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Itaú Asset Management

PRI reporting framework 2017

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ESG incorporation in actively managed fixed income

Implementation processes

FI 04. Incorporation strategies applied

04.1. Indicate 1) Which ESG incorporation strategy and/or combination of strategies you apply to your actively managed fixed income investments; and 2) The proportion (+/- 5%) of your total actively managed fixed income investments each strategy applies to.

SSA
0 Screening alone
0 Thematic alone
100 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (financial)
0 Screening alone
0 Thematic alone
100 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
100 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%

04.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

The Brazilian fixed income market has a very limited number of issuers. For a big player such as IAM, restricting this investment universe would have negative implications for diversification. Therefore, we chose to employ only our ESG integration approach, which is centered at the credit research process. 

04.3. Additional information [Optional].


FI 05. ESG issues and issuer research (Private)


FI 06. Processes to ensure analysis is robust

06.1. Indicate how you ensure that your ESG research process is robust:

06.2. Describe how your ESG information or analysis is shared among your investment team.

06.3. Additional information. [Optional]


(C) Implementation: Integration

FI 14. Integration overview

14.1. Describe your approach to integrating ESG into traditional financial analysis.

Similarly to our listed equities integration, our model projects the impacts of ESG issues in projected cash flows, thus adjusting solvency indicators such as Net Debt / Ebitda or Coverage Rations. The result is a change in the credit rating of the issuer, which determines our risk appetite and allocation across different funds. 

14.2. Describe how your ESG integration approach is adapted to each of the different types of fixed income you invest in.

SSA

For SSA, our portfolio is heavily concentrated on Brazilian treasuries, thus the analysis tends to be of a single issuer. ESG megatrends are part of our macroeconomic scenario and may impact our views on the interest rates curve. 

Corporate (financial)

E&S has low materiality for financial issuers, therefore we make only stress tests for such issues. For instance, we test whether extreme weather events may affect the agriculture lending portfolio of specific banks. Overall, our analysis is focused on G issues and tends to be more qualitative, without integration to cash flows. 

Corporate (non-financial)

For non-financial corporates our ESG integration approach is already described on 14.1. 

14.3. Additional information [OPTIONAL]


FI 15. Integration - ESG information in investment processes

15.1. Indicate how ESG information is typically used as part of your investment process.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
ESG analysis is integrated into fundamental analysis
ESG analysis is integrated into security weighting decisions
ESG analysis is integrated into portfolio construction decisions
ESG analysis is a standard part of internal credit ratings or assessment
ESG analysis for issuers is a standard agenda item at investment committee meetings
ESG analysis is regularly featured in internal research notes or similar
ESG analysis is a standard feature of ongoing portfolio monitoring
ESG analysis features in all internal issuer summaries or similar documents
Other, specify

15.2. Additional information [OPTIONAL]


FI 16. Integration - E,S and G issues reviewed

16.1. Indicate the extent to which ESG issues are reviewed in your integration process.

Environment
Social
Governance
SSA

Environmental

Social

Governance

Corporate (financial)

Environmental

Social

Governance

Corporate (non-financial)

Environmental

Social

Governance

16.2. Please provide more detail on how you review E, S and G factors in your integration process.

SSA

G and S issues very material in the short term. E issues material only on mid and long term. 

Corporate (financial)

E and S are considered tail risks. G is very material. 

Corporate (non-financial)

G always material. S is material for most sectors. E is material for some sectors. 

16.3. Additional information.[OPTIONAL]


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