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Salt Funds Management

PRI reporting framework 2020

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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 399%

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

We incorporate ESG factors into our investment process in order to create portfolios intended to generate attractive risk adjusted returns over the long term, by both;

(1) Mitigating the risks associated with poor ESG standards via both exclusionary screens (removing companies whose activities are not aligned with values of our clients) and by attempting to focus on best-in-class companies (investing in firms that are assessed as the best performers amongst their peers in terms of ESG practices), and;

(2) Investing in companies that can benefit from the opportunities created by both societal attempts to mitigate the risks associated with likely changes in environmental conditions and evolving societal norms more generally via so called "impact investing", whereby we endeavour to target companies whose products / solutions target positive social or environmental outcomes.

In terms of the mechanics as to how we seek to achieve these aims, please see the summary below in section LEI 01.3.

 

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

Each of our major clients applies certain exclusionary screens, which require us to exclude certain stocks from portfolios based on specific ESG criteria

Our underlying investment process is consistently applied across mandates. This process is built around our research team, whose key task is to generate intrinsic value estimates for companies under coverage based on a rigorous financial modelling process. When building financial models that project likely future financial performance our analysts are expected to give due consideration to a wide range of issues that can influence corporate earnings, cash flows and returns, including quite critically, those related to ESG factors. We have developed an ESG template in order to guide analyst' thinking around the potential for ESG related issues.to impact on future financial performance of firms under coverage, with such issues, where quantifiable, explicitly incorporated into financial models. This template also serves to provide structure to our ranking of companies on ESG related factors (consistent with point 1 above in section LEI 01.2).  


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


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


(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

This is a client driven exercise whereby the negative/exclusionary screen is applied by the client. Our funds will avoid companies operating within sectors deemed to have high negative social impact. Specifically, this means we will avoid exposure to companies with material exposure to the the production or manufacture of tobacco, uranium, armaments, gambling, alcohol and pornography.

Screened by

Description

As described above Salt use a positive/best in class screening embedded in the Salt Scoring System. The ESG factors and what we look at are discussed in more detail above.

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

The screening criteria and list of excluded companies is reviewed on an ongoing basis and formally communicated to Salt by its client at least annually.


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.

05.4. 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 (Private)


(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]

Salt Funds Management Limited manages the Carbon Fund.  The Fund’s investment objective is to provide investors with a total return exposure to movements in the price of carbon credits in the New Zealand Emissions Trading Scheme (“NZ ETS”). 

It also has the ability to buy carbon credits in international emission trading schemes. As a result, the Fund may also provide exposure to the price of carbon offshore. The Fund can also invest in international carbon credits, as well as futures, swaps or other derivatives that provide exposure to international schemes such as the European Union emissions trading system.  The Fund can buy and sell carbon credits in these jurisdictions and any further schemes that are developed offshore.

The Fund generally gains its exposure through purchasing and holding carbon credits on the NZ ETS.  We may also use swaps or other derivatives to gain exposure to the NZ ETS.  

The Fund is actively managed by us. This means we buy and sell carbon credits on emission trading schemes based on our own analysis and assessment of the market.  This includes our assessment of the price of carbon credits relative to the demand and supply of carbon credits and other factors including technological advancements, politics, regulation, fuel prices and even global weather and climate change.

The authorised investments for the Fund are:

  • carbon credits in the NZ ETS;
  • carbon credits traded in established international emissions trading schemes;
  • derivatives (either exchange traded or over-the-counter) including but not limited to swaps, interest rate and forward rate contracts, forward foreign exchange contracts, options, and futures contracts;
  • units and other prescribed interests in unit trusts or other pooled funds that invest in the investments referred to above, including unit trusts managed by us or our related parties, irrespective of whether the trust or fund is listed on the NZX Main Board and/or the Australian Securities Exchange; and
  • cash or cash equivalent securities.

(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.

09.4. 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 (Private)


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