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Coronation Fund Managers

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

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01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

​As long-term stewards of our clients’ capital, it is central to our investment philosophy and process to analyze each investment to create, sustain and protect value with the goal of generating superior risk-adjusted returns in line with our clients’ objectives.

Our approach to ESG-related activities focuses on three key functions: integration, engagement and collaboration.

The aim of taking one or all of these actions is to generate positive changes that will create more value in the portfolios we manage on behalf of our clients while ensuring a sustainable future for all generations.

Our investment professionals ensure that the risks and opportunities stemming from potentially material ESG factors are integrated into investment decision-making processes, as opposed to dealing with ESG as separate from the investment process.  The benefit of this is when we engage with investee companies we have an informed dialogue about ESG disclosure and practices, monitoring corporate activities and exercising our ownership rights, this ensures the process is meaningful and encompasses the multi-faceted approach of balancing ESG elements.

We will collaborate with industry bodies and like-minded organisations to advocate better policies and encourage better ESG-related practice.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

Coronation has a single investment philosophy which applies across all strategies and products and is deeply ingrained within the entire Coronation investment team, namely, that of being a long-term, valuation-driven investment house. The long-term nature of the investment philosophy requires us to incorporate ESG and sustainability issues into our investment process and in every investment decision that we make as we need to account for these factors in trying to understand a business’ long-term worth. Coronation explicitly integrates ESG factors in the rating and valuation of the relevant investment. We prefer this approach to assigning a specific ranking to companies comparing their relative ESG merit. 

Given the differing nature of companies’ underlying business models, our approach is for our research analysts to treat ESG issues on an individual case-by-case basis. We focus on the material ESG issues that are considered likely to affect stakeholders, as this will ultimately have an impact on corporate performance and investment performance. In considering ESG factors, we recognize the importance of focusing our attention and time on those ESG issues that can have the most meaningful impact on a company’s long-term prospects. Accordingly, a significant amount of time is spent studying the corporate governance of the companies we invest in. Corporate governance lies squarely within the circle of competence of any institutional investor, and includes capital allocation, remuneration policies and empowerment deals (in the South African context). We favour transparency and comprehensive reporting as this provides the information basis to assess whether a company adheres to high standards of corporate governance and integrates ESG considerations. The environmental and social pillars are more complex, subjective and prone to differing approaches from subject matter experts. Social objectives vary significantly between investors around the world and issues are often fraught with ambiguity. In addition, each business will face its own unique set of environmental and social circumstances. While we systematically review and investigate the potential significance of environmental and social issues, we are cautious to make definitive rulings on complex issues. Our focus centers around areas related to climate change and resource scarcity (e.g. carbon emissions, water usage, energy efficiency, waste management, general environmental impact ); social controversies, health and safety standards, matters relating to labour policies and practices; approach to data security and privacy and in countries like South Africa, the company’s approach to and status of Black Economic Empowerment.

As part of our investment decision-making process, Coronation will weigh up whether the benefits to our clients will be best served by avoiding companies that are poorly governed or that have shortcomings in the environmental or social pillars. We will also evaluate whether we can influence such companies to improve by active involvement through discussions with investee company management, by exercising our voting rights (on behalf of our funds and clients) or through other means of enhancing shareholder value. Coronation will always exercise caution to ensure that in adopting this approach, we do so in a manner which is constructive to the long term value of the business, and avoids conflicts of interest, such as becoming involved in the management of those investee companies.

Coronation explicitly integrates ESG factors in the rating and valuation of the relevant investment. All investment professionals are required to consider ESG factors in the valuation process and are therefore responsible for ensuring that the ESG considerations relevant to a particular company are included in their long-term valuation of a company. As we rigorously apply our investment methodology of (i) valuing stocks on long-term sustainable earnings, and assigning a fair price-to-earnings (P/E) multiple to those earnings or (ii) for debt securities, assessing the impact on issuer cash-flows and ability to repay debt, ESG will be both implicit and explicit in every investment decision that Coronation makes. We will accordingly produce sound quantitative and qualitative analysis of all significant exposure to ESG issues as part of each investment case. Given our single investment philosophy which is consistently applied to all of our products and strategies managed by Coronation, this policy applies across all such strategies.

Coronation will not explicitly screen out any shares due to ESG factors, instead we may require a greater riskadjusted upside or a higher yield before investing in relation to companies with a higher ESG risk profile. The only exception would be where we are concerned about a significant lack of corporate governance in a potential investee company and where, in Coronation’s view, it is unlikely that we would be able to influence management of the potential investee company to improve their corporate governance to the extent required. We will also, depending on the circumstances, take instructions from segregated account mandate clients to exclude from their mandate’s investible universe certain companies that they object to on environmental or social grounds.

Coronation is an active shareholder and we will engage with company management and Boards in executing our fiduciary responsibilities, including through calls, in-person meetings, letters and written statements expressing our views. When there are specific concerns, our first approach is to engage with management to deal with the respective issues. If this fails to deliver the appropriate action, we then escalate the issue to the Board. Where appropriate, we also engage with like-minded shareholders to drive a more successful and coherent engagement with the company. If these actions still do not result in the desired outcome, we will take the appropriate steps at either the annual general meeting or call a special meeting to highlight our grievances and make necessary recommendations. If our best efforts are unsuccessful, then we will re-assess our investment case and valuation and take the appropriate investment action in our portfolios. We will engage on any aspect of E, S or G, as required, with the ultimate intention of driving the change we believe will be most beneficial for shareholders in the long run. 

Coronation is an active shareholder and applies its Proxy Voting Policy which requires us to vote on resolutions for all international and domestic holdings, regardless of the size of these holdings. 

01.6. Additional information [Optional].

          
        

SG 01 CC. Climate risk (Private)


SG 02. Publicly available RI policy or guidance documents

 

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

02.3. Additional information [Optional].

Our ESG policy and proxy voting guidelines are available on our website. Our Engagement policy is included within our ESG policy.

 

 

 


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

All employees are required to report any potential or actual conflicts of interest to the Compliance Department. 

The Compliance Department will investigate any potential or actual conflicts of interest to determine whether such conflicts are conflicts as contemplated in FAIS or any other applicable legislation. The Compliance Department, in conjunction with senior management, will determine whether such conflicts of interest are avoidable or unavoidable conflicts.

If a conflict of interest is identified as being avoidable, then Coronation will adopt the necessary internal procedures to ensure that the activity that gives rise to the avoidable conflict is avoided.

If a conflict of interest is identified as being unavoidable, the Compliance Department, in conjunction with senior management, will establish a strategy to mitigate the risk of such conflict of interest impacting negatively on Coronation’s ability to render fair and unbiased services to affected clients.

Coronation will disclose any specific conflict of interest impacting a client to such impacted client, together with the mitigation strategy employed.

Employees are encouraged to make use of the anonymous “whistleblowing hotline” which is available to all employees, details of which appear in the Whistleblowing Policy and on the Compliance home page.

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios (Private)


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