Integrating ESG Issues into Portfolio Management · Integrating ESG Issues into Portfolio...
Transcript of Integrating ESG Issues into Portfolio Management · Integrating ESG Issues into Portfolio...
OCTOBER 2015
Integrating ESG Issues into Portfolio Management
Russell Investments Nicki Ashton, Head of Strategic Partnerships
Russell Investments An extension of your team to help you enhance your capabilities
Top Due Diligence in Manager Research – 2014 FundFire Survey
Top ranked in Client Service 2013 - 2014 CIO Transition Management Survey
Largest Institutional Investment Outsourcer 2011–2015 Pensions & Investments
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$3.17TRILLION
ASSETS UNDER ADVICE**
570 DEDICATED
INVESTMENT PROFESSIONALS*
$961 TRILLION
ASSETS TRANSITIONED IN 2014
45+ YEARS
OF EXPERIENCE*
22 OFFICES GLOBALLY*
$345 BILLION ASSETS UNDER MANAGEMENT*
12,958 MANAGER PRODUCTS
CONTINUALLY MONITORED AND RESEARCHED*
* As at 31st June, 2015
Resources committed to overseeing and driving Responsible Investment
Adam Goff Leola Ross
Susan Quintin Natalie Miller
Bob Collie Manisha Kathuria
Jean-David Larson Barry Feldman Preetee Gopee
Heather McClellan Leah Fuhlbrugge
Takeshi Osaki
Nicki Ashton Samuel Picot Samuel Faulkner
North America
Europe
Asia
Australasia
› Russell Sustainability Council (RSC) formed in 2009 when Russell became a signatory of UNPRI
› 21 professionals in 10 offices*
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Mike Clark (chair) Mirella Herbu (secretary) Helma Verkouw Jubaida (Jay) Begum Dominique Dorlipo Alexandra Haggard
*Last updated: September 2014
Research of indices and universes using third-party data
Commitment to best practices in ownership and alignment of interests
Integration of ESG issues and considerations in investment process
ESG Integration at Russell
Private real estate Government bonds
Industry collaboration
Capital markets insights
ESG integration in investment process
Proxy voting and shareholder engagement
Thought leadership White papers and conference presentations
Continual capability enhancement, in partnership with our clients and others
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ESG – integrating into the investment process
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Manager research / Security research
Portfolio construction
Monitoring / Reporting
Active ownership
ESG Integration
Incorporating ESG factors in manager research
› Manager’s approach to assessing the financial materiality of ESG issues
› Quality of manager’s process for identifying, researching and acting on ESG issues
› Nature of third party ESG information input to investment process, and effectiveness of its capture
› Support evaluation by review of manager’s voting policy on ESG issues and engagement activity
› Membership of any Responsible Investment initiatives (e.g. UN PRI)
› Subscribe to Sustainalytics’ ESG data since 2011 › Subscribe to Trucost carbon data
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Capital Markets Insights
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Source: Russell 1000® Index (“Russell 1000”), S&P/TSX Composite Index (“Canada Index”), MSCI Europe (“Europe Index”) S&P/ASX Index All Ordinaries (“Australia Index”), TOPIX Total Return Index (“Japan Index”), Russell Global Index (“Russell Global”)
Benchmark scores
Case study – Australian Responsible Investment ETF
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ESG AND INCOME TILT
Each company remaining in the index universe is assigned a score based on two criteria: 1.ESG score provided by Sustainalytics; and 2.Composite Yield Score (derived per the existing Russell Australia High Dividend Index methodology).
OVERLAY The index initially excludes companies that are considered by a Responsible Investment Committee (RI Committee) to be inconsistent with agreed ESG objectives.
ONGOING REVIEW
The list of exclusions and the Responsible Investment Guidelines used to determine companies that are to be excluded is regularly reviewed by the RI Committee to ensure guidelines remain relevant and representative of responsible investment & ESG practices in the Australian market. The Index is reconstituted semi-annually.
INDEX The Russell Australia ESG High Dividend Index starts with the members of the Russell Global Australia All Cap Index (a sub-index of the Russell Global Index).
PROXY VOTING
Our comprehensive Proxy Voting Policy ensures that we discharge the ownership responsibilities in a way that is consistent, and effective. Reporting is compiled by our third-party research provider Glass Lewis.
Monitoring / reporting
› Broad range of reporting and monitoring: › ESG profile › SRI mandates with excluded
industries › ESG tilted portfolios › Carbon tilted portfolios
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Proxy voting and shareholder engagement
› We believe shareholders’ best interests are served by following four principles: › Transparency, Accountability, Independence, Long term value
› Russell Proxy Voting Committee sets and oversees policy › Russell employs a Proxy Service Provider (Glass Lewis & Co.) › Adherence to best practice e.g. UK Stewardship Code › Other Codes e.g. CRISA; Japan Stewardship Code › Increased engagement activities in 2014 › Integrating information from Sustainalytics
› Power of Proxy and Engagement Report publications
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Commitment to best practices in ownership and alignment of interests
Summary
› Russell is strongly committed to responsible investment, supported by UN PRI signatory status
› Our institutional clients have growing ESG integration requirements › Client perspectives vary by country, and are evolving › Regulation is encroaching › ESG integration is becoming mainstream
› Corporates have real opportunities to attract investors with long-term perspectives by enhancing and communicating about their ESG performance.
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