KBI Global Investors

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%
87 %
Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
13 %
Total actively managed listed equities 100%

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

Our Natural Resources strategies self-evidently use a thematic approach, but they also use both negative screening (to a limited extent) and Integration.  Integration is the chosen method as we believe that companies whose products and services enhance social or environmental goals deserve a higher valuation.  Such companies are more likely to have long, durable, sustainable business models.   Or to put it in more technical terms, when using a discounted cash flow valuation calculation, the assumptions behind the terminal value calculation are more likely to be robust.  We carry out a robust analysis of the ESG performance of every company in which we are considering an investment, and that assessment is fully integrated into the investment process, and in particular into our proprietary valuation tool.

Our Global Equity strategies use negative screening to a limited extent as it is the policy of our company not to invest in companies that are involved with certain controversial weapons, large-scale coal extraction or generation, or which are in serious breach of the principles of the Global Compact.   These strategies also use Integration as the ESG performance of companies is an integral part of the investment process, using ESG scores supplied by an external consultancy firm.  The ESG performance of a company directly impacts whether it is in the portfolio, and if so, what its position size will be.

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

See answer to LEI 01.2


LEI 02. Type of ESG information used in investment decision

02.1. Indicate what ESG information you use in your ESG incorporation strategies and who provides this information.

Type of ESG information

Indicate who provides this information  

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

          Niche brokers focused on environmental/ resource sectors
        

Indicate who provides this information 

02.2. Indicate whether you incentivise brokers to provide ESG research.

02.3. Describe how you incentivise brokers.

Brokers are reviewed regularly on a comprehensive basis looking at quality of research. Niche brokers focused on the natural resource sectors in which we invest are evaluated and paid in part based on the quality of their ESG research. 

02.4. Additional information. [Optional]


LEI 03. Information from engagement and/or voting used in investment decision-making

03.1. Indicate whether your organisation has a process through which information derived from ESG engagement and/or (proxy) voting activities is made available for use in investment decision-making.

03.2. Additional information. [Optional]


(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

All portfolios do not invest in companies involved with controversial weapons, companies which are in serious breach of the ten Principles of the Global Compact, and companies which have significant exposure to coal extraction or coal-fired electricity generation.

In addition, for some portfolios we also exclude companies known to have fossil fuel reserves, and companies involved with certain controversial business activities such as tobacco, adult entertainment, stem cell research, and companies with the lowest ESG rating as provided by an external ESG research provider.

Additionally, we manage SRI-screened versions of our Water strategy for some clients based on their criteria, and we comply with Febelfin screens for our KBI Water Fund, which is a UCITS. For another subset of clients, we also screen out countries that these clients wish to avoid based on support for objectionable activities.

Screened by

Description

We exclude - for all portfolios - companies which are involved in serious breach of the Principles of the Global Compact.

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

Changes to exclusionary policy are made available in a variety of ways, including direct communications to existing clients, and publication in our annual Responsible Investing report (available via our 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]

Our Responsible Investing Committee, comprised of high-level staff from across the business including three of the firm's five Executive Directors, has responsibility and oversight of all screening (and other ESG) policies.  A full review of our screening supplier is carried out annually.


LEI 06. Processes to ensure fund criteria are not breached

06.1. Indicate which processes your organisation uses to ensure fund criteria are not breached.

06.2. If breaches of fund screening criteria are identified, describe the process followed to correct those breaches.

In such circumstances the stock would be sold from the portfolio at the earliest practical opportunity, bearing in mind the clients' best interests.  Our Risk Committee would be informed of the breach, and a report on the circumstances as to how the error arose would be prepared by our Compliance & Risk Department and circulated to the various parties involved and to the Risk Committee.  Any learnings from the error or the report into the error would of course be implemented as soon as practical.

06.3. Additional information. [Optional]


(B) Implementation: Thematic

LEI 07. Types of sustainability thematic funds/mandates

07.1. Indicate the type of sustainability thematic funds or mandates your organisation manages.

07.2. Describe your organisation’s processes relating to sustainability themed funds. [Optional]


(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.

          Occasional ESG issue-specific meetings with companies, as required.
        

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.

09.6. Additional information. [Optional]


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

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

          ESG factors comprise two of the four pillars of our proprietary valuation model used in our Natural Resources thematic equity strategies investment process.
        

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

For our Natural Resource equity portfolios, two of the four pillars of our proprietary fair value valuation model are ESG, where the PM rates a company based on a variety of ESG factors and inputs.  The results of the valuation tool directly impact the position size within the portfolios.

For our Global Equity portfolios, ESG scores (as supplied by an external ESG research company) are directly integrated into the investment process and therefore directy influence whether a security is included in the portfolio, and if so, its position size.  

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

For our Natural Resource equity portfolios, two of the four pillars of our proprietary fair value valuation model are ESG, where the PM rates a company based on a variety of ESG factors and inputs.  The results of the valuation tool directly impact the position size within the portfolios.  For our Global Equity ESG  portfolios, a negative screen is in place for certain controversial sectors and activities, and for lowest-ESG rated companies as determined by an external provider. An optimisation process is then implemented via ESG integration with the aim of achieving a portfolio ESG rating which is substantially above the benchmark.

10.6. Additional information. [OPTIONAL]


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