Principal South East Asia (SEA) is a signatory to the United Nations Principles for Responsible Investment (“UNPRI”) since December 2019. Consistent with our brand purpose to foster a world where financial security is accessible to all, we are committed to be a responsible investment manager that will act in consideration of future generation and our global communities. In addition, we recognize our fiduciary duty to our clients, and it is for that reason we believe Environmental, Social, and Corporate Governance (“ESG”) factors should be considered in the investment process for clients’ long term best interest.
Our Responsible Investment Policy governs our ESG Integration approach.
ESG Investment Policy
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.
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.
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 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 focuses 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 which Principal is a member of promotes the following 6 principles which members 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 on 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 is able to measure such progress for continued improvement.