Environmental Social Governance (ESG)

How do you rate investment managers on responsible investing?

By Rebekah Swan
ESG Investment Specialist, NZ / Client Advocate / Head of Product New Zealand

One of the challenges of responsible investing is measuring the impact that investments are actually making on society and on the environment.

Signing up to the Principles of Responsible Investment (PRI) is one way a manager can how show commitment to investing responsibly and measuring its impact. The PRI is a set of global best-practices for responsible investment which provides an externally-recognised benchmark against which to monitor progress. Signatories are required to report on their responsible investment activities annually and are assessed against a range of indicators.

AMP Capital is a long-standing signatory to the PRI, and has been a member since 2007. Our latest PRI assessment report shows we continue to score highly across the various assessment modules and are ahead of the median results of our peers. For further details view a copy of the 2019 Transparency Report and summary scorecard on our website.

The PRI scorecard is one way of reporting on progress, but there are many different ways the societal impact of investments can be measured. One popular form of measurement is a portfolio’s carbon footprint. In other words, how much CO2 are the companies in an investment portfolio emitting? Unfortunately, this measurement is not straightforward with no standard methodology in the market. However, in 2016 AMP Capital created a methodology for calculating the greenhouse gas exposure of its equity investments, which has since been extended to listed property, listed infrastructure and fixed income investments. While we recognise the limitations of carbon footprinting, we think it is an important part of our pledge to be transparent and accountable to clients.

Transparency on what funds are invested in and the work being done to effect change is an important way of assessing how an organisation rates as a responsible investor. For example, earlier this year AMP Capital New Zealand announced the decision to divest from companies that are involved in the production of civilian firearms, a move which complements our existing firm-wide controversial weapons policy. Within the Ethical Leaders range we also announced the tightening of our fossil fuels screen from 20% to 10% revenue threshold, meaning our responsible investment funds will be invested in fewer mining and energy companies globally. Clearly, these initiatives have a positive influence on society and demonstrate our ongoing commitment to responsible and ethical investment, though the actual social or environmental impact is more difficult to quantify.

In my view, active ownership and company engagement are powerful tools for making an impact and driving positive change. AMP Capital actively engages with the companies in which we invest and ask them to do things differently on investors’ behalf. There is no single objective way of measuring the impact of our engagement and active ownership practices, but methodologies are improving. In the meantime, we continue to be transparent in terms of disclosure and reporting on the impact our investments are making. We do this each year through our engagement report.

For further information on AMP Capital’s responsible investment philosophy and range of ethical investment funds, please visit the ESG & responsible investing section of our website.
 

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Important notes

This blog post has been prepared to provide general information and does not constitute 'financial advice' for the purposes of the Financial Advisors Act 2008 (Act). An individual investor should, before making any investment decisions, consider the information available in the relevant Product Disclosure Statement and seek professional advice. While every care has been taken in the preparation of this document, AMP Capital Investors (New Zealand) Limited and the AMP Group (together, 'AMP') make no guarantee that the information supplied is accurate, complete or timely and do not make any warranties or representations in respect of results gained from its use. The information is not intended to infer that current or past returns are indicative of future returns. The views expressed are those of the author and do not necessarily reflect those of AMP. These views are subject to change depending on market conditions and other factors.

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