ESG responsible Investment Policy

General Information:

The purpose of this ESG Policy (the “Policy”) is to provide guidance in the need to integrate environmental, social and governance factors in our investment process. 

ESG Definition:

Principal adopts the definitions of ESG as prescribed by the United Nations sponsored Principles for Responsible Investment (UNPRI). We acknowledge the three different approaches to responsible investment which include Screening, Integration and Thematic. 

ESG Screening:

Funds / mandates may be screened using ESG factors either provided by leading ESG providers or by any subsequent approved internal screening process. PAM includes values or faith-based screening as an ESG approach. Islamic fund management which is a capability in Principal may be recognized as ESG in line with PGI in recognizing their faith-based investment management. Often Product oriented, commonly referred to as SRI. Clients may also provide screened lists which are then parameterized in the client IMA. 

ESG Integration:

ESG integration, which is investment process oriented, is the approach that Principal is adopting across all assets under management. The investment process incorporates any/all E, S or G factors into a fundamental or quantitative investment process. Our bottom up, top-down fundamentals, momentum, valuations (FMV) and fundamentals, technical, valuation (FTV) investment process now include an overlay on ESG research data sourced from leading ESG providers where coverage is available and in absence of ESG coverage, the analysts and managers would use their judgement based on available research information to assess any ESG implication. Fiduciary duty remains paramount, but ESG used as risk management tool or alpha generator hence we do not seek to exclude securities that are non-performing from an ESG standpoint, rather, we seek to engage with the aim of improving their ESG performance. 

ESG Thematic & Impact:

Similar to screening, Thematic & Impact are often Product oriented. Principal may launch / manage funds that focus on themes / sectors to solve E/S challenges or deliver positive E/S impact. Typically associated with specific product or Specialist ESG Manager or by innovating existing products including but not limited to enabling donations to charitable bodies be made in excess of certain performance returns. 

Principles for Responsible Investment:

The UNPRI promotes the following 6 principles which signatories are expected to champion:

  • We will incorporate ESG issues into investment analysis and decision-making processes
  • We will be active owners and incorporate ESG issues into our ownership policies and practices
  • We will promote acceptance and implementation of the Principles within the investment industry
  • We will seek appropriate disclosure of ESG issues by the entities in which we invest
  • We will work together to enhance our effectiveness in implementing the Principles
  • We will each report on our activities and progress towards implementing the Principles

Principal Asset Management acknowledges by being members / signatories to such bodies, we are bound by the requirements including the reporting requirements which is prepared to ensure members signatory continue to progress in the areas of ESG and will measure such progress for continued improvement.