The Fund aims to avoid significant harm by not investing in producers of tobacco, manufacturers of nicotine alternatives and tobacco-based products, or companies involved in the development and production of controversial or nuclear weapons. Companies with exposure to unethical sectors such as alcohol, tobacco, gambling or fossil fuels are marked down in terms of the "E" and "S" scores in the valuation model based on the level of income that is generated from these sectors. Companies that the Fund Manager deems to have poor Corporate Governance are also screened out from the investment universe. 

ESG issues are considered throughout the investment process as the Fund Manager identifies, researches and manages investment opportunities. The Manager considers ESG factors to the extent that they are relevant to a particular business and may have a material impact on its investment performance. The ESG issues manifest through a range of particular factors such as energy efficiency, health and safety, pollution and community relations, as well as corporate governance issues such as board structure and shareholder rights. Research findings are incorporated directly into the valuation model and can have a significant impact on a company's rank relative to peers. Environmental performance and sustainability are considered through NABERS ratings that incorporate energy efficiency, water usage, waste management and indoor environment quality of a building. 

Through the ongoing research process and the ESG questionnaire used to rank ESG factors, the team engages with investee companies to gain an understanding of both financial and ESG issues. ESG issues covered are company specific and range from supply chain management to product quality and safety to ecological impacts of operations. The team considers voting at company meetings such as Annual General Meetings as a key part of its fiduciary duty, therefore voting is not outsourced to a third party.

Pengana is a signatory to the United Nations-backed Principles for Responsible Investment (PRI), a voluntary global initiative to encourage investment institutions to incorporate environmental, social and governance (ESG) considerations into their decision-making and reporting practices.