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PRI reporting framework 2020

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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

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
Private equity
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

In our due diligence questionnaire we also seek information on whether the investment manager has any of the following:

- Diversity initiatives (can include gender, age, board tenure, socioeconomic/ethnic background)? For example, target recruitment or quota (if so, please define), diversity training for employees, mentorship programs, initiatives that support a diverse workforce, diversity monitoring or audits, initiatives to support diversity of thought, skills or opinion in the investment function

- Policy on pay equity? Or targets for closing pay gaps?

- Environmental initiatives? For example, energy efficiency targets, waste targets, carbon offsetting?

- Social initiatives? For example, philanthropy/donations to community or charities

 

Other areas we focus on include:

- Manager’s investment process and ESG integration;

- Stewardship and active ownership practices;

- Asset class specific questions - i.e. for our property managers whether they are the the manager vs operator;

- ESG resourcing and training;

- Remuneration practices related to ESG integration; and

- transparency and alignment.

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

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
Private equity
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

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
Private equity
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

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
Private equity
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

Strategy

We seek to understand how Remuneration practices relate to ESG integration

ESG people/oversight

We evaluate a manager on their ESG Training practices including what training is undertaken and and how often the ESG team integrates with the mainstream team, and if there is no ESG team what the mainstream team does to learn about ESG.

Note: We review but do not mandate the use of ESG data as we allow our managers to choose the most relevant data for their investment process. However, we discuss case studies with them to understand how they are using the data.

 

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

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

FI - SSA
FI - Corporate (financial)
FI - Corporate (non-financial)
Private equity
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

We require all of our managers to integrate ESG considerations into their investment process that aligns to their investment process.  We recognise that different asset classes have different characteristics and time-frames.  Our Investment Management Agreements all include a clause on Responsible Investment that sets out our expectations and the requirements of our managers.

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

          Our portfolio managers are responsible for selecting investment managers that they believe will deliver on the objectives for our members.  All potential investment managers are assessed on their ESG integration process by the Responsible Investment team in line with our assessment framework.  We assess managers on :

-	The firm’s philosophy and policy 
-	Resourcing
-	Stewardship and Active Ownership
-	Investment process and ESG integration 
-	Alignment 
-	Reporting and monitoring 

A score and overall positive/negative/neutral rating is provided and discussed with the relevant portfolio manager and they include this in their decision making process.  Any manager appointment must be signed off by the Head of Responsible Investment.  Any manager with a below average ESG score will be monitored and the Responsible Investment team will work with the manager to improve their ESG integration and active ownership.
        

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

FI - Corporate (financial)
FI - Corporate (non-financial)
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

If you select `Other` option, specify

          - How do they measure success of the engagement? 
- Was this quantifiable? If not, what were the qualitative results? 
- Specific examples
        

(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

          - Whether the voting process is audited 
- Who makes voting decisions internally? 
- Whether companies are always advised in advance of votes ‘against’ management
        

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

          •Evidence of engagement via examples
•Process to prioritise and monitor engagement
•Attempt to measure effectiveness of voting and engagement –what financial and non-financial measures are used?
•A preparedness to use different techniques to achieve improvements in corporate governance including industry associations.
•Who conducts engagement activity
        

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

          Evidence of voting records and rationale. Is there a clear process for identifying and considering contentious resolutions. Are the appropriate people involved in voting decision-making process?
Evidence of informing portfolio companies ahead of vote
Evidence that voting is followed up with company engagement to influence change ahead of the next voting season.
        

03.4. Additional information [OPTIONAL]

          
        

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