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Regnan Governance Research and Engagement Pty Ltd

Service Providers Framework 2020

You are in Research and Data Provision » Research/process level

Research/process level

RDP 02. Sources for research and/or rating

02.1. Indicate the types of sources you use for research and/or ratings of companies/sectors/geographies or similar. Tick all that apply.

          Interviews with corporate and industry representatives
        
          Academic literature
        

02.2. Indicate how ESG factors are incorporated into your research and/or rating methodology

02.3. Describe how you define materiality and how this is captured in your research and/or rating methodology as well as final product.

          Regnan’s ESG research provides high quality information and analysis that is material to valuation. This enables the extension of fundamental analysis to more thoroughly integrate strategic and agency risks (and opportunities) and is distinct from approaches that are norms-driven (i.e. ESG as intrinsically valuable).

Regnan applies the concept of ‘materiality’ in the same way equity analysts apply the concept. Our in-depth issues research assesses the nature, probability and likely consequences of ESG issues in terms of impact on future cashflows and valuation, and the mechanisms by which these might occur. 

Supported by documented methodologies, our highly experienced analyst team applies judgement in assessing materiality of ESG factors in financial terms against clearly defined benchmarks (expressed as percentages of future earnings) which translate into our 'scores' for each ESG factor.
        

02.4. Additional information. [OPTIONAL]


RDP 03. Stakeholder input

03.1. Describe how you actively include input and information, wherever possible, from relevant stakeholders or interested parties, in the research process or in reaching assessment conclusions.

          As part of our research process we actively scan for stakeholder perspectives, including through continuous media searching, which the research analyst drafting conclusions is responsible for review. We may also have direct discussion with key stakeholders as part of reaching assessment conclusions.
        

03.2. Additional information. [OPTIONAL]


RDP 04. Up-to-date assessment and ratings

04.1. Indicate how you ensure that your ESG assessment of companies/ sectors/ geographies or similar is up-to-date and that new information is incorporated or new assessments are conducted at reasonable intervals.

          Ongoing dialogue with companies through our engagement activities.
        

04.2. Additional information. [OPTIONAL]


RDP 05. Balanced research and assessment

05.1. Indicate how you typically ensure a balanced approach to your research methodology and assessing/rating of companies/sectors/geographies or similar. Tick all that apply and explain your approach to each option.

Type of indicators

Explain your approach

          Regnan uses and produces both qualitative and quantitative information, has extensive documented methodologies, a highly experienced team, and internal quality review processes.
        

Explain your approach

          As above.
        

Explain your approach

          As an input for funds managers, Regnan’s focus is on leading indicators (which include past performance, but does not rely exclusively on past performance).
        

Explain your approach

          Regnan assesses each of the three areas separately and does not currently provide a combined ESG score.
        

Explain your approach

          Analysts apply judgement and do not formally weight different sources of information. Regnan does not rely on raw data (self-reported or otherwise) for making assessments.
        

05.2. Additional information. [OPTIONAL]

Regnan’s core research is exclusively concerned with ESG and the applicability of identified ESG issues to the securities within its universe. 

This is intended for use alongside non-ESG considerations and therefore does not seek to achieve a “balance” across factors, through time, or within or across sectors (other than for “best of sector” ratings).

 


RDP 06. Consistency and comparability

06.1. Describe the control processes in place to ensure quality of research.

          Regnan has extensive documented methodologies across all aspects of ESG research and a long history of research from which to draw examples and benchmark. 

New staff are inducted over a six month period to ensure they are fully trained to implement Regnan methodologies in a consistent way. Consistency of scoring is critical because our research is intended (and repeatedly been shown) to provide investment signals. Backtesting is undertaken to provide a further confirmation of quality and consistency. 

Senior members of the Regnan team conduct both formal and informal peer reviews of the analyst team’s work. Formal peer review typically occurs twice during the assessment process.  
1. A pre-assessment review is conducted to ensure that the analyst is focused on all of the material ESG issues affecting the company.  
2. Once the assessment process is completed, final peer review is conducted to ensure accuracy of assessment and alignment with the Regnan research methodology.  

Informal peer review occurs on a regular basis between the analyst team and with senior personnel as issues arise.

Ongoing training is undertaken on research methodologies and ESG topics.

Engagement with companies in our research universe and client feedback provides further checks on quality.
        

06.2. Additional information. [OPTIONAL]


RDP 07. Emerging ESG issues and trends

07.1. Indicate whether you identify and prioritise ESG issues and emerging trends.

07.2. Describe how you incorporate the identified ESG issues and trends in your product offerings and business activities.

          Our core research offering is focused on ESG research and as such all ESG issues are prioritised, and emerging trends continually considered, in assessments.
        

07.3. Additional information


RDP 08. Client use of outputs

08.1. Describe how research and data provision outputs are used by clients.

Describe how research and data provision outputs are used by clients.

Regnan's research and data is used by clients in their investment and voting decision making, asset allocation choices, and as an input to their own engagement activities. Asset owner clients also use Regnan's research to screen prospective managers, and to inform questions regarding stock selection of existing managers.

08.2. Additional information. [OPTIONAL]


RDP 09.

09.1. Provide examples of cases where ESG was incorporated into your services and the tracked impact it had for investor clients in their decision making process and/or active ownership activities.

Description of ESG service provided and the impact it had on investor client’s investment decision making and/or active ownership activities.

Regnan provides voting advice to research and engagement clients on special resolutions at company annual general meetings brought under Section 249N of the Corporations Act. Advice is provided on environmental and social issues, and contentious governance topics. The advice is used by clients to inform their meetings with the companies on the issue, and in formulating their voting positions. On numerous occasions in 2019, clients provided Regnan with feedback that our advice, and the accompanying detailed analysis, informed the questions asked by clients at meetings with companies, as well as voting outcomes. Examples include resolutions tabled with ANZ Banking Group Ltd, Coles Ltd, and Qantas Airways Ltd.   

Description of ESG service provided and the impact it had on investor client’s investment decision making and/or active ownership activities.

Regnan’s ESG data and narrative reports are used by a superannuation fund client to identify companies with unmanaged ESG risks within its Australian shares portfolio. The data and reports are used to build a case for company engagement and to inform meeting agendas and preparation notes.

Description of ESG service provided and the impact it had on investor client’s investment decision making and/or active ownership activities.

A wealth management client uses Regnan’s ESG data to run a quarterly screen of its Australian shares portfolio to identify poorly performing companies. The screen provides the basis for questions to the client’s external managers. The client asks the managers to either justify the investment or to engage with the company to improve ESG risk management.

Description of ESG service provided and the impact it had on investor client’s investment decision making and/or active ownership activities.

Regnan provided support for client participation in Climate Action 100+, providing detailed research to support their role as lead investor. This included advice on how to approach and run subsequent engagement meetings and assess progress made via its engagement.

Description of ESG service provided and the impact it had on investor client’s investment decision making and/or active ownership activities.

Regnan provided consulting advice to the PRI in relation to the potential to evolve Principle 2.  This has subsequently been adopted by the PRI as a preferred pathway for the development of its Active Ownership program(s).

09.2. Additional information. [OPTIONAL]


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