AMP Capital is integrating environmental, social and corporate governance considerations across all our asset classes.
We understand that real estate is a long term asset class. Our environmental, social and governance (ESG) philosophy is centered on delivering sustainable, long term performance by considering ESG factors within our investment decision-making and ownership practices, providing us with greater insight into potential risks and opportunities that will impact the value, performance and reputation of the investment we make on behalf of our clients. From decades of real estate investing we understand what’s right for a building, and we look to add value to our clients’ assets so they realise their full potential.
Apart from integrating ESG factors throughout our investment process, AMP Capital Real Estate has been at the forefront in providing support to Government and industry bodies to develop the tools required to measure, innovate and promote responsible investment in building efficiency and sustainability.
AMP Capital participates in the Global Real Estate Sustainability Benchmark (GRESB) annual assessment on behalf of our flagship funds. All six portfolios maintain their Green Star status, in recognition of management and implementation of key sustainability issues.
GRESB is a highly regarded organisation, backed by many superannuation funds and international investors, engaged in independent evaluation of sustainability performance of real estate portfolios.
AMP Capital Real Estate continues to strive to deliver long-term sustainable returns for our clients, with a strong focus on identification and management of ESG risks and opportunities, in accordance with our ESG and responsible investment guidelines which can be found here.
AMP Capital has a diverse portfolio of investments in infrastructure assets, which includes electricity and gas transmission and distribution networks, water utilities, renewable energy generation, airports, toll-roads, and social infrastructure (such as educational facilities and aged care).
Within Infrastructure, ESG issues are considered across the full scope of our investment process, from the identification of new opportunities and in active management throughout the lifecycle of an asset. Our team has a sophisticated understanding of ESG-related risks and opportunities across a diverse portfolio of infrastructure sectors in both developed and emerging markets.
ESG issues are considered a core component of our mainstream investment process, as demonstrated by explicit protocols relating to the Infrastructure investment team’s decision making, asset management and reporting activities. When investing in infrastructure assets, we view ESG issues in the same way we do any other investment risks, which have the potential to impact on the performance of an asset. Underpinning this view are five key tenets:
- Aligning our approach to ESG with our fiduciary duty to act in the best interests of our clients
- Incorporating ESG considerations into our investment analysis and decision making, active ownership practices and ongoing reporting activities.
- Ensuring a balanced view of broad ESG investment issues and risks that may impact long-term returns (as opposed to adopting specific positive or negative screens)
- Applying our ESG policy across each of the investment portfolios and regions in which we invest
- Ensuring each member of the Infrastructure team is accountable for ESG integration in accordance with our policy.
When considering the key ESG issues likely to impact our infrastructure investment portfolios, we assess the physical location of a facility or service, environmental impacts and constraints, community and social implications, the dynamics of the sector or industry in which they operate and the business practices of related counterparties. Furthermore, we consider the scope of governance arrangements in place to protect the long-term interest of investors.
When originating new investment opportunities, we apply both a qualitative and quantitative approach in identifying and assessing the risks, opportunities and potential impacts of ESG issues. The ongoing consideration of ESG issues is firmly embedded in our asset management approach by way of key internal investment protocols and ESG-specific initiatives including for example ESG audits.
AMP Capital is also a founding member of GRESB Infrastructure and continues to play a leading role collaborating with other global investors to develop the assessment tools to benchmark and report on ESG performance in real assets.
Further details and case studies of how AMP Capital applies ESG issues to infrastructure investments can be viewed below:
- Infrastructure ESG Policy Guidelines
- ESG considerations in Community Infrastructure Investment
- Infrastructure: investments in clean energy – a case study
- ESG consideration in social infrastructure investments: 2012 review
- PRI - Responsible investment in infrastructure – A compendium of case studies
- Environmental, Social and Governance considerations in Infrastructure PPP’s
AMP Capital adopts a variety of approaches to incorporating ESG within equities depending on the nature, investment strategy and style of the particular fund.
ESG integration within the investment process is facilitated via a dedicated in-house ESG research team that undertakes analysis for the benefit of our equities investment teams. Our funds integrate ESG research via numerical ESG company scores which are used to monitor ESG risk of the portfolios relative to the appropriate index. ESG factors are considered within the stock selection process again through application of numerical company scores. This provides a positive ESG bias relative to the relevant index. Qualitative ESG information is also considered by analysts in developing company value (or target price) and call conviction.
ESG research is undertaken through meetings with company management, stock and ESG research analysts, field trips, industry seminars and desk-based research. AMP Capital also use a number of subscription based service providers to access additional corporate governance research, primarily for international stocks.
AMP Capital’s ESG analysis is reviewed regularly, particularly if there are material changes to a company’s approach to managing material ESG risks. Research includes stock-specific, thematic or sector-based analysis. Quantitative and qualitative information is stored in ESG databases, providing access to ESG summaries which our analysts use in regular stock ranking processes. The ESG research team also provides summaries of ESG related news and events (weekly ESG wrap) that have sector or stock-specific relevance.
Our ESG research also informs our Active Ownership and Engagement with investee companies on a broad range of ESG topics.
The motivation for considering ESG issues within fixed income is to offer investors in bonds and corporate credit, increased protection against potential downside risks. AMP Capital believes material ESG issues can, under certain scenarios, impact the operating profit and cash flows of companies. In severe cases this could potentially affect the ability of a company to service debt (risk of default) and adversely impact the company’s credit rating. Corporate governance issues for example are particularly important in understanding both management and overall credit quality, particularly given the links to high profile corporate collapses. As tradeable instruments, preserving credit quality over time (duration) is an important consideration for Fixed Income investments.
AMP Capital’s in house ESG research team also supports our Fixed Income investment teams, raising awareness of the relevance of ESG issues and undertaking company and sector based analysis. For example the research team has worked extensively with the credit team to assist with understanding the impact of carbon pricing regulation on debt instruments within emissions intensive sectors.
AMP Capital is further developing systematic processes for integrating ESG considerations particularly for corporate bonds. We also contribute our insights through collaborative initiatives such as the PRI’s Fixed Income Working Group established to explore the investment related impacts of ESG issues within this asset class. Our priorities going forward include further developing our teams understanding of ESG issues in a way that contributes meaningfully to fixed income investment analysis. This includes determining materiality and demonstrating how ESG analysis serves to increase the understanding of the probability and/or loss given default and bond pricing.
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