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SVM Asset Management Limited

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%
96 %
Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
4 %
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.

Responsible investment is an investment approach that integrates environmental, social and governance (ESG) factors into investment analysis and decisions. It is an important aspect of the service we offer our clients and a key point of differentiation with passive investment strategies and many other active managers. SVM began managing Socially Responsible Investment (SRI) products in 2006. Since then, our engagement principles have evolved to include ESG issues across our range.

As a boutique investment firm we recognise that, because in most cases we will not hold significant positions in investee companies, it can be difficult to encourage changes in management attitudes and behaviour purely by exercising client voting powers alone. Instead, we have adopted a more flexible approach and we engage with company management and boards as and when we believe it will be of most benefit.

Using information derived from a combination of in-house research, dialogue with the company and external sources we identify the key issues and discuss them directly with company management, in order to affect change.

Our ESG team are responsible or completing an ESG template which encompasses a broad range of ESG metrics. This in turn allows us to place an ESG score on each investment which reflects the risk profile of the companies involved. This allows investment managers to incorporate ESG risk or opportunity into their investment process by way of an enhanced discount factor, adjusted valuation multiple and/or portfolio weighting. Furthermore, the data and scores can be aggregated to the portfolio level to give the individual managers a top down view of their portfolio from an ESG perspective.

 

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

The approach for the SVM All Europe SRI Fund (4% of AUM) places emphasis on following a route of engagement.  Using information derived from a combination of in-house research, dialogue with the company and external sources we will identify the key issues and discuss them directly with company management, in order to affect change.

Negative screening is applied but it kept to a minimum as we believe that positive engagement is more influential in creating change within organisations.  By employing a minimal level of negative screening, we are giving ourselves the potential to influence more companies than a broader exclusionary policy would allow.  However, we do recognise that there are certain industries whose activities run contrary to the ideals of SRI invesors.   Specifically we will not invest in companies operating in any of the following three industries: Tobacco, Pornography and Armaments. 

For the remaining 96% of AUM the same ESG engagement strategy is adopted but there is no negative screening applied.


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

The SVM All Europe SRI Fund will not invest in companies operating in any of the following three industries: Tobacco, Pornography and Armaments.

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

The screening criteria for the SVM All Europe SRI Fund has never changed since its inception in 2006. However if it did we would communicate this to all clients as we would a change in fund objectives.


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]

Please note that screening only applies to the SVM All Europe SRI Fund whereas ESG engagement applies to all funds under management.


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]


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]

ESG risk profile of a portfolio against benchmark - ESG factors are taken as comparators for example carbon levels, water useage, waste and health & safety. We find risk analysis against sectors rather than indicies to be a more appropriate benchmark.


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


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