ESG AND RESPONSIBLE INVESTING
Perpetual has a long-standing commitment to responsible investment. Our businesses that invest funds on behalf of our clients consider a range of environmental, social and governance (ESG) factors as part of their decision making and ownership practices.
We believe that integration of ESG principles can help promote more sustainable economic growth and that this should translate into higher and more consistent investment returns.
OUR APPROACH TO RESPONSIBLE INVESTING
Read about our business divisions that invest on behalf of our clients and their distinct approaches to responsible investing.
Trillium Asset Management
Barrow Hanley Global Investors
Perpetual Asset Management Australia
Trillium Asset Management (Trillium) is an impact-driven, ESG investment firm based in Boston, USA. It has been at the forefront of ESG investing for nearly 40 years and was one of the first investment firms to align values with investment objectives. Trillium’s investment strategies (including fossil fuel free strategies) are designed to advance humankind towards a global sustainable economy, a just society, and a better world.
Trillium’s fully integrated investment process incorporates ESG information into fundamental due diligence in all stages. A benchmarking exercise is conducted analysing a company’s performance on specific ESG metrics against their full set of industry peers. This uses a materiality lens driven by Trillium’s in-house knowledge and experience and informed by standards and frameworks such as the Sustainability Accounting Standards Board (SASB) and CDP (formerly Carbon Disclosure Project).
Analysts and portfolio managers then conduct deep analysis to compare companies to a smaller set of close peers in order to understand performance on ESG areas that are specific to their business model. The outputs of this process, including both ESG risks and opportunities, help identify companies best positioned to deliver risk adjusted, long-term outperformance.
Trillium also advocates with investee companies and policymakers to press for positive change on ESG topics that will help improve ESG policies, performance and impact. This has resulted in the firm influencing many companies around the world to create positive social and environmental change. See more on Trillium’s advocacy dashboard.
Barrow Hanley Global Investors (Barrow Hanley) is a US-based global value investment firm, which employs ESG factors into its analysis in the construction of equity and fixed income portfolios.
The firm’s approach to ESG investing is underpinned by the Barrow Hanley Guiding Principles for Responsible Investing, the UN-supported PRI, the Investor Stewardship Group and the SASB. A key element of the process is the calculation of the proprietary Barrow Hanley Composite ESG Score using a weighted average of the scores from the firm’s analysts, third-party ESG research and disclosure based on frameworks such as SASB.
Any changes in ESG scores are captured in Barrow Hanley’s materiality matrix for each holding every six months. Changes in third party ESG-related research are circulated every morning, however, analysts at Barrow Hanley go beyond this data. This is based on the understanding that our own deep research and engagement with company management teams can uncover opportunities that the market has not recognised to improve ESG practices, which can lead to improving share price performance as well as better outcomes for the environment, society or corporate governance.
Barrow Hanley’s universe of ESG themes covers six key environmental and social themes - biodiversity, climate change, greenhouse gas emissions, human capital, supply chain management and access and affordability. These, in addition to governance factors, are considered most financially material to investment performance and are incorporated into the fundamental valuation process and discussions with investee companies.
Barrow Hanley believes that their process provides a unique ability to effectively integrate the consideration of ESG factors in their stock and bond portfolios and produce additional economic value for the firm’s clients.
Perpetual Asset Management Australia (PAMA) has been developing its own ESG focused products since 2002 and became a signatory to the United Nations-supported Principles for Responsible Investment (PRI) in 2009*.
At PAMA, our Responsible Investment Policy sets out how consideration of ESG factors is integrated into our investment analysis and decision-making process, as part of meeting clients’ investment expectations and objectives. PAMA is an active investor and integrates ESG factors into our stewardship activities such as proxy voting and company engagement.
In 2021, PAMA also introduced a new proprietary ESG Workbook for our equity investment managers and analysts. This draws on internal and external ESG research to analyse potential ESG issues at companies and also helps to prioritise issues for engagement with investee company management. A formalised ESG risk score is also used to further integrate ESG factors into the management of credit portfolios.
Significant internal research capabilities exist within PAMA including in our Equities, Credit and Responsible Investment teams to assess ESG risks and opportunities at a company, sector and thematic level. Specialist external ESG research providers are used to provide additional data and analysis.
PAMA’s ESG Report showcases actions undertaken and outcomes delivered that address environment, social and governance issues.
Our Ethical SRI Fund, launched in 2002, and now also available as a quoted class on the ASX (GIVE), and our Ethical SRI Credit Fund, established in 2018, are designed for investors who seek long-term returns while investing in companies that are consistent with investors’ social, environmental and ethical preferences. The funds do not invest in companies or credit issuers that derive a material proportion (5% or more) of their revenue from gambling, tobacco and fossil fuel exploration and production among other ethical criteria. In 2021, we launched the Perpetual ESG Real Return Fund, which offers multi-asset exposure to a diversified portfolio of assets selected based on a range of sustainable, ethical and financial criteria.
*Perpetual Investment Management Limited is the product issuer for PAMA and is also the signatory to the Principles for Responsible Investment, on behalf of PAMA.
Perpetual Private, which provides financial advice and services to high-net-worth individuals, families and not-for-profit organisations, has a responsible investment policy applying to our investment decisions and recommendations. This may include our investment research team conducting reviews of external investment managers’ policies and management on ESG issues, as well as understanding the ESG risks associated with underlying investments and how these ESG risks may impact our portfolios.
With a 100-year history of working with philanthropic trusts, many of our private wealth clients also seek products that align with their values. Perpetual Private has dedicated portfolios with an ethical focus designed to meet our clients rsquo; needs including a direct equities portfolio.
In 2017, Perpetual Private launched a diversified Responsible Investment Managed Fund model portfolio for Perpetual Private clients who want to invest in funds across all asset classes with managers that apply ethical filters*. More recently, in 2018, we set up the Perpetual Private Impact Pool Fund that seeks to achieve a social outcome and a market-linked financial return (only available to investors via the Perpetual Charitable Endowment Fund).*Perpetual Trustee Company Limited is the product issuer of this model portfolio.
Our ESG Focused Funds Available in Australia
We also offer ethical and impact focused investment products which exclude certain investments based on ethical criteria or seek to have positive social or environmental impact while also intending to provide a financial return.