Integrating ESG Issues into Portfolio Management

Transcription

1 Integrating ESG Issues into Portfolio Management Russell Investments Nicki Ashton, Head of Strategic Partnerships OCTOBER 2015

2 Russell Investments An extension of your team to help you enhance your capabilities $3.17 TRILLION ASSETS UNDER ADVICE** 570 DEDICATED INVESTMENT PROFESSIONALS* Top Due Diligence in Manager Research 2014 FundFire Survey $345 BILLION ASSETS UNDER MANAGEMENT* 12,958 MANAGER PRODUCTS CONTINUALLY MONITORED AND RESEARCHED* $961 TRILLION ASSETS TRANSITIONED IN 2014 Largest Institutional Investment Outsourcer Pensions & Investments 45+ YEARS OF EXPERIENCE* * As at 31 st June, OFFICES GLOBALLY * Top ranked in Client Service CIO Transition Management Survey p.2

3 Resources committed to overseeing and driving Responsible Investment Russell Sustainability Council (RSC) formed in 2009 when Russell became a signatory of UNPRI 21 professionals in 10 offices* Europe Mike Clark (chair) Mirella Herbu (secretary) Helma Verkouw Jubaida (Jay) Begum Dominique Dorlipo Alexandra Haggard Asia Takeshi Osaki North America Adam Goff Leola Ross Susan Quintin Natalie Miller Bob Collie Manisha Kathuria Jean-David Larson Barry Feldman Preetee Gopee Heather McClellan Leah Fuhlbrugge *Last updated: September 2014 Australasia Nicki Ashton Samuel Picot Samuel Faulkner p.3

4 ESG Integration at Russell Capital markets insights Research of indices and universes using thirdparty data ESG integration in investment process Integration of ESG issues and considerations in investment process Proxy voting and shareholder engagement Private real estate Thought Government leadership bonds Commitment to best practices in ownership and alignment of interests White papers and conference presentations Industry collaboration Continual capability enhancement, in partnership with our clients and others p.4

5 ESG integrating into the investment process Manager research / Security research Portfolio construction ESG Integration Monitoring / Reporting Active ownership p.5

6 Incorporating ESG factors in manager research p.6 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

7 Capital Markets Insights Benchmark scores 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 ) p.7

8 Case study Australian Responsible Investment ETF INDEX OVERLAY ESG AND INCOME TILT PROXY VOTING ONGOING REVIEW 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). The index initially excludes companies that are considered by a Responsible Investment Committee (RI Committee) to be inconsistent with agreed ESG objectives. 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). 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. 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 semiannually. p.8

9 Monitoring / reporting Broad range of reporting and monitoring: ESG profile SRI mandates with excluded industries ESG tilted portfolios Carbon tilted portfolios p.9

10 Proxy voting and shareholder engagement Commitment to best practices in ownership and alignment of interests 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 p.10

11 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. p.11

12 Thank you Russell, Russell Investments, Russell 1000, Russell 2000, and Russell 3000 are registered trademarks of the Frank Russell Company.