Responsible Investment

We seek to invest your capital responsibly

 

Clarity have adopted the following responsible investment policy:

Clarity believes that environmental, social and governance (ESG) factors are an important determinant of long-term investment returns and global sustainability. As a responsible investor and as part of our fiduciary duty, Clarity will consider these factors in our investment research and management process.

Within these factors, Clarity recognises that climate change is of particular significance, and will give special consideration to each company’s greenhouse gas emissions and efforts to reduce these.

Furthermore, there are a small number of companies worldwide engaged in activities that Clarity believes most clients would prefer not to support with their capital. As such, Clarity will undertake to ensure that no Fund we manage owns securities issued by a company directly involved in:

  • the manufacture or testing of controversial weapons (cluster munitions, anti-personnel mines, chemical weapons, nuclear explosive devices, civilian automatic and semi-automatic firearms)
  • the manufacture of tobacco
  • the processing of whale meat

These are referred to as exclusions. Clarity will update this exclusion list on a regular basis.

 

We approach responsible investing from a number of different angles

 

1. ESG integration into our investment process

Clarity believes environmental, social and governance (ESG) factors are an important determinant of long-term investment returns. Clarity considers these factors as part of its investment research and management process and has contracted with an independent firm to provide research in this area. Clarity’s investment team may supplement this research with its own internally generated research.

Clarity incorporates these factors into our decision making in order to understand all relevant long-term risks associated with the companies we invest in or are researching. The following list, which is not exhaustive, broadly represents what may be considered:

Environmental factors

  • Climate change – greenhouse gas emissions
  • Natural capital – water stress, biodiversity and land use, raw material sourcing
  • Pollution and waste –toxic emissions and waste, packaging material and waste, electronic waste
  • Environmental opportunities – clean technology, green building, renewable energy

Social factors

  • Human capital – labour management, health and safety, supply chain and labour standards
  • Community relations
  • Animal welfare
  • Product liability – product safety and quality, chemical safety, privacy and data security, health and demographic risk
  • Controversial sourcing

Governance factors

  • Corporate governance – board composition, executive pay, ownership, accounting practices
  • Controversial investments
  • Corporate behaviour – business ethics, anti-competitive practices, corruption and instability, tax transparency

Within these factors, Clarity recognises that climate change is of particular significance, and will give special consideration to each company’s greenhouse gas emissions and efforts to reduce these. We believe these will have investment implications in three different ways: increasing direct costs of greenhouse gas emissions; investor preference influencing valuations of emitting versus non-emitting companies; risk of stranded assets for companies directly involved with or dependent on fossil fuels.

 

2. Company exclusion list

Worldwide, there are a small number of companies engaged in activities that Clarity believes most clients would prefer not to support with their capital. As such, Clarity will undertake to ensure that no Fund we manage internally owns securities issued by a company directly involved in:

  • the manufacture or testing of controversial weapons (cluster munitions, anti-personnel mines, chemical weapons, nuclear explosive devices, civilian automatic and semi-automatic firearms)
  • the manufacture of tobacco
  • the processing of whale meat

These are referred to as exclusions. Clarity will update this exclusion list on a regular basis.

Where an external investment manager is appointed to select securities under a discrete mandate (where Clarity is the only investor) the manager will be instructed to follow Clarity’s exclusions. Where an external investment manager is appointed to manage a pooled mandate (where Clarity is one of many investors), the manager will be requested to consider Clarity’s exclusions. Investors should be aware that Clarity cannot obligate the manager of a pooled mandate to follow these exclusions. As part of its due diligence process when appointing an external investment manager, Clarity will consider the manager’s approach to responsible investing.

 

3. Active engagement and proxy voting

Direct engagement with companies (meetings, calls or written communication) is an important part of Clarity’s investment process, and a key element of our approach to responsible investment. This engagement can provide us with insights into a company’s ESG issues. We may use this forum to raise a particular ESG issue with company management, or escalate the matter to the board of directors, as appropriate.

We are advocates for robust corporate governance structures, shareholder rights, and transparency. Clarity undertakes to vote proxies on behalf of clients where we believe a particular proposal or director nominee could influence the long-term value of a Fund’s investment.

 

4. Industry engagement

As part of our ongoing commitment to investing responsibly, Clarity is a member of the Responsible Investing Association of Australia and New Zealand, and the New Zealand Corporate Governance Forum. These memberships ensure we remain informed of the latest developments and thinking in the area of responsible investing, and that our efforts form part of a larger collective action to improve our industry’s approach to responsible investing.

 

5. Clarity’s own efforts

Reflecting the standards we look for in the companies we invest in, Clarity (as part of the Investment Services Group) has gained a Toitū Enviromark Gold certification that recognises we are taking a planned approach to managing the environmental impacts of our own business activities.