We take our responsibility as active owners seriously. ESG principles are ingrained in how we invest and are a mainstream part of our ongoing research process.
Yarra Capital Management’s ESG approach
Environmental, Social and Governance (ESG) principles are ingrained in how we invest and are a mainstream part of the team’s ongoing research process.
We take our responsibility as active owners seriously. We have been a signatory of the UN PRI since October 2007¹ and continue to strive for improvement of the Principles. We are also members of ESG Research Australia, a collaboration between fund managers, superannuation funds, and asset consultants which seeks to increase the amount and quality of company research in Australia that includes consideration of ESG issues.
Where ESG issues are identified, we consider it to be an important part of the process to discretely communicate our concerns to the management or board of the company to seek progress on the issue. We have often found this to be a constructive process which results in more effective outcomes for all shareholders.
At the stock and security level our process is as follows:
Firstly, we identify ESG issues through extensive company and industry due diligence including a proactive program of engaging with company boards, reviewing board structures/compensation guidelines and engaging third-party consultants/brokers to undertake bespoke research.
ESG issues which are identified are included in a one-page investment thesis which we produce for all companies we research, which we believe is an effective tool to monitor ESG issues.
If we assess identified ESG issues as being sufficiently material and a threshold issue, we will choose to not invest in that company.
ESG issues identified and found not to be threshold issues are incorporated into our valuation framework. They may be included as a specific charge to cash flows (e.g. a potential environmental liability) or an adjustment to the calculation of the weighted average cost of capital.
Our policy includes a requirement that we vote on all resolutions put forward by companies that we invest in. In the process of determining how to vote, we incorporate the advice of an external research firm, though we are not bound to follow any advice we find to be inconsistent with the overall objective of voting in our clients’ best interests.
We are committed to including ESG considerations in our brokerage panel structure.
As part of our research process, we utilise multiple channels to remain abreast of ESG issues. These include:
Company and industry contact (as detailed above).
Meetings with industry experts, consultants and market participants including regulators and governments.
Meetings with brokers around specific ESG issues (note: our panel vote includes a specific allocation for ESG research).
Use of the Gerson Lehrman Group (GLG) expert network to identify and target meetings around specific topics, particularly in offshore markets.
Attendance at industry meetings.
The methods by – and the degrees to – which ESG principles are applied to our investment analysis and processes for the range of registered managed investment schemes offered by Yarra Capital Management will vary from product to product. For further information on how ESG principles are relevant to each of these products, please refer to our Product Disclosure Statements.
¹ Goldman Sachs Asset Management Australia was the UN PRI signatory between October 2007 and December 2016. Yarra Capital Management was established in 2017 following the 2016 management buyout of Goldman Sachs Asset Management’s Australian-focused investment capabilities, backed by private equity firm TA Associates.