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Bank Julius Baer & Co. Ltd.

PRI reporting framework 2017

You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (C) Implementation: Integration

(C) Implementation: Integration

FI 14. Integration overview

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

Responsible Investment ensures Julius Baer’s overall investment process takes financial material Environmental, Social and Governance (ESG) risks into consideration in order to achieve long-term economic benefits for our clients, and raise awareness and transparency of these risks.

Responsible Investment combines financial assessment with information regarding ESG risks, and is built upon the understanding that key extra-financial factors, such as corporate governance, vulnerability to climate change, water supply stress, product safety and quality, and corruption and instability can have a significant influence on a company’s financial success. We are convinced that firms recognising the importance of these factors manage industry-specific risks more efficiently than their competitors, and will be able to report more perennial profitability and creditworthiness. In doing so, the underlying goal is to capture the entire spectrum of risks to achieve what is economically profitable for our clients in the long-run.

Aiming to minimise ESG risks in the investments of our clients, Julius Baer uses company ESG ratings to assist research analysts, portfolio managers and investment advisors to identify financial material ESG risks in the investment process. Julius Baer takes an inclusive approach by actively screening our investment universe and challenging companies with the lowest ESG ratings, in order to fully understand the entailed ESG risks in addition to traditional financial analyses. Julius Baer has set up a Responsible Investment Board to ensure governance of this integration.

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

Corporate (financial)

Julius Baer does not differentiate fixed income between Corporate (financial) and Corporate (non-financial) in the Responsible Investment approach. We consider fixed income investment grade a greenfield for Responsible Investment, because the ability to pay back the credit is the utmost financially material factor for investment grade fixed income. For corporate fixed income instruments with high yield credit rating, the issuers' MSCI ESG ratings are used to determine if an instrument is investable for Julius Baer. All the instruments with issuer ESG rating above CCC are investable. If the issuer's ESG rating is CCC, the responsible portfolio manager has to go through the Conflict Resolution Committee to assess whether the issuer is investable based on ESG risks analysis. If the issuer does not have an ESG rating, an internal ESG rating process must be triggered by the respective portfolio manager in order to obtain an ESG rating and identify if the Conflict Resolution Committee approval is needed.

Corporate (non-financial)

Julius Baer does not differentiate fixed income between Corporate (financial) and Corporate (non-financial) in the Responsible Investment approach. We consider fixed income investment grade a greenfield for Responsible Investment, because the ability to pay back the credit is the utmost financially material factor for investment grade fixed income. For corporate fixed income instruments with high yield credit rating, the issuers' MSCI ESG ratings are used to determine if an instrument is investable for Julius Baer. All the instruments with issuer ESG rating above CCC are investable. If the issuer's ESG rating is CCC, the responsible portfolio manager has to go through the Conflict Resolution Committee to assess whether the issuer is investable based on ESG risks analysis. If the issuer does not have an ESG rating, an internal ESG rating process must be triggered by the respective portfolio manager in order to obtain an ESG rating and identify if the Conflict Resolution Committee approval is needed.

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
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
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.

Corporate (financial)

At Julius Baer we conduct an annual ESG rating review of companies in our investment universe that has been approved by the Conflict Resolution Committee or internally rated, and an ad-hoc review is conducted in case of major controversies. The review criteria are established in collaboration with external partners.

Corporate (non-financial)

At Julius Baer we conduct an annual ESG rating review of companies in our investment universe that has been approved by the Conflict Resolution Committee or internally rated, and an ad-hoc review is conducted in case of major controversies. The review criteria are established in collaboration with external partners.

16.3. Additional information.[OPTIONAL]


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