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Regnan Governance Research and Engagement Pty Ltd

Service Providers Framework 2020

You are in Strategy and Governance » Policy on ESG beliefs

Policy on ESG beliefs

SG 01. Responsible investment policy

01.1. Describe how your organisation’s philosophy incorporates environmental, social and governance factors, and the link to your business offerings.

Regnan was established by and for institutional investors to investigate and address environmental, social and corporate governance (ESG). Focusing solely on ESG for nearly two decades has ensured the depth of expertise and breadth of experience necessary to support our Australian and international clients to develop, operationalise and implement effective responsible investment strategies.

Regnan provides an engagement and advocacy program to pursue improved corporate ESG performance, and an advisory service to assist organisations embed ESG into core policies, processes and positioning and an ESG research and ratings service.

Responsible investment/ESG constitutes the entire Regnan suite of business offerings.

01.2. Indicate whether you have policies that formalise the incorporation of your ESG beliefs in your business offerings.

01.3. Indicate the components/types of your internal policy and provide the URL and/or an attachment of the document/s if they are publicly available.

Policy components/types

Public availability

Public availability

Public availability

Public availability

Public availability

01.4. Indicate how these are put into practice internally across the organisation.

          Recruit for specific experience in ESG
        

01.5. Additional information [OPTIONAL]

Our approach to RI/ESG and individual guidelines to environmental, social and corporate governance factors are broadly outlined on our website. Clients receive these guidelines in further detail, including the engagement guidelines and mandate, and reseach methodology, however details are not publicly available. 


SG 02. Norms used to develop policies

02.1. Indicate what frameworks and guidelines you have used to develop your organisation’s policies. Tick all that apply.

          ASX Corporate Governance Principles and Recommendations
        
          International Corporate Governance Network standards
        
          Task force on Climate-Related Financial Disclosure (TCFD)
        

02.2. Additional information. [OPTIONAL]


SG 03. Policy offerings to clients

03.1. Indicate whether you offer standard, off the shelf, policies to clients as part of your product offerings, and/or whether you create tailored versions for individual clients.

Off the shelf
Tailored
Asset class-specific RI guidelines
Sector-specific RI guidelines
Screening/exclusions policy
Engagement policy
(Proxy) voting policy
RI guidelines set out within the Investment Policy Statement (IPS)
RI guidelines set out in a freestanding RI policy
Multi-year RI implementation project plan
Conflict of interest management policy
Stockbroker allocation policy
Securities lending policy
Other, please specify (1)
Other, please specify (2)
Other, please specify (3)
None of the above

please specify (1) - Tailored

          We provide support to clients in developing policies tailored to their needs and circumstances. E.g. ethical screen, impact product policy, AO vs FM
        

03.2. Provide a brief description of the key elements, any variations, or exceptions applying to these policies.

Regnan tailors all policies offered to individual client needs.

03.3. Additional information. [OPTIONAL]


SG 04. ESG/RI in business offerings

04.1. Briefly describe how you include ESG/RI factors as part of your business offerings.

Business area

Active Ownership Services

How you include ESG/RI factors

Regnan’s active ownership service is solely focused on ESG factors. This service for asset owners/managers is a core offering, developed from a proprietary research program, prioritised in consultation with clients, to address ESG related matters that we have identified as material to long term value.

Engagement is conducted to address company specific concerns as well as ESG issues that affect multiple stocks, sectors or the portfolio more broadly.

Where shareholder resolutions on ESG issues are put to companies, we conduct tailored engagement where possible and support client voting decision making.

Investment Consultancy

How you include ESG/RI factors

Regnan's advisory service is focused solely on supporting clients in RI / ESG. This includes developing RI/ESG strategy, priorities and portfolio resilience.

Examples include the development of responsible investment strategy/frameworks, ethical decision support, stewardship programs, active ownership activities, manager ESG review, and integration of ESG into product strategy.

Research and Data Provision

How you include ESG/RI factors

Regnan's research and ratings are entirely focused on RI/ESG factors.

Regnan uses in-house proprietary methodologies to assess companies across a range of specific environmental, social and corporate governance factors.

Our ESG stock assessments employ a 'bottom up' approach, akin to fundamental research, that focuses on how ESG factors relate to financial value over the short, medium and long term. 

04.2. Indicate the roles in your organisation, and indicate for each whether they have oversight and/or implementation responsibilities for ESG/RI within the organisation.

Roles present in your organisation
Oversight/accountability for ESG/RI
Implementation of ESG/RI
Board
Directors
Chief Executive Officer (CEO), Chief Financial Officer (CFO)
Chief Operating Officer (COO), Chief Information Officer (CIO)
Other chief-level staff
Other heads of department

Please specify

          All Regnan leadership roles undertake ESG implementation
        
Dedicated ESG/RI staff
Other role, specify (1)
Other role, specify (2)
Other role, specify (3)
None of the above

04.3. Indicate how you ensure ESG/RI expertise for the roles where there are RI oversight/accountability or implementation responsibilities.

04.4. Indicate whether your organisation has any ESG/RI linked incentives for its employees.

04.5. Describe the ESG/RI linked incentives.

As all Regnan staff are responsible for the implementation of ESG/RI given it is our core offering as a business, ESG/RI incentives are inherently linked to remuneration. KPIs are primarily ESG/RI related.

04.7. Additional information [OPTIONAL]

Regnan became a Pendal group business on 1 March 2019 reporting to the Pendal Australia CEO. Other than admin roles, all Regnan staff are responsible for implementation of ESG/RI and all leadership roles are responsible also for oversight, as it is our core offering as a business. We note that the COO is the most senior role within the Regnan organisation, who reports to the CEO of Pendal Australia.


SG 05. Outsourcing of services

05.1. Indicate whether you outsource some of your services. Report percentage of services outsourced as percentage for that specific business area.

Business area

SG 06. Providing training/education

06.1. Indicate whether you provide training/educational services on ESG/RI. Tick all that apply.

06.2. Describe the main components of your training/educational services on ESG/RI and any variations depending on the group you provide training/education to.

Training on RI is a core activity. Content varies with client needs.  In this reporting period it has included: climate change risk and disclosure, introduction to ESG/RI, understanding evolving regulator expectations, fiduciary responsibilities, how to differentiate RI approaches, evaluating asset management RI strategies, and developing effective theories of change.

06.3. Describe whether these training/educational services include any commercial elements.

          It depends on the nature of the project. Some training, when offered as part of active ownership and our advocacy program, does not include commercial elements. However, at times training is conducted as part of advisory contracts undertaken on a commercial basis.
        

06.4. Additional information. [OPTIONAL]


SG 07. Applying, advancing and promoting the PRI principles

07.1. Describe how your organisation applies, advances and promotes the PRI Principles.

Regnan's suite of offerings is entirely directed towards advancing responsible investment; our philosophy is closely aligned to the PRI principles, which are applied across all business activities, and Regnan supports the PRI itself to advance its agenda.

More specifically, Regnan's engagement and research offerings support clients in adhering to the six principles. Regnan also assists clients in meeting their specific obligations under the PRI, including reporting.

When developing tailored advice to advisory clients that are seeking to embed ESG across their business activities, we may recommend that the client becomes a signatory to the PRI and assist them in meeting their commitments.

Regnan also actively seeks collaborative engagement opportunities with likeminded organisations which advance the principles. Where aligned with client-approved mandates for engagement and advocacy, Regnan will participate in collaborative engagement initiatives coordinated by the PRI, for instance our participation in the Climate Action 100+ initiative. 

Examples of our research, policy engagement and media appearances can be found in the 'Insights and Publications' section of our website at https://www.regnan.com/public-submissions. 

07.2. Highlight whether there are any ways that your organisation would like to engage further with the PRI. [OPTIONAL]


SG 08. Actions taken to promote responsible investment

08.1. Indicate which of the following actions your organisation has taken to promote responsible investments during the reporting year, independently of collaborative initiatives.

          Participated in academic research on responsible investment.
        

08.2. Additional information. [OPTIONAL]

Examples of our research, policy engagement and media appearances can be found in the 'Insights and Publications' section of our website at https://www.regnan.com/public-submissions.

Both directly and through our membership of Investor Group on Climate Change (IGCC) and Responsible Investment Association Australasia (RIAA), we have engaged with public policy-makers or regulators on the following topics during the reporting year:

  • CPS511 submission (not yet released by the regulator at the time of writing, will be available at https://www.apra.gov.au/consultation-on-remuneration-requirements-for-all-apra-regulated-entities)
  • Provided input and in-kind support to responsible investment initiatives such as the Australian Sustainable Finance Initiative (ASFI) - Developing an Australian Sustainable Finance Roadmap: Progress Report Summary https://www.sustainablefinance.org.au/ 
  • Attended the PRI Sustainable Finance Policy Conference, an input to its whitepaper 'Taking stock: Sustainable finance policy engagement and policy influence', available from the link at https://www.unpri.org/pri/pri-blog/pris-first-sustainable-finance-policy-conference-heres-what-we-discussed 
  • Offered input to professional networks and peer initiatives, concerning appropriate RI / ESG disclosures and related matters. 

In recent years, topics have included ESG disclosure, whistleblowing, remuneration, climate change, corporate governance and modern slavery.


SG 09. Long term trends

09.1. Indicate which of the following long-term trends are addressed in your product outputs.

09.2. Explain how this long-term trend affects your product outputs.

Changing demographics are factored into Regnan engagement and research offerings. For example, diversity and human capital management considerations such as aging workforces or changing customer or stakeholder demographics are analysed by Regnan when assessing a stock’s ESG characteristics. Companies in which concerns are held regarding management of these issues may be recommended for engagement. Detailed behavioural change objectives will be developed to be pursued in engagements with the company.

Further, changing demographics influence recommendations to advisory clients. For example, considerations regarding the rise of millennial influence and the increased wealth of women have shaped advisory recommendations to clients about the value of RI product offerings.

In addition, shifts in the demographics of participants in public company scrutiny (with developing country observers and activists increasingly connected and visible to developed country audiences) has introduced additional nuance to preferred outcomes from engagement. 

09.2. Explain how this long-term trend affects your product outputs.

Climate change has been a major theme across Regnan’s research and engagement services for more than 14 years. In our current product outputs, we look to see evidence of companies building resilience to climate change, mitigating risks of the physical impacts of climate change, careful consideration of the regulatory environment and market changes as we transition to a low carbon economy, and the ongoing need for enhanced climate related disclosure. Stocks assessed through the research offering as being of elevated concern may be included as a targeted company for corporate engagement.

Regnan’s advisory offering is also shaped by climate change considerations. It can support clients in managing a variety of climate related risks, but also in capitalising on opportunities for value creation.

09.2. Explain how this long-term trend affects your product outputs.

Considerations around resource scarcity are factored into Regnan’s research and engagement. Regnan research analysts assess each company’s exposure and management of resource scarcity risk and incorporate the assessment into the stock’s ratings. These research and ratings feed into Regnan’s engagement program recommendations. If a company’s exposure and/or resource management warrants elevated concern, Regnan will pursue targeted outcomes via direct corporate engagement.

09.2. Explain how this long-term trend affects your product outputs.

Technology developments are factored into Regnan’s research and engagement. In stock level assessments, Regnan analysts look to see evidence of sound management of risks and opportunities related to technology developments in exposed companies. Ranging from developments in automation and artificial intelligence, through to developments in clean energy and advanced materials, Regnan assesses the potential impact in areas such as human capital management, board capacity, stakeholder management, environmental management, future of the workplace and ethical conduct. If a company’s exposure to and/or management of advances in technology warrants elevated concern, Regnan will pursue targeted outcomes via direct corporate engagement. 


SG 10. Interaction with asset owners

10.1. Indicate whether you interact with asset owner clients.

10.2. Indicate the typical frequency and type of interactions with your asset owner clients.

Type of interaction

Frequency

Frequency

Frequency

Frequency

Frequency

          Formal reporting on engagement activities.
        

Frequency

10.3. Additional information. [OPTIONAL]


SG 11. Aligning approach with investor goals

11.1. Describe how you typically align your organisation’s philosophy and approach to ESG/RI with your investor clients’ goals.

Regnan was established by and for institutional investors, and its philosophy and approach is entirely driven by investor goals to improve the alignment of their investments with long term risk-adjusted returns outcomes and, where appropriate, other responsible investment objectives.

11.2. Additional information. [OPTIONAL]


SG 12. ESG recommendations not aligned with investor goals

12.1. Describe what steps you take, if any, when your ESG recommendations are not in line with your investor clients’ goals.

Regnan’s core activities involve identifying sources and instances of such misalignment for its clients. In the instances where potential misalignment could occur, we open dialogue with the client to more fulsomely explain our recommendation and gain further understanding of their position. We respect clients' decisions to not adhere to each of our recommendations, recognising their individual operating environment and needs. Should repeated misalignment occur, we would re-consider the provision of service. 

12.2. Additional information. [OPTIONAL]


SG 13. Seeking feedback from clients

13.1. Indicate whether you seek feedback from clients on your RI/ESG services and product offerings

13.2. Describe how you use this feedback in your RI/ESG services and product offerings.

Regnan's entire business involves providing RI/ESG product and service offerings on a commercial basis. In this context, incorporating market feedback is a core business activity.


SG 14. Managing conflicts of interest

14.1. Indicate whether your organisation has a policy for managing potential conflicts of interest.

14.2. Describe how you manage potential conflicts of interest.

Regnan adheres to Pendal policies. Pendal has an internal trading and conflicts policy, with all conflicts being centrally recorded. 

Regnan also discloses all potential conflicts to affected parties, including clients. Where necessary, barriers (physical, technological and behavioural) are established within the business.

We also have additional policies in place, effectively ensuring the independence of our work from Pendal’s influence. An overview of the governance in place to support this can be found on our website https://www.regnan.com/governance. 

14.3. Describe how you ensure that company employees do not derive any personal gain from the use of information collected during your work process.

Regnan adheres to the policies of its parent Pendal Group including its securities trading policy applicable to all employees. All personal trading must receive prior approval from Pendal’s Risk and Compliance team. 

14.4. Additional information. [OPTIONAL]


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