ESG and Impact

Providence manages bespoke portfolios for our clients containing a mix of direct investments and managed funds. Our approach to incorporating ESG and Impact considerations is impacted by the variations that we see in client values and ESG concerns, and the ability to reflect these differing values in portfolios whilst maximising investment returns within the agreed risk parameters.

While we are focused on capital preservation and the generation of strong, risk adjusted returns, we firmly adhere to the principal of empowering our clients to ensure that their investment portfolio reflects their values and purpose.

We are a member of the Responsible Investment Association of Australia.

When undertaking due diligence on fund managers we always seek to understand their ESG policy and determine its reasonableness. We also view favourably if they are a signatory to the Principles of Responsible Investment. Third party assessment of their ESG credentials (for example, Morningstar) is also noted. Typically, managers that we approve on a sustainable investment measure must demonstrate that their sustainability practices sit at the heart of their investment process and ethos.

On a quarterly basis we review all approved fund manager portfolios* to identify any potential controversial exposures in a range of 14 factors (alcohol, tobacco, gambling, weaponry etc), using measures provided by Sustainalytics. Where exposures are identified, we then undertake additional research to provide materiality awareness as to the company or investment’s contra activities.

This enables us to provide our clients with a percentage weighting per portfolio of any controversial exposures and facilitates discussion as to significance and variance from values and purpose.
Increasingly as clients seek to ensure their investment portfolio more fully reflects their values and priorities, we are assisting in the identification and inclusion of impact investments in areas such as affordable housing, education, sustainable energy production and sustainable agriculture.

Where investments are included for impact, it is important that measures of success are equally weighted in relation to financial outcomes and impact achievement in relation to the Sustainable Development Goals.

We can assist you in including ESG and Impact measures in your Investment Policy.

*This may be restricted by the underlying fund strategy.


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