At Platinum, we have a core belief that if we responsibly and successfully look after our clients’ money, our business should prosper. With this in mind, we seek to apply a pragmatic approach to both how we run our business, and the expectations we place on the companies in which we invest.
Platinum is a signatory to the UN Principles for Responsible Investment (“UN PRI”) and thereby has made the commitment that “as an institutional investor, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe that environmental, social, and corporate governance issues can affect the performance of investment portfolios”.1
A summary of how we incorporate labour standards, environmental, social, governance and ethical considerations (“ESG”) into our investment decision-making and ownership practices is set forth below:
Application of exclusions
Platinum exercises caution when setting exclusionary screens. We believe that proactive engagement with companies is often a more effective tool for influencing companies to act in a more responsible manner with regard to ESG considerations (discussed further under Engagement). We believe that extensive exclusionary screening may risk excluding potentially profitable investments from our investable universe.
However, we currently apply screens against the following categories of companies which present social issues on which we hold a strong view and where there may be broad but not universal agreement in society:
- Tobacco: companies engaged in the manufacture of tobacco products; companies engaged in the distribution and/or retail sale of tobacco products where the revenue derived is 5% or more of a company’s reported or estimated revenue; and companies engaged in the supply of tobacco-related products/services where the revenue derived is 5% or more of a company’s reported or estimated revenue;
- Military weapons: companies engaged in the manufacture or sale of military weapons systems and/or integral, tailormade components for these weapons; companies providing tailormade products and/or services that support military weapons; companies that manufacture and sell small arms to military/law enforcement; and companies involved in the retail and/or distribution of assault weapons to military/law enforcement – in each case where the revenue derived from those activities is 25% or more of a company’s reported or estimated revenue;
- Pornography: companies involved in the production of adult entertainment and/or which own or operate adult entertainment establishments; and companies involved in the distribution of adult entertainment materials where the revenue derived is 5% or more of a company’s reported or estimated revenue.
Platinum also screens investments having regard to applicable sanctions programmes.
ESG analysis in stock research
Platinum’s central endeavour is to deliver good absolute returns for our investors over the medium to long-term by investing in companies that we believe are undervalued. We have a contrarian, long-term investment philosophy. Our detailed fundamental investment research looks beyond short-term market turbulence caused by events of a transient nature to seek out ‘unfashionable’ companies whose actual worth is greater than the value implied in their present share price.
We believe that ESG considerations can impact on a company’s financial performance and, consequently, a company’s valuation. Such issues can have an impact on the environment and/or communities in which a company is operating and may also represent legal, regulatory, operational and/or economic risks and opportunities, potentially impacting a company’s financial performance and hence investor returns.
Although Platinum has no predetermined view about what it regards to be an ESG consideration, some examples of ESG issues that companies may potentially be facing, include but are not limited to:
ESG issues are identified through our fundamental investment research process, supported by a range external data providers. However, we do not rely on ESG scores from 3rd-party data providers. Platinum has no predetermined view or methodology for determining how far it will take ESG considerations into account when making investment decisions for a Fund, other than we will take ESG considerations into account that we may become aware of, but only to the extent such issues impact our view of a company’s inherent value and hence the return on our investment. Consideration of ESG issues provides us with an expanded information set by which we assess the risks and opportunities facing companies.
Our approach to ESG is a continual work-in-progress as we seek to refine and balance our investment approach to these issues whilst maintaining our primary objective of seeking good medium to long term absolute returns for our clients.
Our approach to responsible investment is primarily designed to focus on engagement. We understand that value creation by companies can take time and we look to support companies as they make progress on their ESG strategies.
Platinum also has a number of long-standing relationships with key decision makers in management teams as a result of our long holding periods and/or the size of positions we take.
We understand that companies behave differently depending on multiple factors including stage of development, size of workforce, environmental footprint and geographic exposure. As such, we do not adopt a one-size-fits-all approach and we tailor our engagements to the individual company.
Company engagements are typically conducted by the responsible analyst plus other members of that team supported by our stewardship team. Our analysts will generally meet (either in person or virtually) with members of a company’s management team both before we initiate a position in the company and periodically after we have invested in it.
Where we deem that our engagements are not achieving the desired outcomes, we may escalate our actions to include one or any combination of the following:
- Additional engagement potentially with other management members or the board including via sending shareholder letters;
- Exercising our proxy voting rights;
- Collaborative investor action for example via the UN PRI or with other institutional investors; and/or
- Reducing or divesting our holding.
Platinum has recently developed a more targeted engagement strategy that focuses engagement with companies on financially material ESG issues (as guided by the by the SASB2 materiality map) as well as ESG issues that are aligned with the SDG pillars of our corporate strategy i.e. gender equality, climate action, decent work and economic growth, and peace, justice and strong institutions.
This engagement strategy has been developed for a “priority list”3 of companies with the aim of contributing to demonstrable ESG outcomes. The priority list3 is comprised of companies based on a number of criteria including but not limited to companies:
- Where we have a substantial holding;
- That we have held within the funds for an extended period of time; and/or
- That represent a significant weighting within our funds.
To support this work, we have developed a proprietary engagement reporting template to enable us to record, set objectives and report on the progress of company engagements and subsequent potential engagement outcomes over time.
Platinum Japan Fund: With an uplift in corporate governance standards and changes to stock exchange rules, we may employ a more active and systematic engagement strategy vis a vis Japanese companies to encourage the management of these companies to improve their operations and capital allocation decisions. Actions we take could include detailed discussions of our views with management, presentations to management, written communications and/or meetings with Boards and independent directors. Where we deem it to be in the best interests of our Investors, we may seek to solicit and/or bring shareholder resolutions to effect change.
Proxy voting is a key tool that is consistently available to fund managers and is an important responsibility we carry out on behalf of our investors. We view proxy voting as a key component of our broader investment and engagement objectives. Voting strengthens our ability to engage and supports the conversations we are having with management teams and boards.
At Platinum, voting decisions are made on a case by case basis. Given that taking a long position in a company generally reflects our alignment with and confidence in the company’s management, we will generally vote with management unless we hold a contrary view on a particular motion.
Further detail on Platinum’s Proxy Voting approach can be found in our Responsible Investing Policy.
Managing conflicts of interest
As a responsible entity, trustee, investment manager and SEC registered investment adviser, Platinum owes a fiduciary duty to its clients and investors. We are required to avoid or otherwise manage (including through disclosure) all conflicts or potential conflicts arising between Platinum’s interests, and the interests of Platinum’s clients and investors.
In accordance with Platinum’s Business Rules of Conduct, all employees are required to report any such conflicts or potential conflicts of interest, to Platinum’s Chief Compliance Officer.
Furthermore, as a fully independent asset management firm, Platinum does not belong to any corporate group.
United Nations Principles for Responsible Investment (“UN PRI”)
Platinum became a signatory to the UN PRI in 2021. In addition to a set of principles1 we must adhere to, this exposes us to a regular external review of our approach, and benchmarks us against industry best-practice, which will help us to continuously improve. From the second, and subsequent reviews, these will become publicly available, and include a rating against industry standards.
As part of this commitment, we have identified three Sustainable Development Goals (“SDGs”) we intend to align with, at both a corporate and an investor level. The three SDGs are Gender Equality (Goal 5), Decent Work and Economic Growth (Goal 8) and Climate Action (Goal 13).
1The UN PRI principles are:
- incorporate ESG issues into investment analysis and decision-making processes.
- be active owners and incorporate ESG issues into our ownership policies and practices.
- seek appropriate disclosure on ESG issues by the entities in which we invest.
- promote acceptance and implementation of the Principles within the investment industry.
- work together to enhance our effectiveness in implementing the Principles.
- each report on our activities and progress towards implementing the Principles.
1 Source: www.unpri.org 2 Source: Sustainability Accounting Standards Board. 3 As at 1 September 2023, the priority list for FY2023-2024 comprised 75 companies accounting for ~50% of Platinum’s funds under management.