What is ESG?
‘ESG’ is an abbreviation for Environmental, Social, and Governance issues. The Principles for Responsible Investment (PRI) which is an international organisation dedicated to promoting ESG issues into investment decision making, broadly defines ESG as follows:
Environmental considerations include climate change, waste, pollution, conservation of natural resources, sustainable land use, the circular economy, and biodiversity.
Social criteria consider things like human
rights, equality, health & safety, impact on local communities, working conditions, and diversity.
Governance refers to the way a company is managed and can include things like the structure of the board, executive remuneration, cyber security, privacy policies, anti-corruption, and conflicts of interest.
Responsible investment
The PRI explain ‘Responsible investment’ as considering ESG issues when making investment decisions and influencing companies or assets. The consideration of ESG issues can further support the investment process and complements traditional financial analysis and portfolio construction techniques.
How Responsible investment works within AMP Investments (AMPI)
Factors informing AMPI’s investment decisions are primarily financial and economic, including investment style and approach. AMPI incorporates some consideration of ESG factors into our investment process because we acknowledge there are links between a company’s environmental and social impacts, the quality of its corporate governance, and its long-term financial success.
Where Responsible investment considerations are implemented
AMPI appoints external investment managers to invest fund assets in two ways: through either Direct holdings or Indirect holdings.
‘Direct’ means the assets are held directly under an investment mandate agreement with an underlying investment manager. In this instance, we’re able to influence the investment manager’s ESG considerations.
‘Indirect’ means the assets are held indirectly through an investment in an underlying investment manager’s pooled fund. In this instance, the ESG policies of that investment manager’s pooled fund may apply, and AMPI may have limited influence over ESG considerations.
The exact mix between Direct and Indirect assets changes depending on the fund. Please refer to the PDS and Incorporated information for each fund, which sets out where the majority of assets are held.
Our responsible investing approach covers the following five aspects:
1. Restricted investments
Restricted investments preclude an underlying investment manager from investing in certain companies and issuers based on AMPIs’ social and governance considerations. These screened out companies and issuers are represented in our Restricted investments list.
Our Restricted investments criteria is only applied to Direct holdings.
‘Direct’ means the assets are held directly under an investment mandate agreement with an underlying investment manager, so we are able to influence the investment manager’s ESG considerations.
‘Indirect’ means the assets are held indirectly through an investment in an underlying investment manager’s pooled fund. Our Restricted Investments criteria would not apply to Indirect holdings.
2. Voting and engagement
Voting and engagement mean that we can use our rights as a shareholder to support ESG issues. Where assets are directly held under an investment mandate agreement, we can do this in two key ways:
- By exercising our rights as a shareholder to vote at shareholder meetings.
- By engaging with companies, their management teams and boards as part of the investment research and voting process.
We generally delegate these actions to the Fund’s underlying investment managers, however, AMPI can also direct the investment managers on how to vote. To learn more please see our Proxy Voting Policy.
3. Advocacy and collaboration
Through our AMP group memberships, we support investor collaborations and partner with industry groups, including:
- Principles for Responsible Investment (PRI)
- Responsible Investment Association of Australasia (RIAA)
- Investor Group on Climate Change (IGCC)
- Climate Action 100+
- Business Council for Sustainable Development Australia (BCSDA).
4. Reporting and information
We are committed to sharing information on ESG integration through regular reports and information. These include the following documents:
- AMP Investment’s Proxy Voting Disclosure Document
- AMP Investment’s Restricted investments list
5. AMP Limited’s corporate sustainability approach
AMP Investments is part of the AMP group (AMP Limited). AMP Limited also considers sustainability issues which it considers are material to its customers, people and partners, and communities and environment. For more information on how AMP Limited manages the risks and opportunities associated with these issues, please visit the AMP Limited corporate sustainability page which contains the full AMP Limited sustainability reporting suite.
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What you need to know
This information is provided by National Mutual Funds Management Ltd (ABN 32 006 787 720, AFSL 234652) (NMFM) and is general in nature only. It doesn’t consider your personal goals, financial situation or needs. It’s important you consider the appropriateness of any advice in light of your goals, financial situation, needs and ESG values and read the relevant product disclosure statement and target market determination available at amp.com.au, before deciding what’s right for you.
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A number of the statements on this website are based on information published by others. NMFM has not confirmed the accuracy or completeness of such statements.
All information on this website is subject to change without notice.