We are conservative long-term investors. We believe investing in long-dated assets requires a long-term view, and recognise that capital preservation is critical to achieving long-term capital growth. We are active managers of our clients' capital. Our investment approach is primarily bottom-up, with a sensible consideration of macroeconomic risks.
Our investment process combines direct company contact with proprietary research, a consistent valuation framework and a comprehensive 25-point quality assessment. This structured process reduces bias and supports repeatable outperformance.
Led by Peter Meany, the investment team consists of eight infrastructure specialists, with complementary skills and experience in both infrastructure and equities markets.
This industry experience is enhanced by over 500 company visits each year. We meet with company management, competitors, suppliers, customers, regulators, government officials and industry bodies. The information and insights gleaned from these meetings are our most important sources of idea generation and risk management.
Stock coverage within the team is split by sector to maximise the team's specialist knowledge and to identify global best practice. Team members are encouraged to contribute views on all stocks, not just those under direct coverage, and all stock calls are openly discussed and debated on an ongoing basis.
The team's RI Representative is Rebecca Sherlock, Senior Investment Analyst, who has 14 years of experience in infrastructure and eight years in the funds management industry.
ESG issues are fundamental to infrastructure companies, given they have significant service obligations and moral accountability to the communities in which they operate. We therefore believe it is important that ESG issues are fully integrated into the investment process.
We do not screen companies on ESG criteria, but seek to understand the risks and capture them in our proprietary quality ranking.
ESG analysis is integrated into our investment process through our quality assessment and ranking model. This model consists of 25 criteria that influence stock returns in general and infrastructure securities in particular. A score is assigned to each criterion; a lower quality score makes it harder for a stock to be included within the overall portfolio. ESG criteria account for 20% of the overall quality score.
Incorporating ESG considerations into the investment process in this way helps to inform our decisions of whether or not to hold shares in a specific company at any given point.
Assessment and monitoring
Infrastructure companies are assessed on a broad range of ESG-related factors and are relevant for every company we look at. Some notable examples include:
We look to positively influence companies towards ESG best-practice. Through company engagement, we seek to highlight areas for potential improvement, encourage disclosure on ESG issues, and commend companies that are making progress in this area. We typically engage companies on material issues to achieve specific outcomes, namely to ensure good ESG practices to help protect investor interests.
"ESG issues are fundamental to infrastructure companies, given they have significant service obligations and moral accountability to the communities in which they operate."
"ESG analysis is integrated into our investment process through our quality assessment and ranking model, accounting for 20% of the overall quality score."
|Average turnover across all funds
(Five years annualised)
|Stock name retention over five year period||71%|
|Number of holdings
Wholesale Global Listed Infrastructure Fund
|% of portfolio companies met with||100%|
Top five holdings
Top five active holdings
East Japan Railway
SBA Communications Corp
Performance and investment characteristics are as at 31/12/2016
Performance is quoted pre-fees and in $A terms.
Source: First State Investments
Please follow this link for information on how our RI and Stewardship Measures are calculated.
|Portfolios outperforming their relevant benchmark over five years
(Weighted by size of fund)
|Weighted average of outperformance
(Five years annualised. Weighted by size of fund)
Absolute return over five years
The following tables incorporate third party information to provide additional context. We believe that providing an independent view of some typical ESG issues facing the industries and countries where we invest helps to emphasize the importance of considering ESG factors, as well as the value that this approach can add to investment outcomes. These risks are not company specific, but are relevant to the team's larger industry and country exposures.
This contextual information should be considered alongside the description of the team's approach to integrating and engaging on ESG issues, and the company-specific case studies provided. Taken together a more complete view can be formed on how the team is able to generate value through responsible investment and stewardship.
Typical ESG Risks by Sector
The bar chart below counts the number of times different risks have been flagged by Sustainalytics as being material for the different sectors the team invests in. The line graph does the same, only as a weighted average based on the value of the team's holdings in each sector across all portfolios. These risks are generic for the industry and may be different for individual companies. They also don't reflect how individual companies are managing the risks.
Typical ESG Country Profile
The table below provides ESG information for the top 10 countries invested in. For country profiles, we provide a number of indicators for countries where the companies we invest in are domiciled. Like the industry risks, we include a weighted average based on the team’s exposure and also include a global average.
Sector and country exposure percentages are as at 31/12/2016
Source: Sustainalytics (sector risks), United Nations (HDI and carbon), Transparency International (CPI).
The section below provides additional, team specific, information on climate change. Further information on our approach to climate change can be found in our climate change statement.
Team Climate Change Statement
Climate change is the most material ESG theme affecting our investment strategy. Efforts are underway to decarbonise the world’s economy in order to reduce global warming. The effort to reduce carbon emissions spread from Europe in the 2000s to the US west and east coasts in the latter half of the 2000s, and from there to China, Japan and US mid-continent in the early 2010s.
Our investment approach takes account of a company's carbon exposure in various ways.
For example, our quality score includes an environmental assessment of each company that takes account of the carbon intensity of that company. This means that companies with higher levels of carbon exposure are naturally discounted more than those with cleaner generation portfolios.
We also take account of carbon risk within our financial models, to the extent that it has direct implications for the earnings potential of a business. For example, due to the evolution of shale gas in the US, coupled with the reduced cost curves and tax incentives for renewables, we have seen the amount of coal used decline rapidly. Since the volume of coal hauled is explicitly modelled within our freight rail volume numbers, we adjust those accordingly to take account of the structural change that we have seen in the market.
Holdings in companies with fossil fuel exposure
The table on the right outlines companies that the team invests in, which have exposure to fossil fuels. There is no revenue, cost curve or other threshold applied and so the fossil fuel exposure should not be seen as a guide to the risk of stranded assets, however it is reasonable to expect that the attention paid to the risk of stranded assets by teams will correspond to their fossil fuel exposure.
|Number of Companies||% of Funds|
|Number of companies||44||100%|
|Fossil Fuel Companies inc gas||7||15%|
|Companies with Gas Reserves||2||4%|
The table on the right provides an overview of the team's carbon exposure. The first measure provides an equity ownership approach to accounting for the emissions, while the second set of numbers provides a guide of how efficient the average company held is versus other companies in that industry group. The chart below shows the difference between the two.
The carbon emissions, fossil fuel and revenue data have been provided by MSCI. 36% of the carbon emissions data has been estimated due to gaps in company disclosure and 2% were not covered. Companies without carbon or revenue data have been excluded, hence the difference between these and the fossil fuel numbers. Please see the RI and Stewardship Measures page for more information on how these and other metrics have been calculated.
|Equity Share Carbon Emissions||Number of Companies Team||Average Team Company Intensity||Number of Companies (GICS) Industry Group (Global)||Average Industry Group Intensity (Global)|
Difference Team Average Intensity vs Industry Average Intensity
Fossil Fuel and carbon information are as at 31/12/2015 (most recently available), holdings information is as at 31/12/2016
The team's live proxy voting record is available here
Proxy voting history by type of resolution
The table below contains the proxy voting history for the team by issue type. The chart provides the same information for 2016.
The chart below shows the number of times the team has voted against management recommendations, proxy advisors' recommendations, or against both. The purpose of this table is to show the independent judgement which is applied by the team when making voting decisions.
Votes by Region
The chart below shows the number of times the team has voted in each region and the percentage of votes against management and our proxy advisors' recommendations, or against both. The purpose of this table is to show the regional difference in voting patterns and governance concerns.