The United-Nations-supported Principles of Responsible Investment (PRI) is the world’s leading proponent of responsible investment. We are pleased to share with you that we were recently awarded an A in multiple categories after being assessed on our approach to incorporating environmental, social and governance (ESG) issues in investing.
The PRI is an independent body that ‘encourages investors to use responsible investment to enhance returns and better manage risks.’ It works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions.
Allan Gray Australia became a signatory to the UNPRI in 2018 and each year we submit answers to a questionnaire from the PRI about our ESG activities and our investments. This year was our first year of reporting. We recently received our results and we are delighted to have received an ‘A’ for Strategy & Governance, an ‘A’ for Listed Equity – Incorporation, and an ‘A+’ for Listed Equity – Active Ownership.
As long-term investors, we have always believed it is critical to understand the full range of factors that might affect a company’s business and its sharemarket performance. As part of our bottom-up research process, our analysts consider a range of factors that might affect a company’s intrinsic value, which can include ESG issues. Specifically, our focus on ESG issues relates to their potential impact on the sustainability of a company’s earnings and accordingly, our assessment of the company’s intrinsic/fundamental value.
For example, if a company makes money in a manner that is not sustainable from an environmental or social perspective, we will not gain conviction in the sustainability of its current level of profits. Similarly, the consideration of governance issues is a critical part of our assessment of a company’s intrinsic value.
Our approach to engagement is very much based on acting in the best interests of the Funds we manage on behalf of our clients, and to enhance and preserve shareholder value. We generally consider private engagement to be more constructive than public engagement, but on rare occasions we have taken a public stance, raising our concerns with our clients, other asset managers and stakeholders so that we may enact change.
You can read our Statement on Responsible Investing here.
You can also read our PRI-published Public Transparency and Assessment Report here.