One step further for ESG

T. Rowe Price has launched its Global Impact Equity Fund to Australian wholesale and institutional investors. Head of distribution for Australia and New Zealand, Darren Hall, explains how they hope to contribute to social progress with the fund, which has also been certified by RIAA's Responsible Investment Certification Program

Why did you decide to launch this product to Australian investors?

As an active manager, we want to make a difference with our dollars by directing capital towards desired impact outcomes as well as to influence positive environmental and social progress.

The investment industry has reached an exciting point where we can contribute to positive societal and environmental change, alongside a focus on financial performance. Being able to marry these goals together in the Global Impact Equity Fund is an exciting step forward for us.

Over the last decade, T. Rowe Price has invested significantly to integrate ESG factors into our investment research platform, recognising that the long-term sustainability of our portfolio companies is critical to their financial success and to our mission of helping clients reach their financial goals. We look forward to partnering with Australian clients in our pursuit of positive impact at scale, on a truly global basis.

How did you research market opportunities?

The fund employs an active management approach to seek companies that we believe are on the right side of societal and environmental change. It focuses on three impact pillars: climate and resources, social equity and quality of life, and sustainable innovation and productivity guided by the United Nations Sustainable Development Goals (UN SDGs). It excludes certain industries and companies that the manager believes do not conform to the Fund's impact mandate, such as fossil fuel, tobacco, gambling/ casinos, and for-profit prison companies.

As with other T. Rowe Price strategies, the fund draws upon the firm's global equity research platform, comprising 203 equity research analysts, 10 sector portfolio managers, and 73 regional and diversified portfolio managers. In addition, the fund will tap the deep expertise of the firm's Environmental, Social and Governance (ESG) experts and responsible investing research analysts as well as its proprietary Responsible Investing Indicator Model (RIIM), a database detailing how more than 15,000 securities measure up against established environmental and social parameters.

What challenges did you face, and how were they overcome?

This is T. Rowe Price's first time introducing an impact fund to the Australian market and we want to be sure the fund is recognised by leading local industry bodies. Through developing a close partnership with RIAA (Responsible Investment Association Australasia), we are pleased to be able to launch the fund with a RIAA certification that signifies best-in-class operational and disclosure standards. Particularly, the fund's investment process is endorsed by RIAA as embedding clear principles of materiality and measurability to form the basis for identifying positive impact for clients. The fund also received an "Approved" rating from renowned research and investment consultancy, Zenith Investment Partners, which highlighted the fund's investment process as "differentiated and logical".

How did you decide on service providers?

We are working towards making this truly global approach of impact investing accessible to a wide range of investors. As an Australian Unit Trust, the fund is available now to wholesale and institutional investors in Australia and New Zealand, as well as to retail and advised investors in Australia on various distribution platforms, including Hub24, Netwealth and Wealth O2. It is also being added to more major platforms. In New Zealand, the fund is available via our arrangement with Harbour Asset Management NZ.

What is unique about your offering?

The fund brings a global approach of impact investing to Australian Investors. It is our first global impact equity product that allows Australian investors to simultaneously pursue their financial goals and a positive impact on global environment and social equity issues. In recognition of the important linkage between societal good and financial performance, the fund provides a high-conviction, truly global equity portfolio that seeks to invest in companies creating sustainable, positive, and measurable impact, and identify the added return potential this can bring.

Can you explain how you expect the fee structure to work?

The management fees are 0.99 per cent per annum of the NAV of the Fund.

What are the biggest challenges currently facing this asset class?

A common challenge faced by impact managers is around impact measurement. Hari Balkrishna, portfolio manager of the T. Rowe Price Global Impact Equity Fund, takes a stock-by-stock approach to look at inputs, activities, outcomes, and outputs, and assess the impact against the key performance indicators that his team comes up with at the outset of the investment.

The continued improvement of environmental disclosure will allow impact managers greater accuracy in their measurement. Part of our role as an active investor is to engage with companies to improve data disclosure and data availability, which in turn will support the development of common and widely accepted frameworks within the industry.