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At AlbaCore, we focus on the long-term. As one of Europe’s leading alternative credit specialists, we invest in private capital solutions, opportunistic and dislocated credit and structured products. 

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Specialist in Asia Pacific, Japan, China, India and South East Asia and Global Emerging Market equities.

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Our philosophy is very simple. We are constantly searching for high quality businesses and when we acquire them, we will work relentlessly with them to create long-term sustainable value through innovation, ESG-led and proactive asset management.

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Leader in active quantitative equities across Australian equities, global equities, emerging markets and global small companies.

Backed by a unique blend of research, portfolio construction and risk management, focused on uncovering original insights and translating them into investment strategies that are active and systematic, aiming to generate alpha.

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Specialists in equity portfolios in Asia Pacific, emerging markets, global and sustainable investment strategies

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RQI Investors

Approach to responsible investment

ESG integration

RQI Investors, along with our parent company First Sentier Investors (FSI), hold the following beliefs on ESG issues:

  • ESG issues are sources of long-term risk and return therefore considering ESG issues leads to better analyses and investment decisions.
  • The execution of ownership rights in relation to proxy voting and collaborative engagements can improve our understanding of ESG issues that companies face as well as help drive improvements. Therefore, ultimately protecting and enhancing the value of our clients’ investments.
  • Integrating ESG in all mandates enhances the quality of our investment processes as ESG issues, when poorly managed, will create long-term material impacts for society and the environment.

Learn more the about the four pillars: Exclusions, Risk controls, Alphas and Stewardship

1. Exclusions

Standard FSI exclusions*:

  • Tobacco production and cigarette manufacturing**
  • Controversial Weapons^
  • Global Sanctions^^

Other potential exclusions that can be tailored to clients (note these are examples only):

  • Coal: Exclude where thermal coal mining/extraction >10% revenue, or >10% of power generation capacity
  • Oil Sands: Exclude where oil sands >10% of oil and gas mining/extraction
  • UN Global Compact Violators#

2. Risk controls

Tailored potential carbon reductions or other ESG risk penalties

3. Alphas

Driven by economic and fundamental insight along E, S and G dimensions.

Integrated insights forming part of our diversified alpha model:

  • Level and change in Carbon Efficiency
  • Change in Governance Quality
  • Multiple dimensions of Governance (Aust. Small Cap)
  • Reputational and Litigation Incidents
  • Board and Team Diversity

4. Stewardship

  • Collaborate with FSI active teams on proxy voting and ESG issues
  • Participate in firm-wide sustainability committee designed to share and develop best practise on ESG integration
  • Direct and collaborative engagement with other FSI teams and external collective initiatives
  • Participate in Investors Against Slavery and Trafficking (IAST) APAC, Climate Action 100+, 40:40 Vision

Please note these features are examples only. The client can customise the portfolio as they wish.

 

* Companies in scope for exclusion are entities that derive revenue directly from the activity, or that own more than 50% interest in entities (not including joint ventures) that derive revenue directly from the manufacture of cigarettes and other tobacco products (not including e-cigarettes and vaping), and the manufacture of certain types of controversial weapons. Where available, revenue derived from a specific activity is based on company-reported revenue within the financial statement. Where not available, revenue is derived from the company’s segment reporting or based on an analyst’s assessment.

** 0% revenue threshold.

^ 0% revenue threshold where CWS is defined as anti-personnel mines, cluster munitions, white phosphorus, biological and chemical weapons and certain types of nuclear weapons.

^^ Where companies are flagged under UN, US, EU or Australian sanctions

# Companies deemed non-compliant with global standards per our data vendors.

ESG research

ESG research has been, and continues to be, a strategic initiative for RQI Investors. We have an extensive database of ESG data and metrics licensed from third parties which we use in our research and in some cases as part of our investment process, or customised client solutions.

The incorporation of ESG into the RQI Investors investment process remains an important and ongoing area of research for our business.

Andrew Francis

Chief Executive, RQI Investors

Case studies

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

RQI Investors manages a variety of strategies including market cap index portfolios, value weighted funds and market cap aware active funds. Across all these funds, there are different climate-related risks that impact the team’s portfolios.

Key climate-related risks in our team’s portfolio

Given the nature of the value active strategies, these portfolios tend to have a higher exposure to the transition risks of moving to a low carbon economy. These will be ongoing risks if left unaddressed in the investment strategy.

A higher exposure to fossil fuel presents a market risk which may lead to increased costs and decreased revenues for companies. As we are moving away from fossil fuels towards more renewable resources, there is an increased potential of stranded asset risk with high exposure to fossil fuel reserves over the next decade and beyond.

The high reliance on fossil fuels for power generation will be associated with a higher regulatory risk over the short and medium term. Without clear revenue diversification plans these companies could be impacted by policies introducing carbon pricing, or potential carbon border tariffs, or even the introduction of stricter environmental standards.

There is also increased reputational risk for any portfolio companies with exposure to fracking, arctic drilling, oil sands and shale oil which are all considered to be controversial energy extraction methods.

In addition to the transition risk, our exposure to agriculture, mining, oil and gas companies will also translate into physical impact risk. If we do not transition quickly enough, the financial impact from extreme weather events such as floods, droughts, cyclones and wildfires will only increase. In order to mitigate those risks, significant capital expenditure by these companies will be needed for adaptation or building resilience for these assets.

How we identify these risks

The climate related risks in the portfolios are identified in a number of different ways. We consider carbon footprinting and the carbon intensity of our portfolios. We conduct scenario analysis which looks at not only how the portfolios are tracking against science based targets but also the exposure to different fossil fuels and renewables. This helps us identify many of the transitional, reputational, regulatory and physical impacts risks that the portfolios face.

We assess company’s alignment to net zero to see how the portfolio is tracking in relation to, and its overall alignment to, net zero. We also consider transition metrics to see in which areas (e.g. product, operations and assets) the portfolio is transitioning to a low carbon economy and where those transitional risks may lie. We conduct climate risk analysis to understand which climate hazards present the greatest financial risks.

How we address these risks

The risks are addressed in a number of different ways depending on the type of portfolio.

In a number of our portfolios, we have excluded oil sands which is a controversial energy extraction method, as well as revenue limits on thermal coal mining and power generation.

For all our active portfolios (value weighted and diversified alpha) we incorporate a number of signals into the model that address some of these risks. We consider the carbon intensity and changes in the carbon intensity of companies. This ESG integration results in a tilt away from more highly carbon intense companies. We also consider reputational risks by monitoring company controversies and tilting away from companies that have had severe reputational risk issues previously.

For all of our portfolios, engagement and voting is used to delve further with companies as to how they are assessing their climate related risks and opportunities and what they are doing to address these risk and opportunities. We discuss their alignment to net zero and the strategy they are undertaking to achieve this. This is for all companies we engage with, not just those that we have assessed as high emitters. Our voting is aligned with improved climate disclosure and tends to favour shareholder proposals on climate especially those that are looking for improved climate disclosures and a clear climate strategy. We look at both shareholder and management proposed ‘say on climate’ resolutions making sure they have a clear strategy, strong governance around that strategy and a clear transition path. We will vote against directors of companies that have not been responsive to any of our engagements in relation to climate over a three year period.

The targets and objectives we have set

We have set a number of different targets based on the strategy.

All portfolios will have a focus on engagement. For our market cap weighted index strategies, engagement is our primary focus. We commit to discuss net zero with all companies that we engage with at least once a year. We encourage them to move up the scale of the Net Zero Investment Framework Implementation Guide (NZIFIG) i.e. from not aligned to commit to aligning etc. In our engagement, we encourage companies to disclose scope 1, 2 and 3 emissions, set science-based short, medium and long term targets on their path to net zero, and align their capital expenditure to meet their net zero goals.

For our Value strategies, in addition to engagement, we are progressing towards the target of reducing the carbon intensity of the strategy by 30% by 2025 (AUM adjusted for the 2020 baseline). We will look to increase this to a 50% reduction by 2030.

For our diversified alpha strategies, in addition to engagement, we aim to reduce carbon intensity by at least 20% relative to the benchmark. We look to reassess this target in 2025 and 2030 depending on how the benchmark has evolved.

These targets have been formulated based on: (i) available information and representations made to RQI 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, RQI Investors cannot guarantee the achievement of these targets. These targets are subject to ongoing review and may change without notice.

Proxy voting

RQI Investors understands its stewardship responsibilities of managing its clients' assets, including acting in the best interest of clients when monitoring corporate events and client proxies. The team will generally vote its proxies in accordance with proxy adviser Glass Lewis’ ESG guidelines to promote high standards of corporate governance which are aligned with clients’ interests.

An additional level of review of proxies may be undertaken where the meeting includes a contentious issue or a relevant ESG issue. This review is undertaken using input from leading proxy voting advisors such as Glass Lewis and Ownership Matters, ESG research from providers such as RepRisk, ISS ESG, Sustainalytics or MSCI, advocacy groups, the FSI Responsible Investment team, other investment teams in FSI, and other sources as appropriate. The conclusions of this additional review are documented and considered by a Peer Review Committee, comprised of the RQI Investors portfolio managers. The Peer Review Committee determines how the proxies are voted by considering the best interests of clients. For further information, please see RQI Investors' separate Proxy Voting Policy.

Australian Equity

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 FY2023.

Voting independence

The chart below shows the number of times the team have voted in each region.

Global Equity

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 FY2023.

Voting independence

The chart below shows the number of times the team have voted in each region.

Proxy voting by region

The chart below shows the number of times the team voted in each region and the percentage of votes against management recommendations, against our proxy advisors' recommendation, 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 31/12/2023

Source: First Sentier Investors / CGI Glass Lewis

Disclaimer

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.