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StatewideSuper

PRI reporting framework 2020

You are in Indirect – Manager Selection, Appointment and Monitoring » Selection

Selection

SAM 02. Selection processes (LE and FI)

02.1. Indicate what RI-related information your organisation typically covers in the majority of selection documentation for your external managers

Your organisation’s investment strategy and how ESG objectives relate to it

ESG incorporation requirements

ESG reporting requirements

Other

No RI information covered in the selection documentation

LE

Property
Infrastructure
Your organisation’s investment strategy and how ESG objectives relate to it
ESG incorporation requirements
ESG reporting requirements
Other
No RI information covered in the selection documentation

You selected an `Other` option in table SAM 02.1 above, please specify

These areas are also discussed with investment managers during due diligence meetings. Our emphasis is primarily on how the investment managers' teams integrate the ESG policies and practices in their day to day management of funds. 

02.2. Explain how your organisation evaluates the investment manager’s ability to align between your investment strategy and their investment approach

Strategy

Assess the time horizon of the investment manager’s offering vs. your/beneficiaries’ requirements

Assess the quality of investment policy and its references to ESG

Assess the investment approach and how ESG objectives are implemented in the investment process

Review the manager’s firm-level vs. product-level approach to RI

Assess the ESG definitions to be used

Other

None of the above

LE

Property
Infrastructure
Assess the time horizon of the investment manager’s offering vs. your/beneficiaries’ requirements
Assess the quality of investment policy and its reference to ESG
Assess the investment approach and how ESG objectives are implemented in the investment process
Review the manager’s firm-level vs. product-level approach to RI
Assess the ESG definitions to be used
Other
None of the above

ESG people/oversight

Assess ESG expertise of investment teams

Review the oversight and responsibilities of ESG implementation

Review how ESG implementation is incentivised

Review the manager’s RI-promotion efforts and engagement with the industry

Other

None of the above

LE

Property
Infrastructure
Assess ESG expertise of investment teams
Review the oversight and responsibilities of ESG implementation
Review how is ESG implementation enforced /ensured
Review the manager’s RI-promotion efforts and engagement with the industry
Other
None of the above

Process/portfolio construction/investment valuation

Review the process for ensuring the quality of the ESG data used

Review and agree the use of ESG data in the investment decision making process

Review and agree the impact of ESG analysis on investment decisions

Review and agree ESG objectives (e.g. risk reduction, return seeking, real-world impact)

Review and agree manager’s ESG risk framework

Review and agree ESG risk limits at athe portfolio level (portfolio construction) and other ESG objectives

Review how ESG materiality is evaluated by the manager

Review process for defining and communicating on ESG incidents

Review and agree ESG reporting frequency and detail

Other, specify

None of the above

LE

Property
Infrastructure
Review the process for ensuring the quality of the ESG data used
Review and agree the use of ESG data in the investment decision making process
Review and agree the impact of ESG analysis on investment decisions
Review and agree ESG objectives (e.g. risk reduction, return seeking, real-world impact)
Review and agree manager’s ESG risk framework
Review and agree ESG risk limits at athe portfolio level (portfolio construction) and other ESG objectives
Review how ESG materiality is evaluated by the manager
Review process for defining and communicating on ESG incidents
Review and agree ESG reporting frequency and detail
Other, specify
None of the above

If you select any `Other` option(s), specify

While review of policies and processes is a fundamental component of due diligence, we believe that discussing the rationale for investment decisions made with the investment team is critical to understanding the extent to which ESG is integrated in the portfolio. Many investment managers with good ESG teams, policies and processes do not live up to expectations because investment teams do not have sufficient buy-in to the process. We believe that monitoring a manager over an extended period provides deeper understanding of the manager's approach.

02.3. Indicate the selection process and its ESG/RI components

          The investment consultant reviews the managers ESG policy, proxy voting policy and other related documents. For equity managers, proxy voting and engagement records are also reviewed.
        

02.4. When selecting external managers does your organisation set any of the following:

ESG performance development targets

ESG score

ESG weight

Real economy influence

Other RI considerations

None of the above

LE

Property
Infrastructure
ESG performance development targets
ESG score
ESG weight
Real world economy targets
Other RI considerations
None of the above

You selected an `Other` option in table SAM 02.4 above, please specify

The managers are reviewed thoroughly as part of the due diligence and selection process.  This includes acitivities and expectations around stewardship activitities, being active owners, engagement and voting requirements.

When determining whether a manager should be recommended for use in the portfolio, the consultant rates a manager's ESG capabilities in a formal evaluation process. In line with the approach taken to all other aspects of a manager evaluation (e.g. strategy, team, organisation etc), the consultant assigns a peer relative rating to the managers approach to ESG integration. A manager must be considered to be "average" relative to their peer group in relation to ESG (and all other areas) as a minimum to be recommended to a client (in conjunction with being considered as outstanding in other areas). 

02.5. Describe how the ESG information reviewed and discussed affects the selection decision making process.[OPTIONAL]

          Managers with unsatisfactory ESG integration practices will not be appointed. As noted above, this assessment is undertaken on a peer-relative basis.
        

SAM 03. Evaluating engagement and voting practices in manager selection (listed equity/fixed income)

03.1. Indicate how your organisation typically evaluates the manager’s active ownership practices in the majority of the manager selection process.

Engagement

Review the manager’s engagement policy 1

Review the manager’s engagement process (with examples and outcomes)

Ensure whether engagement outcomes feed back into the investment decision-making process

Other engagement issues in your selection process specify

LE

Review the manager’s engagement policy
Review the manager’s engagement process (with examples and outcomes)
Ensure whether engagement outcomes feed back into the investment decision-making process
Other engagement issues in your selection process specify

(Proxy) voting

Review the manager’s voting policy

Review the manager’s ability to align voting activities with clients’ specific voting policies

Review the manager’s process for informing clients about voting decisions

Ensure whether voting outcomes feed back into the investment decision-making process

Review the number of votes cast as a percentage of ballots/AGMs or holdings and available rationale

Other voting issues in your selection process; specify

LE

Review the manager’s voting policy
Review the manager’s ability to align voting activities with clients’ specific voting policies
Review the manager’s process for informing clients about voting decisions
Ensure whether voting outcomes feed back into the investment decision-making process
Review the number of votes cast as a percentage of ballots/AGMs or holdings and available rationale
Other active ownership voting issues in your selection process; specify

If you select any `Other` option(s), specify

          The consultant reviews who's responsible for all elements of the proxy voting process.
        

03.2. Describe how you assess if the manager’s engagement approach is effective.

03.3. Describe how you assess if the manager’s voting approach is effective/appropriate

          We consider the managers' approach and proxy voting activities relative to their peer group.
        

03.4. Additional information [OPTIONAL]

          
        

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