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PRI reporting framework 2020

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ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation carries out scenario analysis and/or modelling, and if it does, provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

13.3. Additional information. [OPTIONAL]

We are in the process of advancing our response to the recommendations of the TCFD. We have commenced with some limited climate analysis modelling through pilot programs and testing a subset of our portfolios, but not systematically across the whole Pendal Australia portfolio. To date, we have focused on stock-specific assessments of exposure to transition risks and physical risks, as well as measuring the carbon intensity of portfolios. For example in the past 12 months our Fixed Income team collaborated with Regnan on a water-risk assessment project and we are in the process of expanding the scope of the research to equities.

However, we are actively working on securing a service provider in CY2020 to support our capacity to undertake scenario analysis and stress testing thoroughly and consistently across all of our holdings and are trialling a number of providers to support a tailored in-house and asset class specific approach.

We also conduct scenario analysis based on financial risk factors (including market & liquidity risk).


SG 13 CC.

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

other description (1)

          Enhanced geopolitical risk

other description (2)

          Transitioning economies and economic dispersion

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

Specify the AUM invested in low carbon and climate resilient portfolios, funds, strategies or asset classes.

Total AUM
trillions billions millions thousands hundreds
Assets in USD
trillions billions millions thousands hundreds

Specify the framework or taxonomy used.


  • Exclusion screening: we have been managing 'low-carbon' investment strategies since 2014. Our dedicated Sustainable Series funds have a thermal coal and oil sands exclusion framework across the sector funds. We also have strategies that include oil and gas exclusions (in addition to thermal coal).
  • Best of Sector / Sustainability ratings: we actively tilt holdings towards more sustainable companies such as renewable energy and green tech. 
  • In 2019 we collaborated with a client to introduce a portfolio level carbon target

Asset classes:

  • Through our Sustainable Australian Fixed Income strategy Pendal targets an active overweight exposure to Green and Climate Bond holdings. A number of our "mainstream" portfolios also now invest in these Green and Climate Bond securities.


  • Our multi-asset team has incorporated climate-related factors in their secular themes taxonomy that feeds into the strategic AA framework.
  • We measure client portfolio carbon intensity and make this information available to clients, including for use in their own reporting. This also enables us to undertake internal benchmarking, for instance the carbon intensity of our low carbon (fossil fuel free) Australian share strategy, launched during 2018, was 37 per cent below benchmark for the index as a whole (as at 30 September 2019).

other description

          Physical risk assessments

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

other description

          Physical risk assessments

14.4. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

We use MSCI's Carbon Metrics and Research platform. We have also been trialling other research providers' climate-specific research offering (e.g. ISS, FactSet, GRESB) during the year.

14.5. Additional information [Optional]


SG 14 CC.

14.6 CC. Provide further details on the key metric(s) used to assess climate-related risks and opportunities.

Metric Type
Metric Unit
Metric Methodology
Weighted average carbon intensity
          Risk management, transparency, client reporting
          tons CO2e / $M sales
          Measures portfolio’s exposure to carbon intensive companies. Since companies with higher carbon intensity are likely to face more exposure to carbon related market and regulatory risks, this metric indicates a portfolio’s exposure to potential climate change related policy risks relative to other portfolios or a benchmark. Agnostic to ownership share, it also facilitates comparison with non-equity asset classes.
Carbon footprint (scope 1 and 2)
          Risk management, transparency, client reporting
          metric tons
          Carbon emissions - This figure represents the company's most recently reported or estimated Scope 1 + Scope 2 greenhouse gas emissions (if available). Scope 1 emissions are those from sources owned or controlled by the company, typically direct combustion of fuel as in a furnace or vehicle. Scope 2 emissions are those caused by the generation of electricity purchased by the company.
Portfolio carbon footprint
          Risk management, transparency, client reporting
          tons CO2e
          Measures the carbon footprint of a portfolio – i.e. the total carbon emissions for which an equity portfolio is responsible – by summing up the proportionate carbon emissions of portfolio companies based on the investor’s ownership share.
Total carbon emissions
          Risk management, transparency, client reporting
          tons CO2e/$m revenue
          Total Carbon Emissions measures the absolute tons of CO2e (Scope 1 + 2) for which an investor
is responsible. It is apportioned to the investor based on an equity ownership perspective.
Carbon intensity
          Risk management, transparency, client reporting
          tons CO2e/$m sales
          This figure represents the company's most recently reported or estimated Scope 1 + Scope 2 greenhouse gas emissions normalized by sales in USD, which allows for comparison between companies of different sizes.
Exposure to carbon-related assets
          Risk management, transparency, client reporting
          $m sales
          This figure represents the company’s sales (USD) used for calculating the most recent Carbon Intensity.

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risk management processes used for identifying, assessing and managing climate-related risks.

Please describe

Governance of climate-related risk sits within Pendal’s broader risk management framework. The primary oversight responsibility sits with the Pendal Australia Executive Team with items referred to the Group CEO and Board as required. This Executive Team includes the Head of Risk & Compliance, enabling the consideration of climate-related risks across the business more broadly, including potential operational and credit risk implications.

14.9 CC. Indicate whether your organisation, and/or external investment manager or service providers acting on your behalf, undertake active ownership activities to encourage TCFD adoption.

Please describe

We undertake engagement on a direct basis as part of active management approach for all our Australian asset classes (equities, fixed income and property). We actively encourage transparent and investor-useful disclosure around climate-related risks, and endorse the TCFD framework. This information is used by our analysts to assess when, where and how real and financial asset markets may be affected. This includes issues of business resilience to climate-related transition and physical risks.

Both directly and via Regnan, in CY2019 we conducted 44 engagements with 34 companies on TCFD disclosures specifically. This most typically involved in-depth discussions with senior leaders in high risk sectors, including finance, mining and energy to provide companies with insight on the risk analysis and disclosure investors require.

SG 15. Allocation of assets to environmental and social themed areas (Private)