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Alquity Investment Management Limited

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 100%

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

The Alquity investment process emphasises not only financial, but also material non-financial factors.
Through the incorporation of Forward-Looking Environmental, Social and Governance (ESG) analysis we assess management ability, practices and investment values. This results in portfolios that capture long-term themes, via transparent companies, with effective management who are aligned with shareholders.
In turn, these outcomes allow us to generate significant conviction and therefore enhanced risk adjusted financial returns. Moreover, they mean that our portfolios are responsible by construction – we will not own companies whose investment values are fundamentally incompatible with our process.

We will not hold companies with business practices that are fundamentally inconsistent with our process. This includes companies with over 5% of revenues or profits in their most recent financial report attributed to:

Tobacco
Gambling
Narcotics
Adult Entertainment
Armaments
Liquor

Coal mining

Fossil Fuel extraction and production

 

With respect to the development, production, maintenance and trade of weapons that have a disproportional and indiscriminate impact on civilian populations (so called “Controversial Weapons”), we have operate a zero tolerance. These include:

Anti-personnel landmines

Biological weapons

Chemical weapons

Cluster munitions

Cluster bombs

Ammunitions containing depleted uranium

Nuclear Weapons

 

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

Our approach is conviction based. This means we have to understand the ability of management to execute on their business plan, monetise opportunity and correctly manage risk through the cycle. It also means there must be sufficient transparency and disclosure to analyse the company in full. We reinforce this understanding via an ESG analysis. Specifically, we look at behaviours and practices across the firm in the context of global and regional best practice. As a discipline, and for comparability, we then assign a rating (A-C) to each institution, which captures risk and the quality of judgement and decision-making. Only those companies rated C or better can be included in the portfolio. To be clear, this means that we will only invest in firms where there is satisfactory quality and alignment of management.


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

We will not hold companies with business practices that are fundamentally inconsistent with our process. This includes companies with over 5% of revenues or profits in their most recent financial report attributed to:
1. Tobacco
2. Gambling
3. Narcotics
4. Adult Entertainment
5. Armaments
6. Liquor

7. Coal Mining

8. Fossil Fuel extraction and production

 

With respect to the development, production, maintenance and trade of weapons that have a disproportional and indiscriminate impact on civilian populations (so called “Controversial Weapons”), we have operate a zero tolerance. These include:

Anti-personnel landmines

Biological weapons

Chemical weapons

Cluster munitions

Cluster bombs

Ammunitions containing depleted uranium

Nuclear Weapons

Screened by

Description

Using our proprietary ratings approach we compare companies to both global best practice ( high risk industries) and regional best practice ( low risk inductries) across all the ESG criteria.

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

We exclude some sectors purely on the basis that they are incompatible with our investment process which seeks transparent companies, aligned with minority shareholder and run by managment teams that are capable and share our investment values. 

Following our analysis, our overall view on the quality of Transparency and ESG on a forward-looking basis is then summarised on a scale from A (excellent) to C(pass)- anything below this is a fail and we do not invest. Our ratings are relative to regional and global best practices and take into account the riskyness of its industry as well as secto-specific issues. 


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.

          All our funds are independently audited by Afnor, on behalf of the French Finance Ministry and awarded the ISR label which confirms the 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)


(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]

We focus our investment process on only the material ESG factors linked to the specific sector or business of the equity being assessed. 


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]

All stocks in our funds must have an ESG rating of C or higher. This is recorded centrally on a specific ESG section of the stock note for each investment and reviewed by the Portfolio Risk Committee, quarterly.


LEI 10. Aspects of analysis ESG information is integrated into (Private)


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