First Sentier Responsible Listed Infrastructure Fund

Product Name

First Sentier Responsible Listed Infrastructure Fund

Issuer

First Sentier Investors

Category

Investment

Type

Fund or Trust

Target

Retail, Wholesale, Institutional

Certified Since

2021

Asset Classes

International equities

Markets

Australia

Investment Approaches

Sustainability themed, Minimum-standards (norms-based) screening

It Includes:

  • Riaa icons 10 Renewable energy and energy efficiency
  • Riaa icons 13 Sustainable transport
  • Riaa icons 31 Sustainable water

It has some level of screening for:

  • Riaa icons 41 Alcohol
  • Riaa icons 56 Animal cruelty
  • Riaa icons 42 Gambling
  • Riaa icons 45 Genetic engineering
  • Riaa icons 52 Human rights abuses
  • Riaa icons 38 Labour rights violations
  • Riaa icons 34 Logging
  • Riaa icons 99 Pornography
  • Riaa icons 35 Tobacco

It fully excludes:

  • Riaa icons 36 Armaments

Overview

Investment Process: The First Sentier Responsible Listed Infrastructure Fund is managed using an active, bottom-up process of stock selection, with an overarching focus on sustainable development and environmental, social and governance (ESG)-related criteria. The Fund’s investment process places equal emphasis on asset quality and stock valuations. Value is determined using detailed financial models. Quality is determined by a 25-point score which seeks to minimise downside by assessing significant areas of risk - from politics, regulation and customer satisfaction to leverage, management incentives and Board independence. Value and Quality results are peer reviewed to reduce analyst bias. These results, along with the Sustainability Analysis described below, underpin the Investment Manager’s stock selection and portfolio construction process. Sustainability Analysis: Analysis of a company’s ESG and sustainability-related credentials is undertaken in three ways. First, the infrastructure stocks that the Investment Manager analyses and researches are ranked using a weighted combination of the sustainability elements only of each company’s Quality score; namely – Environmental, Social, Governance, Alignment of interests, Board and Disruption. This provides a clear and consistent framework for the Investment Manager’s collective thoughts on sustainability-related criteria, to reference when stocks are being considered for inclusion within the portfolio. Second, the Investment Manager seeks to identify companies that are contributing to, or benefitting from, sustainable development, aligned with the United Nations Sustainable Development Goals (SDGs). The most relevant SDGs to infrastructure companies are SDG 6: Clean Water and Sanitation, SDG 7: Affordable and Clean Energy, SDG 9: Industry, Innovation and Infrastructure, SDG 11: Sustainable Cities and Communities, SDG 12: Responsible Consumption and Production, SDG 13: Climate Action. Third, the Investment Manager carries out company engagement via an ongoing process of outreach to companies, regulators and other stakeholders. This provides the manager with a way of driving change, as well as giving the manager a better understanding of how companies are performing. This enables the manager to push for better outcomes on an ongoing continual basis. These steps provide the Investment Manager with a lens through which all investment decisions are made. Investments in companies that do not satisfy this Sustainability Analysis will not be included within the portfolio. Avoidance of Harmful Products and Services: In addition, the Fund aims not to invest in companies with material exposure to harmful products and services, or companies that fail to discharge their environmental stewardship and human rights responsibilities which may harm the achievement of the sustainable investment objectives. The Fund also aims to ensure that the companies it invests in neither cause adverse social and environmental impacts, nor undermine other social and environmental sustainability objectives, and that the companies it invests in follow good governance practices. The Investment Manager considers harmful products and services to include: • Environmental issues: Companies that are materially involved in fossil fuels (defined as companies where coal-fired generation assets represent more than 20% of their of overall assets; or where carbon intensity - as measured by tons of carbon per MwH of electricity generated - is not declining over rolling three year periods), or companies that do not operate in alignment with the Ten Principles of the UN Global Compact. • Social issues: Companies that are materially involved in gambling, companies that are materially involved in pornography, companies that are materially involved in animal testing, companies with a poor track record in relation to globally accepted human rights, such as modern slavery, child labour, land grants and indigenous rights, or companies that do not operate in alignment with the OECD Guidelines for Multinational Enterprises. In addition, consistent with FSI exclusions, the Fund does not invest in companies involved in the manufacture of cluster munitions and anti-personnel mines, and companies whose primary business is the manufacture of cigarettes and tobacco products. The list of excluded companies is based on research from credible third parties in the case of the manufacture of cluster munitions and anti-personnel mines, and those companies in the MSCI Tobacco GICS sub-industry classification in the case of the manufacture of cigarettes and tobacco products. • Governance issues: Companies whose Board structure reduces their effectiveness or level of independence, companies with a higher risk of government interference, or companies that fail to provide the requisite level of transparency in their business or financial statements. In rare circumstances the Fund may hold investments in companies that have a non-material exposure to certain harmful products and services. The Fund will only hold such investments in circumstances where the company has strong ESG credentials overall, or if the company can demonstrate that it is taking tangible steps to improve the aspects deemed to be harmful.


Description


Infrastructure assets are large scale, long life, tangible assets having significant environmental footprints and social licenses to operate.  This means that small changes to the way a company operates can have meaningful changes to people, the planet and its ability to generate sustainable economic returns.  First Sentier’s Global Listed infrastructure strategy was established in 2007, integrating ESG factors into its investment process from the start.  

Since then, our experienced team of specialists has built up detailed, proprietary knowledge of how these factors can affect the companies we invest in, and of the various stakeholders that a company needs to consider in order to manage these factors appropriately. The First Sentier Responsible Listed Infrastructure strategy was established in 2017, placing additional emphasis on sustainability-related criteria in its investment process and seeking to identify listed infrastructure companies that can contribute to or benefit from sustainable development. This approach reflects our belief that a focus on sustainability is integral to reducing risk and achieving positive long term return outcomes within the listed infrastructure asset class.    

The response to the previous question outlines how ESG and RI factors are integrated within the First Sentier Responsible Listed Infrastructure Fund’s investment process. 

Companies must be able to meet the following criteria are in order to be considered eligible for investment by the Fund.

•           The utility companies that the Fund invests in must be able to demonstrate a declining carbon intensity (as measured by tons of carbon emitted per MWh of electricity generated) over rolling three year periods. 

•           Coal-fired generation assets must represent less than 20% of the overall assets of the companies that the Fund invests in. 

•           The companies that the Fund invests in must not severely violate any of the Ten Principles of the UN Global Compact, or the OECD Guidelines for Multinational Enterprises. 

The Fund adheres to First Sentier’s company-level policy prohibiting investment in from investing in tobacco companies. This exclusion applies to any company classified in the ‘Consumer Non-Cyclical – Tobacco’ sub-sector. 

We fully support the conventions relating to the manufacture of anti-personnel mines (Ottawa Convention) and cluster munitions (Oslo Convention). The manufacture and use of such weapons undermines the basic fundamental principles of human rights. As a result, the Fund is unable to invest in the shares of companies that have been identified, by credible third parties, as being involved in the manufacture of such weapons. 

Other products certified by the Responsible Investment Association Australasia (RIAA)

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First Sentier Multi-Asset Real Return Fund

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