PRI

1. Qualitative Analysis (ID key issues, then ID material ESG factors)

• Economy, Industry, Co Strategy, Quality of mgt
• --> assessing ESG Materiality, ID Co' ESG factors, Summary of material ESG factors

2. Quantitative Analysis

• Financial FC, Models
• --> Sector comparison, Deep dive into water related risks, assessment results, now how will ESG identified impact financial modelling and investment decisions
• --> scoring and rating, Integrating ESG into DCF, ESG Macro modelling

3. Investment Decision

• Buy/Increase/Hold/maintain/sell/decrease/dont invest

4. Active Ownership

• Co engagement/voting

=active ownership, i.e. the us of investors influence as owners of secucrities. to maximize LT value, incl. value of common economic, social and E assets

• Engagement (good engagement id's relevant ESG issues, sets objective, tracks, mitigates...)
• Voting
• Other
  • being on investee boards
  • as service provider
  • contributing to public goods
  • Litigation as escalation tactic

• Improving risk return
• Fiduciary duty
• Regulation (comply or explain basis)
• Focus on Real-World Outcomes
• Universal ownership

Engagement dynamics that create value for both co and investors

• Communicative
• Learning
• Political

• Exposure (what are largest holdings9?
• Filter further by geography or market
• Look at materiality of ESG factors
• Real-world impact (i.e. highest value at risk or highest potential of impact)
• Consultation with cients/beneficiaries

Launched in 2017, is a corporate climate action benchmark that ranks 415 co based on their mgt of GHG, as well as risks and opps to the low carbon transition. --> can be used to trigger Engagement in a positive and negative sense, ie. other co having to catch up.

• Issue focused (eg. climate change)
• Co focused (what are most relevant ESG risk of co, and then enter into discussion with them)
• Proactive
• Reactive

Climate change, labour standards in supply chain, deforestation, palm oil procurement, remuneration, CEO chair separation 

Outlines how an investment manager exercises voting rights on behalf of its clients. It includes typically following aspects:

• Scope of voting activities (ie. positive list or negative, where it will not vote)
• Voting guidelines (how to vote on specific issues)
• Oversight of voting activities (who is responsible for implementation of voting policy)
• Proxy voting execution
• Reporting on voting

Voting principles:

High-level statement of investors' voting philosophy and active ownership priorities

• engagement
  • research issues (esg)
  • select companies to engage with (eg. problem co)
  • set objectives
  • engage (meeting, emails, letters, visits)
  • Escalate if necessary (collaboration, file shareholder resolution, vote agains directors) --> submit an item for AGM agenda
• voting 
• investment decision

• Engagement
• Investment decision

= PRI's for more effective and ambitious stewardship with 3 central elements

• Outcomes (positive in a real-world)
• Common goals (focus on larger, global systemic risks, such as climate or corruption)
• Collaborative action

CLIMATE ACTION 100+

=investor initiative to ensur the world's largest co GHG emitters take necessary action to climate change. It is a strong example of a coordinated and collaborative engagement to influence ESG practices. 

includes 100 "focus co" responsible for  2/3 of annual industrial CO2 emissions

in 2018 another 61 companies were added to focus list = (+) list

3 tasks of 100+:

• implement strong governance frameworks
• actions to reduce GHG along value chain
• Enhance co disclosure  (i365!!)

Passive investing: = rules-based investment instead of discretionary investment decisions. So equity indices, etc. 

Separately Managed Accounts (SMAs), owned by individual clients and managed based on their specific investment requirements. 

INactive DISC PROMOTES C PR

• incorporate ESG in Decision and Analysis
• active ownership and practices
• disclose ESG 
• promote acceptance and implemetation in financial industry
• Collaborate to enhance effectiveness
• Progress report on implementing the Principles

• Philosophy and policy
• Investment process
• Attitudes and Beliefs
• Responsibilities
• Incentives and competencies
• Research resources

• Purpose & Definitions
• Scope (all assets? selected? sectors?..)
• Legal and regulatory factors (fiduciary responsibility)
• Engagement (how will investees be engaged)
• Implementation & Monitor
• Responsibilities
• Reporting
• Review (How and when will policy be reviewed)

Organisational level

• PRI (annual requirement to report on RI)
• GRI (for financial industry)
• TCFD (translate non-financial info about climate change to financial metrics)

Fund Level

• GRESB (asses and benchmark ESG performance of real assets
• EU taxonomy (is an economic activity S?)

Investment Level

• SASB (industry standards)
• GRI Standards
• IRIS catalogue of ESG and impact metrics

• Incorporate ESG issues in investment decisions
• active ownership (voting and engagement)
• transparency
• constructive engagement with public policy

Investment teams

• pricing externalities
• intangible factors (not on b/s such as quality of mgt, capacity for innovation, safety, reputation, governance...)
• Managing idiosyncratic risks (good mgt will have fewer controversial business practices)
• Generating outperformance

Sr mgt and client teams

• fiduciary duty
• increasing demand for RI
• Universal owner principle

E

• Climate change
• resource depletion
• water scarcity
• waste and pollution
• deforestation

S

• Huri
• Modern slavery and child labour
• Working conditions
• Health and safety
• employee relations

G

• Bribery and corruption
• Executive pay
• board diversity and structure
• lobbying and donations
• Tax strategy

• Global ESG (megatrends)
• Regional
• Industry
• Co

na

1. Material inputs for products

2. Manu process

3. Issues related to product use

4. End-of-product-life issues

• Physical risks
• Transitions risks (techn. changes, regulaton change, disruptive innovation

• Power generation 25%
• Agriculture 24%
• Industry 21% (iron & steel, cement, chemicals, waste, other)
• Transport 14%
• Buildings 6%

Nationally determined contributions to Paris Agreement

People, prosperity, planet, partnerships, peace

owner and manager do not have same interests --> need to be aligned

• Agency Theory
• Stakeholder theory (voice of all stakeholders)
• Stewardship (work together for a common goal)

• shareholder representation
• Board independence
• Transparency
• Risk mgt
• Executive remuneration
• Sustainability

Inernational Corporate Governance Network (ICGN)

OECD

• integration
• Screening
• Thematic

SASB materiality map (for i365)