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Danske Bank

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
100 Screening alone
0 Thematic alone
0 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
0 Integration alone
95 Screening + integration strategies
0 Thematic + integration strategies
5 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.

Fixed income (corporate) adhere to the same RI Policy as Listed Equity.

This type of screening intends to ensure that the investors do not hold assets in companies that are in breach of international norms as well as ensuring that no funds are invested in certain aspects of nuclear arms production and other controversial weapons (cluster munitions and anti-personel mines). In addition, funds that exclude selected controversial sectors such as alcohol and gambling are screened to ensure the applicable exclusions are in place.

We integrate environmental, social and governance (ESG) considerations in our investment practices, as we believe that management of environmental and social risks and well-functioning corporate governance is a precondition for an optimization of the risk-adjusted return. The ESG integration process took place in 2016 through biannually meetings between the RI team and all portfolio management teams in all actively managed strategies. ESG risks were highlighted and potential outliers in terms of low ESG scores were discussed.

04.3. Additional information [Optional].

Guideline on investing in Fixed Income (SSA):

The guideline for publicly listed sovereign bonds is intended to assure customers that their funds are invested with due respect of human rights and with a precautionary approach to avoid financing human rights abuses.

We base our guidelines for investing in government bonds on the Worldwide Governance Indicators (WGI). The WGI methodology was developed and is updated by the World Bank Development Research Group, and it ensures that our decisions are based on a wide range of official and non-official sources. The WGI measures countries' strength on six parameters:

 Voice and accountability

 Political stability and absence of violence

 Government effectiveness

 Regulatory quality

 Rule of law

 Control of corruption

The guideline represents a precautionary approach to investing in sovereign bonds issued by countries and other sovereign entities that are affected by armed conflict or particularly weak public governance. The guideline supplements sanctions imposed by the UN and EU, and supports our commitment to UN Guiding Principles and UN Global Compact.


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]


(A) Implementation: Screening

FI 07. Types of screening applied

07.1. Indicate the type of screening you conduct.

Select all that apply
SSA
Corporate (non-financial)
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

07.2. Describe your approach to screening for internally managed active fixed income

The fixed income strategies must comply with the same RI Policy and investment restrictions as the listed equity funds. 

07.3. Additional information. [Optional]


FI 08. Negative screening - overview and rationale

08.1. Indicate why you conduct negative screening.

SSA

SSA

Corporate (non-financial)

Corporate (non-fin)

08.2. Describe your approach to ESG-based negative screening of issuers from your investable universe.

Norm-based and sector-based negative screening is applied.

08.3. Additional information. [Optional]


FI 09. Examples of ESG factors in screening process (Private)


FI 10. Screening - ensuring criteria are met

10.1. Indicate which systems your organisation has to ensure that fund screening criteria are not breached in fixed income investments.

Type of screening
Checks
Negative/exclusionary screening?
Norms-based screening

10.2. Additional information. [Optional]


(B) Implementation: Thematic

FI 11. Thematic investing - overview (Private)


FI 12. Thematic investing - themed bond processes

12.1. Indicate whether you encourage transparency and disclosure relating to the issuance of themed bonds as per the Green Bonds Principles:

12.2. Describe the actions you take when issuers do not disburse bond proceeds as described in the offering documents.

If the proceeds were not used in accordance with the principles stated at the time of issue then we would reclassify the bond as a non-green bond.

12.3. Additional information. [Optional]


FI 13. Thematic investing - assessing impact

13.1. Indicate how you assess the environmental or social impact of your thematic investments

13.2. Additional information. [Optional]


(C) Implementation: Integration

FI 14. Integration overview

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

We integrate ESG considerations into all our actively managed funds. Bi-annual meetings are held between portfolio managers and the RI team. The credit team has access to ESG ratings of all companies covered by our external service provider on ESG data. For passively managed funds, we monitor the ESG scores

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

Corporate (non-financial)

We integrate ESG considerations into all our actively managed funds. Bi-annual meetings are held between portfolio managers and the RI team.  The credit team has access to ESG ratings of all companies covered by our external service provider on ESG data. For passively managed funds, we monitor the ESG scores

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 (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 (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 (non-financial)

We integrate ESG considerations into all our actively managed funds. Bi-annual meetings are held between portfolio managers and the RI team. The credit team has access to ESG ratings of all companies covered by our external service provider on ESG data. For passively managed funds, we monitor the ESG scores.

16.3. Additional information.[OPTIONAL]


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