The inclusion of sustainability as a core part of our investment process significantly contributes to our goal of delivering infrastructure-like returns to investors while mitigating investment risk. Additionally, it enhances investment support to companies with strong sustainability practices.
Sustainability is often referred to as environmental, social and governance (ESG) factors. However, for our specialist infrastructure investment team, it also includes other long-term factors, such as disruption. Our investment team believes that sustainability factors are an important aspect of company performance and since inception has incorporated these factors as part of our standard investment appraisal process. We do not defer sustainability analysis to a dedicated ESG analyst; rather, it is a responsibility of all investment team members.
As global listed infrastructure specialists, our investment philosophy includes the delivery of infrastructure-like returns to investors while mitigating investment risk wherever possible. Our process combines input from our in-depth sector knowledge, our communications with company management and non-executive directors as well as our network of industry experts, and various third-party sources, such as ESG risk report provider Sustainalytics, into a proprietary sustainability scorecard. The Sustainability Committee is responsible for oversight of the sustainability process within the investment team and ensuring that the process remains effective.
To learn more about our sustainability process click here.
We are proud to have achieved high scores for our practices from the United Nations–supported Principles for Responsible Investing (“PRI”) in 2020 and to have scored highly in every PRI scoring category. RARE has been a signatory since 2010. The PRI is a voluntary framework for institutional investors who commit to integrate ESG factors into their investment analysis and decision-making practices. As a signatory, RARE adheres to the six guiding principles of the PRI. We take our participation in the PRI very seriously and strive in all we do to be a leading example of sustainability for our clients, our peers and the companies we own in our portfolios.
We believe that while the SDGs are more thematic than company-specific, they do help align sector and company-specific ESG considerations with broader societal goals. Tackling social and environmental challenges is a core aspect of ESG investing and our Sustainability process, so understanding how the issues we care about as investors intersect with the targets and goals of the SDGs is a valuable exercise to give our efforts an even broader context. As a leading ESG investor and advocate for ESG best practices among public companies, we believe the SDGs are a globally accepted roadmap to gauge progress that can benefit society and the environment while motivating companies to create long-term sustainable value.
Yes, since inception (2006), we have maintained policies in respect of responsible investment. Our current policy is the 'Responsible Investment Policy'.
The primary motivation for adopting a responsible investment approach was to align our objectives as an institutional investor to those of society at large. Moreover, we believe that a responsible investment approach can lead to a comprehensive understanding of a range of material issues which should ultimately lead to lower risk, resulting in the improved long-term performance of our investment portfolios.
By integrating sustainability considerations such as ESG as well as other factors, such as disruption, into our investment process and approaching the ownership of equity in listed infrastructure companies from a long-term perspective, we are exercising our responsibility as an investment manager to act with the best interests of our clients.
Yes, we have maintained policies in respect of Proxy Voting. Our current policy can be accessed here.
Our investment team are active participants in corporate governance matters that arise as a result of investments in securities. We think of ‘active ownership’ as the supporting of good corporate governance in companies and other assets and seeking to achieve change where we think that governance is poor or less than ideal.
We delegate proxy voting discretion to Portfolio Managers, believing that the Portfolio Managers should be responsible for voting as it is a matter relating to the investment decision-making process. In voting proxies, we are guided by general fiduciary principles. Our goal is to act prudently, solely in the best interest of the beneficial owners of the accounts it manages. We attempt to provide for the consideration of all factors that could affect the value of the investment and will vote proxies in the manner that it believes will be consistent with efforts to maximise shareholder value.
A for Strategy and Governance,
A+ for Listed Equity Incorporation and an
A for Active Ownership.
We are an active participant in environment, social and corporate governance (ESG) matters that arise from investments in securities, and our commitment to the PRI has facilitated greater engagement between our staff and with companies on how they can improve performance around ESG issues.
As a PRI signatory, our commitment to the six Principles for Responsible Investing is as follows:
Principle 1: Incorporating ESG is an integral part of our Investment Process, from both a fundamental research and portfolio construction perspective, and is a responsibility of our specialist investment team.
Principle 2: We are active managers and incorporate ESG issues into all our ownership policies and practices. We pursues ESG matters with companies in both formal and informal settings, meeting with senior management and their peer companies, speaking with other investors, writing letters to Boards of Directors and making submissions to regulators, plus engaging with many other industry participants regularly.
Principle 3: We regularly seek appropriate disclosure on ESG issues by the entities in which we invest.
Principle 4: We promote acceptance and implementation of the Principles within the investment industry through client communications and industry-related events.
Principle 5: We have worked collectively with the PRI in one-on-one discussions and also in group forums, to enhance the effectiveness of implementing the Principles, particularly on issues that relate specifically to the listed infrastructure asset class.
Principle 6: We report on ESG related activities (both positive and negative) each quarter or as required to clients, asset consultants and research houses. We have also spoken about ESG activity at events, conferences and webinars.
When we become a shareholder in a company, we expect to be so for some years, and the relationship with management is an important part of the process. We believe that meeting a company’s management is essential in gaining a deep understanding of the company’s strategy and operations, and to test our investment thesis. As a specialist infrastructure investor with a long-term investment horizon, we have good access to management and company boards. Contact with companies is through:
Our investment team also engages with management on ESG and related issues in regular meetings and conversations. These discussions seek to provide feedback to companies on:
In addition to executive management, the investment team engages with the Chair where this is separate, and the supervisory board in a two-tier structure. Discussion topics include, among other issues:
In CY 2019 our investment team conducted:
Responsible investing is an integral part of our Investment process, from both a fundamental research and portfolio construction perspective. As such, it is not the responsibility of a dedicated individual rather, the responsibility of the entire Investment Team. Oversight of the sustainability process within the investment team is the responsibility of our Sustainability Committee that comprises of Senior Portfolio Managers and Senior Analysts.
Our specialist infrastructure investment team have continually evolved our responsible investing process, having incorporated sustainability into cash flows and a governance factor into our hurdle rate since our inception. We have expanded this to ESG factors as Sustainalytics’ first Australian client in 2012 and continuing to evolve the process to the current proprietary scorecard introduced in 2020.