14 www.ppf.co.uk Responsible Investment Report 2019/20 15 Our RI approach A ppr RI criteria and ESG considerations as part of our investment process oa c h Phase Request for Selection/ Appointment Post-funding proposal/ due diligence identification ESG Evidence of firm-level Ensure ESG Binding ESG and Ongoing monitoring requirement and strategy-level ESG processes are in climate-risk clauses and engagement with policy; PRI support; place, appropriate inclusion in legal external managers; E and capabilities or industry guidelines are documentation (e.g. regular fund-level x e c resources for ESG followed and reporting IMAs, LPAs, side ESG, carbon and u t integration. is available. letters). stewardship reporting; ion commitment to continuous improvement. ESG integration ESG integration (including climate External manager selection Our RI strategy is primarily focused change) is achieved by engaging with and due diligence on integrating material ESG issues and advancing the ESG practices Before we appoint external of our external managers and L into our investment process, which o managers, we carry out extensive o underlying issuers, rather than k we believe allows us to make more due diligence on their RI policies in divesting. As a large and diversified g informed decisions and enhances the and approach to ESG integration, f asset owner, we have the opportunity o r RI governance at the PPF value of our assets. Since 2007, we which not only includes minimum w have applied Principles 1 and 2 of the to encourage improvements in ar Inadequate governance is often a factor in schemes entering the PPF, therefore we have a responsibility to PRI’s Six Principles for Responsible ESG integration from the top down requirements that they must meet, d exemplify good governance on behalf of our members and levy payers. and bottom up. We expect our but also a consideration of how they Investment (see page 12) as a external managers to integrate all might go beyond those minimum benchmark for integrating ESG across relevant material factors into their standards. We have also integrated PPF Board Highest governing body with oversight of RI all asset classes and markets in which investment analysis and decisions, considerations on diversity and (including climate-related) issues. we invest. We take a materiality-based and demonstrate active stewardship. inclusion policies and initiatives approach to relevant ESG factors, Our expectations vary between within the external manager’s firm. and give particular consideration to different asset classes, depending We ensure that appropriate RI climate change (see page 13 Climate on relevance (such as time horizons clauses are incorporated into all Investment Responsibility for developing and maintaining the Fund’s change policy – assessment for or types of instruments used) and investment management agreements Committee (IC) RI principles and policies (including climate-related) is further information). current best practice. and side letters. delegated to the IC. Investment Team Led by the Chief Investment Officer (CIO). Responsibility for ensuring adherence to the RI framework and associated ESG Team policies (including the integration of climate change) across all asset classes, both internally and externally managed. The ESG Team, as part of the Investment Team, provides support and expertise, oversees appropriate implementation of the RI framework, engages with portfolio managers, and monitors investments for ESG risks and opportunities (including climate-related).