Stewardship and ESG integration
ESG issues are fundamental to infrastructure companies, given they have significant service obligations and moral accountability to the communities in which they operate. We therefore believe it is important that ESG issues are fully integrated into the investment process.
We do not screen companies on ESG criteria, but seek to understand the risks and capture them in our proprietary quality ranking.
ESG analysis is integrated into our investment process through our quality assessment and ranking model. This model consists of 25 criteria that influence stock returns in general and infrastructure securities in particular. A score is assigned to each criterion; a lower quality score makes it harder for a stock to be included within the overall portfolio. ESG criteria account for 24% of the overall quality score.
Incorporating ESG considerations into the investment process in this way helps to inform our decisions of whether or not to hold shares in a specific company at any given point.
Assessment and monitoring
Infrastructure companies are assessed on a broad range of ESG-related factors and are relevant for every company we look at. Some notable examples include:
- Environmental issues are key drivers for electric utilities, energy infrastructure (oil & gas pipelines & storage) and railways.
- Social issues are particularly important to utility companies, as they have obligations to the communities where they provide essential services.
- Governance issues are important performance drivers for all infrastructure stocks. Board composition and alignment of interests are considered to be particularly important, so they are rated separately in our ESG scoring process.
We look to positively influence companies towards ESG best-practice. Through company engagement, we seek to highlight areas for potential improvement, encourage disclosure on ESG issues, and commend companies that are making progress in this area. We typically engage companies on material issues to achieve specific outcomes, namely to ensure good ESG practices to help protect investor interests.
We believe that a strong commitment to stewardship is an essential component of a strong approach to responsible investment, and that embedding responsible investment into the core of our investment activities is in the best long-term interests of our clients. For more than a decade we have systematically and progressively improved our practices and processes across our investment capabilities globally.
Climate change statement
Key climate-related risks in our team’s portfolio
How we identify these risks
How we address these risks
The targets and objectives we have set
Proxy voting history by type of resolution
The table below contains the proxy voting history for the team by issue type. The chart provides the same information for FY2022.
The chart below shows the number of times the team has voted against management recommendations, proxy advisors' recommendations, or against both. The purpose of this table is to show the independent judgement which is applied by the team when making voting decisions.
Proxy voting by region
The chart below shows the number of times the team has voted in each region and the percentage of votes against management and our proxy advisors' recommendations, or against both. The purpose of this table is to show the regional difference in voting patterns and governance concerns.
Proxy voting information is as at 31/12/2022
Source: First Sentier Investors / CGI Glass Lewis
Any targets (including, but not limited to, the net zero targets) on this webpage are based on (i) available information and representations made to First Sentier Investors by third parties, including, but not limited to, portfolio companies; and (ii) assumptions made in relation to future matters such as the implementation of government policy in climate-related areas, enhanced future technology and the actions of portfolio companies. Such information and representations may ultimately prove to be inaccurate and such future matters may not ultimately be realised. As such, First Sentier Investors cannot guarantee the achievement of these targets. These targets are subject to ongoing review and may change without notice.
Any ESG related commitments, are current as at the date of publication and have been formulated by the relevant investment team in accordance with either internally developed proprietary frameworks or are otherwise based on the Institutional Investors Group on Climate Change (IIGCC) Paris Aligned Investment Initiative framework. The commitments are based on information and representations made to the relevant investment teams by portfolio companies (which may ultimately prove not be accurate), together with assumptions made by the relevant investment team in relation to future matters such as government policy implementation in ESG and other climate-related areas, enhanced future technology and the actions of portfolio companies (all of which are subject to change over time). As such, achievement of these commitments depend on the ongoing accuracy of such information and representations as well as the realisation of such future matters. Any ESG related commitments are continuously reviewed by the relevant investment teams and subject to change without notice.
To the extent this material contains any measurements or data related to ESG factors, these measurements or data are estimates based on information sourced by the relevant investment team from third parties including portfolio companies and such information may ultimately prove to be inaccurate.