Environmental, Social and Governance Policy

1. Introduction

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This policy applies to Eley Griffiths Group Pty Limited ABN 66 102 271 812 (Eley Griffiths, we, us, or our).  Eley Griffiths is a fund manager and the holder of an Australian Financial Services (AFS) licence, No. 224818. As disclosed in the product disclosure statement for the Eley Griffiths Group Small Companies Fund and Eley Griffiths Group Emerging Companies Fund,

The Investment Manager only takes into account labour standards or environmental, social or ethical considerations as part of a broader environmental, social and governance approach in the selection, retention or realisation of investments or when such issues could have a material impact on either investment risk or return. It does not otherwise have a predetermined view about how far labour standards or environmental, social or ethical considerations will be taken into account in determining which investments to make, the timeframe for monitoring or reviewing investments in light of these standards and considerations, or what will occur and the timeframe in which it will occur if investments cease to meet any of these standards or considerations. The Investment Manager does not take a consistent approach when assessing such considerations during the investment process or when reviewing a portfolio and such considerations may not determine whether an investment is made or divested. Refer to the Investment Manager’s ESG Policy available at https://www.eleygriffithsgroup.com/

Whilst the market strives for a consistent standardised approach to ESG considerations, we are also continually developing our methodology and thought process in this area.

Performance returns for our clients is therefore currently a priority.  As such, Eley Griffiths does not exclude companies based solely on ESG factors but seeks to ‘identify and engage’ rather than ‘exclude’ companies that are identified as not having ‘best ESG practice’.

We will continue to encourage all companies both through our active engagement and voting policy, to continually reduce their reputational risk by embracing ESG factors into their disclosures in the hope of improving transparency, accountability and ultimately performance for our clients.

The purpose of this document is to set out our current approach to ESG considerations when selecting investments in the fund. It outlines the key considerations and approach when we do take labour standards or environmental, social or ethical considerations into account at any given time.  This may include consideration of a company’s corporate governance, workplace health and safety, labour and environmental practices, as part of the fundamental research, investment selection and portfolio construction stages of the investment process.        

2. Environmental, Social and Governance Policy

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At Eley Griffiths, the stock analysis process is both qualitative and mainly quantitative. As noted above, ESG considerations are a part of the process and is a component of the overall decision as to whether to invest but not determinative on whether an investment is made.

As an active investment manager, Eley Griffiths believes any factor that may have a material impact on a company’s performance and the industry it operates in needs to be considered.

Below is a sample of the list of ESG factors, which we currently collate data, monitor and review on a regular basis, based on publicly available data:

2.1     Environmental

• Net zero commitment: Net-zero carbon commitments offers both the financial implications of climate risk abatement and reputational benefits.
• Emissions to EV (tC02e/$m): Emission intensity is the volume of Scope 1 and Scope 2 carbon equivalent emissions per $m of Enterprise Value
  
  

2.2     Social

• Executive to average pay: We assess whether the ratio of CEO to average employee pay is suitable as unequitable compensation can negatively affect employee engagement.
• Employee turnover (%): High levels of employee retention should improve an organization’s productivity.

2.3     Governance

• Independent board share (%): Strong governance practice is best demonstrated by a majority independent board providing strong management oversight.
• Independent chair: Ensures an independent review and evaluation of CEO performance and that of other board members.
  
  

3. The process

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3.1     ESG Dashboard and Regular Reviews

As part of the Eley Griffiths investment process, we use publicly available data including, amongst other things, 1) information disclosed by the company such as annual reports and sustainability reports, 2) information from the government such as Modern Slavery Statements Register and the Workplace Gender Equality Agency and 3) information from data vendors like Bloomberg and Factset, to inform us of ESG factors that may have an impact on the company’s valuation and/or portfolio risk.  Eley Griffiths Group has developed an in-house, proprietary dashboard which collates and reports on the ESG factors noted above, for these companies.

Using the publicly available data collated, we undertake regular reviews to evaluate the ESG credentials of the companies in our portfolios and companies we are considering investing in.   During these reviews, ESG issues are front of mind for the analyst/portfolio manager responsible for the stock and ensures clear and focused engagement can be had with management regarding ESG issues illuminated by the process. The goal of this engagement with management is to achieve better ESG outcomes for the companies in focus. 

We note that in some cases, a lack of credible ESG relevant information and data might mean that we are unable to evaluate an ESG factor and are therefore unable to conduct a complete assessment of the likely impact of the relevant ESG factor. This is more likely to occur amongst emerging companies (rather than small companies).  For this reason, the assessment and consideration of ESG factors in the investment strategies of the funds is not consistent.  Ultimately, investment decisions are discretionary regardless of ESG considerations.

For the above reasons, our investment decisions are not based on ESG factors alone.  However, where Eley Griffiths believes the company has demonstrated wilful disregard for ESG considerations such that it believes it will have a negative impact on the portfolio risk, it may choose to avoid or divest the stock on a case by case basis. Where this occurs, we may do so within a timeframe we believe is reasonable and in the best interest of investors in the relevant fund.

3.2     Benchmarks and targets

Eley Griffiths currently does not use specific benchmarks nor adopt ESG targets.  We note that the Funds are not marketed nor promoted as sustainable, ESG related funds.  The performance
objective is not ESG/sustainability related.

3.3     Certifications

Eley Griffiths is not affiliated with or specifically adopts any ESG models such as TCFD. We are cognisant that the community values consideration of ESG factors at company or industry level and for this reason Eley Griffiths Group has developed its proprietary ESG methodology. We remain alert to industry developments in the area of ESG certification.

3.4     Roles, responsibilities and monitoring arrangements

The Portfolio Managers are responsible for reviewing the companies selected and assessing portfolio risk on a regular basis. As noted above, Eley Griffiths Group is currently developing an in-house, proprietary dashboard which collates and reports on various ESG factors described in this policy, for these companies.

The Directors, with the Compliance committee, are responsible for reviewing this framework, training and monitoring arrangements.

4. Disclosure and communications

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As we currently do not consistently apply ESG factors in the investment strategies of the funds we must ensure all communications to investors and promotional materials do not indicate otherwise. 

We seek to ensure all promotional materials and communication to investors are clear and factually correct, in compliance with the Corporations Act and ASIC policy including information sheet INFO 271 on How to avoid greenwashing when offering or promoting sustainability-related products. 

5. Enquiries

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If you have any queries regarding our ESG Policy, you can contact us by the following means:

Call: +61 (2) 9271 0900
Email: office@eg-group.com.au
Mail: Eley Griffiths Group Pty Ltd
Level 24, 1 Farrer Place
Sydney NSW 2000

6. Changes to this ESG policy

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This privacy policy may change from time to time. We will display our current ESG policy on our website and we may notify you when significant changes are made.  Please check this policy for any changes either by accessing our website or by contacting us as set out above in section 5 to request an up to date copy. This privacy policy was last updated on 24 August 2023.