For Munro, ESG integration refers to how ESG issues impact our financial analysis, stock selection and portfolio construction. The three elements of Munro’s approach are below.
Every long portfolio holding undergoes a proprietary ESG analysis which results in an ESG score. The ESG score is one of six qualitative factors that determine what Munro considers the appropriate earnings multiple and therefore valuation for the company.
Subject to other qualitative and quantitative factors, Munro is generally willing to pay more for companies that perform better on ESG matters.
The ESG score is determined on a 1 to 5 scale as follows:
Environmental and Social (E&S) score (two-thirds weight):
Governance score (one-third weight):
Analysis of three issues:
The following chart shows the ratings for our long positions held at 30 June 2023.
Companies in Munro’s Areas of Interest may contribute positively to ESG outcomes.
Notably, climate change has been a longstanding investment theme. Companies that are providers of climate change solutions have been among the top exposures for our long/short and long only strategies, and via the dedicated Climate Change Leaders strategy which invests exclusively in this theme. Companies we consider climate change leaders and decarbonisation enablers generally fit one or more of the following sub-themes:
As of June 30, our investments in the climate change Area of Interest were:
All of the Munro Areas of Interest are subject to change from time to time, they are listed and explained on our Areas of Interest page.
We use negative screens or exclusions sparingly. In our view, investors can usually have a much more significant impact if they remain invested and use stewardship to bring about change.
Nonetheless, consistent with our corporate values, we have applied a small number of exclusions to our portfolios. This is detailed in the ESG Policy.
We publicly disclose all our portfolio holdings on a one month lag on each Fund’s webpage. This allows anyone to actively monitor which companies are included in our Funds.
For Munro, stewardship refers to how we use our ownership rights to influence companies towards improved ESG performance.
Munro considers that voting rights are an important power and should be managed with the same care as any other asset managed on behalf of our investors, and in the Funds’ best interest. Therefore, we will always exercise our voting rights, except in rare circumstances where the costs associated outweigh the benefits (for example, where votes cannot be exercised electronically).
When we exercise our voting rights, considerations may include the company’s ESG score (as outlined above), external ESG research, specialist proxy advice and insights from company engagement.
When exercising our voting rights, our general expectation is that companies:
These principles are not prescriptive, and votes are exercised on a case-by-case basis in the best interests of our investors.
We provide examples of Munro’s voting in our Responsible Investment Report.
To summarise our voting for the 12 months to 30 June 2023:
(100% of eligible meetings)
meetings where Munro voted differently to the board recommendation on at least one resolution
resolutions where Munro voted different to the board recommendation (full list available in the Responsible Investment Report)
Munro regularly engages directly with companies on ESG issues, tracks engagement activity and maintains internal targets for engagements.
In FY2023, we selected three issues – climate change, human rights and safety – as our priority issues for proactive engagement. This means that we proactively seek out engagement with companies in our portfolio on these topics.
We chose these issues because we consider each material for several companies in our portfolios. We identify materiality based our view of the potential for the issue to impact the company’s financial performance, and our assessment is based on the Sustainability Accounting Standards Board (SASB) framework, supplemented by external research and company disclosures.
We provide examples of engagements in our Responsible Investment Report.
We review our key engagement issues annually.
To summarise our engagement for the 12 months to 30 June 2023:
Priority engagement issues where the company improved following engagement
Number of meetings
Split of topics on which we engaged
E – Environmental
(includes climate change and circular economy)
S – Social
(includes product safety, workforce, supply chains and lobbying)
G – Governance
(includes remuneration, board and shareholder rights)
Munro recognises that investor engagement with policymakers is an important tool, especially for systemic risks like climate change.
Munro believes that advocacy is best done collaboratively with other investors because it is more likely to result in the outcomes we want for our investors, and because it is a more economical use of our internal resources. We pursue advocacy collaboratively, for example as a signatory to the Principles for Responsible Investment (PRI), as a member of the Investor Group on Climate Change (IGCC) and as a member of the Canadian Responsible Investment Association (RIA).
Through our membership, we support advocacy on both specific ESG issues (such as government policies on emissions reduction) and on promoting and developing responsible investment practices (such as how investors can best integrate climate change into their investment process).
We recognise that our business should adopt the same standards that we expect of the companies in which we invest.
Separate to our investment activities, Munro undergoes an external carbon footprint audit on our business operating emissions annually with the aim of maintaining certification that our business operations are carbon neutral from the Australian Government as ‘Climate Active’. Munro was first certified as Climate Active for financial year 2022. This certification requires us to implement an emissions reduction plan that is actioned and measured.
We continually look to implement changes to reduce our carbon intensity and our reliance on carbon offsets. More information about Munro’s Climate Active certification is set out in Munro’s Climate Active Public Disclosure Statement:
Munro encourages an inclusive, flexible and safe working environment. We encourage a work/life balance. The following is available to all employees:
Munro is a core manager of Sohns Hearts and Minds ASX listed investment company HM1. HM1 aims to provide access to retail investors with the highest conviction ideas from some of Australia’s highly regarded fund managers, including Munro Partners, while supporting Australian medical research through donating a portion of the portfolio’s assets to medical research beneficiaries each year. Munro has elected to donate Munro’s portion to WEHI, specifically Dr. Hamish King research project on the genetic causes of auto-immune diseases.
Members from Munro’s advisory committee with Dr Hamish King.
Munro sponsors the Future IM/Pact program, this is an industry collaboration building the next generation of female investors through inspiring, developing and providing access for young women to networks and funds management opportunities. Since 2021 Munro has partnered with Future IM/Pact to support the work they do in improving gender diversity in our industry and to improve our access to female talent in the early stages of their careers.
At the core of Munro’s values is to govern and operate ethically, and we aim to achieve this through a quality and experienced board, robust compliance and risk management which is embedded in the Munro culture, with fair remuneration that encourages a long-term commitment through a partnership structure.
Meet the Directors
Munro Asset Management Limited
Munro Investment Holdings Limited
We recognise that our approach to ESG, best practice and investor expectations will continue to evolve. As such, we commit to reviewing and, if necessary, updating our ESG and Climate policies annually.