The Australian Equities Socially Responsible Investment Portfolio is an actively managed portfolio that adopts a negative screening strategy, combined with an ESG ratings assessment, ESG integration and company engagement, to deliver responsible investment. The portfolio’s negative screen precludes the portfolio from owning stocks with exposure to pornography, gaming, armaments and tobacco.

DNR Capital have developed an ESG scoring system to assess ESG risk at a company level.  A company must have an ESG score greater than index average to be eligible for inclusion in the portfolio.  We score companies on a five-point scale for each of the ESG factors listed below, which is aggregated to an overall company ESG score.  DNR Capital use a range of information sources including research published by Sustainalytics, Ownership Matters and brokers, and company information to inform our assessment. 

-        Energy intensity-        Water intensity

-        Land and materials intensity

-        Waste and pollution

-        Susceptibility to climate change

-        Human capital management-        Modern slavery

-        Product integrity

-        Data privacy and security

-        Community impact

-        Shareholder focus-        Management quality

-        Board quality

-        Business strategy and risk

-        Business culture

DNR Capital’s ESG score is one of five components of our proprietary ’quality web’, which is used to assess the quality of companies.  Where we are satisfied that a business possesses strong quality characteristics (i.e. scores well in aggregate across the five quality characteristics in the quality web) then it is eligible for inclusion in the portfolio.  As described previously, we then undertake further valuation work to determine if the company offers sufficient returns opportunity.  Consistent with our ESG integration and engagement investment strategy, DNR Capital factor ESG risks and opportunities into our risk-return assessment. Where we invest in a company with ESG risks, the forecast return is sufficient to compensate for the risk. Consistent implementation of this strategy will increase portfolio performance by ensuring ESG factors are adequately reflected in our assessment of fundamental company valuation.

DNR Capital’s ESG score is supplemented by Sustainable Development Goals (SDG) opportunity analysis.  We assess the aggregate portfolio’s contribution to each of the 17 SDGs.  Citi Group’s SDG impact research forms the basis of this analysis.

The integration of ESG factors into investment decision-making is supplemented by a comprehensive stewardship program, including company engagement and proxy voting.  Our stewardship initiatives are undertaken by our investment analysts, which ensures that outcomes are fed back into the investment decision-making process.