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Pendal

PRI reporting framework 2020

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Objectives and strategies

SG 05. RI goals and objectives

05.1. Indicate if and how frequently your organisation sets and reviews objectives for its responsible investment activities.

05.2. Additional information. [Optional]

Responsible investing is a core component of Pendal Group's strategic vision. A key objective of our five-year plan is to be a leading provider of ethical, sustainable and impact solutions for our clients as well as to embed ESG as part of our investment process in our existing investment boutiques. This stems from a commitment from the Group Board and our Global CEO. Pendal Australia has had an RI Philosophy and Approach document since 2017 and it is available to the public on our website. We believe there are important responsible investment principles that can be applied across all of our investment boutiques, providing guidance to our investment teams. The document has been approved by the Pendal Australia Executive Risk & Operations Group and is reviewed annually or more frequently if required.

As part of this strategic emphasis on RI, in February 2019 Pendal Group assumed full ownership of Regnan, a specialist ESG research, engagement and advisory firm. With Regnan now in-house, their expertise is now closer to the investment process and they are supporting our investment teams build capability in key areas of importance, such as climate change and human rights.

As part of our annual employee and business review process, key stakeholders driving our RI activities set key objectives in consultation with Pendal Australia’s CEO and senior management. Our Group Board also conducts an annual Strategy Review discussion. In addition, Pendal Australia also has a Responsible Investments Working Group (RI Group) to facilitate knowledge sharing and provide input into RI guidelines, strategy and solutions. The RI Group consists of senior members of the investments (all asset classes) and corporate teams (Risk & Compliance, Legal, Sales and Marketing) and its responsibilities are set out in the Responsible Investments Governance Structure. The objective of the RI Group is to oversee the development and application of Pendal Australia’s Responsible Investment (RI) process across offerings and communications to ensure alignment with Pendal Australia’s RI philosophy as well as client expectations and needs. The RI Group does not replace prior risk management and compliance processes, rather it serves to enhance the existing controls already in place. Our RI  Group meets at least quarterly and more frequently if required. The RI Group sets high level annual RI objectives as well as quarterly RI objectives. Specific objectives range from the development and maintenance of Pendal Australia's RI process and products as well as considerations of broader industry trends, standards and practices - with a particular focus on the RI needs of our clients.


SG 06. Main goals/objectives this year

06.1. List the main responsible investment objectives that your organisation set for the reporting year.

Responsible investment processes

Key performance indicator

          RI/ESG education seminars internally and externally (clients, industry)
        

Progress achieved

Internally:

Regnan, our in-house ESG team, held a number of internal workshops to support Pendal investment teams. Climate change and modern slavery were the two key areas of focus in 2019.

Externally:

Both Pendal and Regnan provided ESG training to the boards and investment teams of various clients - institutional and wholesale/advisory.
Regnan facilitated a one-day workshop for approx. 50 Investor Group on Climate Change (IGCC) members on TCFD disclosure.

Key performance indicator

          Client education forums
        

Progress achieved

Conducted numerous forums with clients to educate them about effective ESG engagement.

Participant, via Regnan, in Responsible Investment Association Australasia’s (RIAA) Corporate Engagement Working Group.

Key performance indicator

          Staff updates on Pendal's RI strategy (RI is one of the strategic pillars); RI Working Group
        

Progress achieved

Building a Responsible Investments business is one of the growth strategies for Pendal. As part of this initiative, the Pendal Australia CEO provided quarterly updates to employees covering resources, product, process and partnerships. This included updates on the integration of Regnan, wholly owned by Pendal from Feb 2019, which forms a key part of this strategic objective.

Pendal's Responsible Investments Working Group continued to facilitate knowledge sharing and provide input into RI guidelines, strategy and solutions. The group consists of senior members of the investments (all asset classes), corporate teams (Risk & Compliance, Legal, Sales and Marketing) and Regnan. The objective of the group is to oversee the development and application of Pendal's Responsible Investment (RI) processes and communications to ensure alignment with Pendal's RI philosophy as well as client expectations and needs. The group does not replace prior risk management and compliance processes, rather it serves to enhance the existing controls already in place.

Key performance indicator

          Engagement enhancement
        

Progress achieved

We continued to enhance our engagement programs across both our Australian Equity and Fixed Income teams over CY2019. During the year we successfully rolled out a new process of ESG engagement tracking, measurement and client reporting in our Australian Equity team. We also enhanced ESG engagement monitoring in our Fixed Income team, with an impact-focused program developed, to be rolled out in CY2020.

This is separate to Regnan's long standing collective ESG engagement program conducted on behalf of Pendal and other institutional investors. In 2019, Regnan notably enhanced its public disclosure of its engagement program. This can be found on their website here: https://www.regnan.com/engagement-advocacy-reports

 

Key performance indicator

          Global Equity Team - ESG Integration
        

Progress achieved

During CY2019, our Global Equity Team worked closely with the newly in-house Regnan team and our Responsible Investment team to enhance their ESG integration processes. This included multiple workshops and training sessions to develop processes that were fit for purpose, and complementary to existing investment decision making processes. The Global Equity Team have begun to implement new processes, while still receiving regular feedback from Regnan staff as a form of peer review.

Financial performance of investments

Key performance indicator

          Water Risk Score that includes 7 metrics along three dimensions to assess comparative water performance of states in Australia
        

Progress achieved

Our Fixed Income team worked with Regnan (our in-house ESG Research team) to develop a water performance framework to enhance our understanding of water-related risks and opportunities across our semi-govt holdings. We are in the process of expanding this framework to corporate level analysis.

ESG characteristics of investments

Key performance indicator

          ESG assessment of State Government entities
        

Progress achieved

Our fixed income team continued to enhance our internal proprietary ESG risk assessment framework for government and semi-government issuers to complement external ESG ratings. This supported greater conviction in active positions in some state government holdings relative to benchmark

Key performance indicator

          Carbon Intensity below benchmark
        

Progress achieved

We worked with a client to develop a mandate that, in addition to a fossil fuel exclusion screen, also has a whole of portfolio requirement to achieve a carbon intensity that is 20% below the carbon intensity of the benchmark, as measured annually.

Other activities

Key performance indicator

          Participating in RI-related Initiatives
        

Progress achieved

We continued our active participation in RI initiatives such as the PRI, Responsible Investment Association Australasia (RIAA), Investor Group on Climate Change (IGCC), and Climate Action 100+

During the reporting period, we commenced participation in the Australian Sustainable Finance Initiative, with the Pendal Australia CEO joining the Steering Committee and other participation on technical working groups.

Our Head of Responsible Investments also participated on panels presenting to asset owner chairs and c-suite representatives on the importance of incorporating climate-related consideration into investment strategy and processes as well as educating on how the Sustainable Development Goals can be incorporated into investment processes and products.

Key performance indicator

          Encourage asset owners to join PRI or RIAA
        

Progress achieved

Presented to asset owners and advisory groups regarding PRI and RIAA. Advisory work undertaken by Regnan has specifically included recommendations for clients to join the PRI.

Key performance indicator

          Engagement case studies for clients
        

Progress achieved

In new quarterly client reporting, rolled out during the year, we included an engagement case study in each. These have included both stock-specific and thematic case studies (e.g. gender diversity). 

06.2. Additional information.

Improved communication publicly through greater detail on our responsible investment practices provided in our annual Corporate Sustainability and Responsibility Report (part of our annual reporting suite). See more: https://annual-report-2019.pendalgroup.com/csr/ 


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