This report shows public data only. Is this your organisation? If so, login here to view your full report.

Itaú Asset Management

PRI reporting framework 2017

Export Public Responses
Pdf-img

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (C) Implementation: Integration of ESG issues

(C) Implementation: Integration of ESG issues

LEI 10. Review ESG issues while researching companies/sectors

10.1. Indicate if E, S and G issues are reviewed while researching companies and/or sectors in active strategies.

ESG issues

Coverage/extent of review on these issues

Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

10.2. Additional information. [Optional]

The ESG analyst systematically updates analysts and PMs on ESG issues. Additionally, the NPV of material E&S issues is available in an intranet platform to all analysts and PMs. Questions and feedback on the analysis are used by the ESG analyst to adjust the assumptions used in the models.

Corporate Governance analysis is part of the equity research process for a longer time than E and S. Each sector analyst holds responsibility to analyze G. Given the relatively limited investment universe (Latam and Brazilian equities) and our access to senior management teams, we consider G to be incorporated in our analysis.


LEI 11. Processes to ensure integration is based on robust analysis

11.1. Indicate which processes your organisation uses to ensure ESG integration is based on a robust analysis.

11.2. Describe how ESG information is held and used by your portfolio managers.

11.3. Additional information.[Optional]

At the end of 2016, our complete ESG research process covered the following indices:

Brazil: Ibovespa (100%), IBX100 (100%) and ISE (100%)

Chile: IPSA (60%)

Argentina: Merval (50%)


LEI 12. Aspects of analysis ESG information is integrated into

New selection options have been added to this indicator. Please review your prefilled responses carefully.

12.1. Indicate which aspects of investment analysis you integrate ESG information into.

12.2a. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

          Our ESG model is based on calculating the NPV of specific E&S issues. ESG may impact CAPEX, WACC, costs, revenues, among others.
        

12.3. Describe how you integrate ESG information into portfolio construction

For activelly managed funds, PMs are aware of the NPV of speficic ESG issues and the fair value of companies integrated with ESG analysis. PMs are able to use the adjusted ESG fair value of companies in portfolio construction if they agree with the assumptions used in the ESG model calculations.

12.4a. Describe the methods you have used to adjust the income forecast / valuation tool

Higher COGS due to resource scarcity/climate change.

Higher CAPEX due to incresed extreme weather events.

Lower/higher margins due to environmental issues such as certifications, lack of environmental licenses, land disputes, water costs, emissions taxation.

Higher/lower WACC due to specific company sustainability practices. 

12.2b. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

12.4b. Describe the methods you have used to adjust the income forecast / valuation tool

We focus on projecting ESG-speficic impacts on cash flows. Our full methodology with examples is depicted in our white paper: http://www.itauassetmanagement.com.br/_arquivosestaticos/Asset/pdf/WhitePapers/White_Paper_ESG_Port.pdf

12.5. Additional information.

 We prefer adjustments to financial forecasts than to valuation tools. On the later, we occasionally adjust cost of debt (never cost of equity) and growth rates.


Top