Perpetual Ethical SRI Credit Fund

Product Name

Perpetual Ethical SRI Credit Fund

Issuer

Perpetual

Category

Investment

Type

Fund or Trust

Target

Retail, Wholesale

Certified Since

2018

Asset Classes

Fixed income

Markets

Australia, New Zealand

Investment Approaches

Negative Screening, Positive Screening

It Includes:

    It fully excludes:

    • Riaa icons 41 Alcohol
    • Riaa icons 56 Animal cruelty
    • Riaa icons 36 Armaments
    • Riaa icons 33 Fossil fuels
    • Riaa icons 42 Gambling
    • Riaa icons 45 Genetic engineering
    • Riaa icons 52 Human rights abuses
    • Riaa icons 50 Nuclear power
    • Riaa icons 99 Pornography
    • Riaa icons 35 Tobacco

    Overview

    Aims to provide regular income and consistent returns above the Bloomberg AusBond Bank Bill Index (before fees and taxes) over rolling three-year periods by investing in a diverse range of income generating, ethical and socially responsible assets. Investment Approach: The Fund's approach to delivering returns and managing risk is through an active and risk aware investment process which invests in a diversified core portfolio of liquid investment grade credit securities. Perpetual believes these assets provide investors with protection in times of market stress. When the environment is supportive Perpetual seeks to enhance returns by taking more risk whether that be in maturity, credit rating, subordination or gearing. The Fund can also invest in alternative income generating securities such as infrastructure debt and private debt. This approach to portfolio construction is Perpetual’s preferred method to deliver investors the highest possible risk adjusted returns. In addition to the above investment approach, Perpetual utilises a strategy for screening ethical and socially responsible investments: PERPETUAL ETHICAL SRI CREDIT FUND AND PERPETUAL WHOLESALE ETHICAL SRI FUND Perpetual evaluates companies, issuers and derivative counterparties (as applicable) that meet the investment approach, set out above, on a range of environmental, social, governance and ethical issues and labour standards to determine their suitability for inclusion/retention in, or divestment from, the portfolios of these Funds. We seek to invest in quality companies or issuers that have satisfied our range of ethical and socially responsible investment criteria. There are two main steps to the process, namely ethical exclusions and socially responsible investments (SRI) screening, utilising research from external specialists. ETHICAL EXCLUSIONS We don’t invest in companies or issuers that derive a material proportion of their revenue from: • the manufacture or sale of alcohol or tobacco • the operation of gambling facilities or the manufacture of gambling equipment • fossil fuels (upstream) • uranium and nuclear • animal cruelty (cosmetic testing) • genetic engineering • pornography • armaments (including weapons). SRI SCREENING Companies or issuers remaining after the ethical exclusions are then subject to an SRI screening to evaluate how their business practices impact society and the environment. The SRI screening involves three steps: 1. Negative scoring: Companies or issuers are scored on negative environmental, social and governance factors in relation to a number of criteria including the environment, labour standards, human rights, supply chain and corporate misconduct. 2. Positive scoring: Companies or issuers are scored on positive environmental, social and governance factors in relation to a number of criteria, including environmental improvement, labour standards, charity commitment and ethics. 3. Universe inclusion: Scores from all negative and positive screens are then combined. Companies or issuers with negative total scores are excluded while other companies become allowable investments. The Funds’ investments are regularly reviewed to determine whether they continue to pass the ethical SRI screening process when updated information is received. If we become aware that the Funds are invested in a company or issuer that no longer passes the ethical SRI screening process, the investment will be sold as soon as practical, in an orderly, price-sensitive manner. Where a company or issuer is not covered by our research provider, we may invest in the asset (following preliminary internal analysis) until coverage is initiated. Should the stock or issuer fail the screening process when coverage commences, the asset will be sold as described above. In rare circumstances where an issue that has caused an exclusion is deemed to be minor, we may override the exclusion for that issue, or for a period of time while the company or issuer rectifies the issue. These decisions are made independently of the Funds’ portfolio managers to ensure conflicts of interest do not occur. Emerging issues are monitored to ensure that the screening criteria remains relevant and in the spirit of the Funds. From time to time, and with the advice of our research provider, we may alter the screening criteria to take account of these emerging issues. We may engage with companies that are at risk from emerging issues to encourage them to consider the issue and improve their practices. We can modify the screening process for Perpetual Ethical SRI Credit Fund and Perpetual Wholesale Ethical SRI Fund at any time. PERPETUAL ETHICAL SRI CREDIT FUND Sovereign issuers (governments) will be analysed on ESG factors, based on a scoring system utilising research from external specialists. This may include, but is not limited to, considering any unethical practices such as corruption, rule of law and political instability of the sovereign. ENVIRONMENTAL, SOCIAL AND ETHICAL FACTORS AND LABOUR STANDARDS Perpetual is a signatory to the United Nations-supported Principles for Responsible Investment (PRI). PRI signatories undertake to consider environmental, social and corporate governance (ESG) factors in their investment decision-making and ownership practices.


    Description


    The Fund's approach to delivering returns and managing risk is through an active and risk aware investment process which invests in a diversified core portfolio of liquid investment grade credit securities. Perpetual believes these assets provide investors with protection in times of market stress. When the environment is supportive Perpetual seeks to enhance returns by taking more risk whether that be in maturity, credit rating or subordination. The Fund can also invest in alternative income generating securities such as infrastructure debt. This approach to portfolio construction is Perpetual’s preferred method to deliver investors the highest possible risk adjusted returns.

    In addition to the above investment approach, Perpetual utilises a strategy for screening ethical and socially responsible investments  - see ‘Environmental, social and ethical factors and labour standards’ below.

    ENVIRONMENTAL, SOCIAL AND ETHICAL FACTORS AND LABOUR STANDARDS

    Perpetual is a signatory to the United Nations-supported Principles for Responsible Investment (PRI). PRI signatories undertake to consider environmental, social and corporate governance (ESG) factors in their investment decision-making and ownership practices.

    PERPETUAL ETHICAL SRI CREDIT FUND AND PERPETUAL WHOLESALE ETHICAL SRI FUND

    Perpetual evaluates companies, issuers and derivative counterparties (as applicable) that meet the investment approach, set out above, on a range of environmental, social, governance and ethical issues and labour standards to determine their suitability for inclusion/retention in, or divestment from, the portfolios of these Funds. We seek to invest in quality companies or issuers that have satisfied our range of ethical and socially responsible investment criteria.

    There are two main steps to the process, namely ethical exclusions and socially responsible investments (SRI) screening, utilising research from external specialists.

    ETHICAL EXCLUSIONS

    We don’t invest in companies or issuers that derive a material proportion of their revenue from:
    ·     the manufacture or sale of alcohol or tobacco
    ·     the operation of gambling facilities or the manufacture of gambling equipment
    ·     fossil fuels (upstream)
    ·     uranium and nuclear
    ·     animal cruelty (cosmetic testing)
    ·     genetic engineering
    ·     pornography
    ·     armaments (including weapons).

    SRI SCREENING

    Companies or issuers remaining after the ethical exclusions are then subject to an SRI screening to evaluate how their business practices impact society and the environment. The SRI screening involves three steps:

    1.  Negative scoring: Companies or issuers are scored on negative environmental, social and governance factors in relation to a number of criteria including the environment, labour standards, human rights, supply chain and corporate misconduct.

    2.  Positive scoring: Companies or issuers are scored on positive environmental, social and governance factors in relation to a number of criteria, including environmental improvement, labour standards, charity commitment and ethics.

    3.  Universe inclusion: Scores from all negative and positive screens are then combined. Companies or issuers with negative total scores are excluded while other companies become allowable investments.

    The Funds’ investments are regularly reviewed to determine whether they continue to pass the ethical SRI screening process when updated information is received. If we become aware that the Funds are invested in a company or issuer that no longer passes the ethical SRI screening process, the investment will be sold as soon as practical, in an orderly, price-sensitive manner.

    Where a company or issuer is not covered by our research provider, we may invest in the asset (following preliminary internal analysis) until coverage is initiated. Should the stock or issuer fail the screening process when coverage commences, the asset will be sold as described above.

    In rare circumstances where an issue that has caused an exclusion is deemed to be minor, we may override the exclusion for that issue, or for a period of time while the company or issuer rectifies the issue. These decisions are made independently of the Funds’ portfolio managers to ensure conflicts of interest do not occur.

    Emerging issues are monitored to ensure that the screening criteria remains relevant and in the spirit of the Funds. From time to time, and with the advice of our research provider, we may alter the screening criteria to take account of these emerging issues. We may engage with companies that are at risk from emerging issues to encourage them to consider the issue and improve their practices. We can modify the screening process for Perpetual Ethical SRI Credit Fund and Perpetual Wholesale Ethical SRI Fund at any time.

    PERPETUAL ETHICAL SRI CREDIT FUND

    Sovereign issuers (governments) will be analysed on ESG factors, based on a scoring system utilising research from external specialists. This may include, but is not limited to, considering any unethical practices such as corruption, rule of law and political instability of the sovereign. 

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

    Perpetual WealthFocus Super Plan-Ethical SRI Option

    Perpetual Wholesale Ethical SRI Fund

    Sign up to join the Responsible Returns newsletter