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Colonial First State Global Asset Management (including First State Investments)

PRI reporting framework 2017

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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. ESGを従来の財務分析に統合するアプローチを説明してください。

We have five fixed income and credit teams:

Global Unconstrained Fixed Income (USA based)
Asian Fixed Income
Emerging market Debt
Australian Fixed Income & Global Credit.
Short term investments (cash)

In addition we have recently added a high yield team who were not managing client funds at the end of the reporting period. 

Like our equity teams our fixed income teams have developed their own approaches to ESG integration which complements their investment processes. The Asian and USA FI&C teams share significant elements of their investment process with the Global credit team, including analyst resources. The US team joined the firm in 2014.

We believe that ESG issues have a direct impact upon a company's risk and therefore its probability of default. As risk turns into a liability for company, it impacts cash flow and therefore both its debt cost and credit ratings.

ESG issues can impact on a sovereign's ability to generate sustainable revenues or potentially increase its future costs, affecting its ability to repay bond holders.

14.2. 投資する債券の各種類に対してESG統合アプローチをどのように調整するのか説明してください。

SSA

ESG issues can impact on a sovereign's ability to generate sustainable revenues or potentially increase its future costs, affecting its ability to repay bond holders.

For the emerging market debt team ESG factors are incorporated in the following way.

Issues are identified and considered in the course of the team's investment analysis. At the core of their process is the Key Factor Model (KFM). The KFM is comprised of six factors, or angles, from which we approach the analysis of the issuers in the team's investment universe. Three of these factors are intimately related to RI and stewardship: fiscal policy, politics, and structural reform.

The team seeks to monitor the investment restrictions put in place by the national and supranational entities relevant to their universe including: national foreign policy measures, United Nations sanctions, European investment restrictions, among others.

The majority of information the team needs in order to analyse sovereign issuers is publicly available through National Statistics Offices. However, it is important for the analysts to spend time on the ground and observe country conditions first-hand to verify whether the statistics or the news is giving the full picture. This time spent on the ground can include meetings with government officials, but a great deal can also be gauged simply by observing the surrounding environment.

For the Fixed Income and Credit teams ESG factors are incorporated in the following way:

The team is still at an initial stage of incorporating ESG issues into our assessment for sovereign issuers. Many of the indicators and data the team use to arrive at their assessment of ESG risks do not apply for certain sovereign issuers. For instance, country or corporate criteria for assessing ESG risks do not apply for supranationals. These issuers have a social or sustainable policy objective but there is limited reporting on ESG performance to enable bond investors to assess and monitor these risks. The challenge is to find the appropriate data in order to assess the risks for a range of sovereign issuers and to understand how ESG risks impact the risk of default for these issuers.

社債(金融)

Credit and Fixed Income Teams

Assessment and monitoring

Analysts identify ESG risks during their bottom-up credit research. We use customised ESG rankings as a starting point for assessments. Analysts consider these alongside their own research with reference to a variety of other external sources. Where external ESG ratings are often not available there is a greater reliance on the analysts assessments. 

By analysing and assessing ESG issues within a company, we can identify sources of non-financial risk. In line with our credit philosophy of avoiding the losers, we are able to identify companies with a higher default risk than the balance sheet implies. This gives us greater insight than that offered by a rating from a traditional credit agency.

Integration

The team assigns a proprietary internal credit rating (ICR) to every bond we review. The ICR is a forward looking measure of default risk and is one of the key outputs of our research process. It reflects all risks relevant for that issuer, including ESG risk. Our ICR is on the same scale as ratings assigned by the ratings agencies but is often materially different for individual issuers.

The ICR is also used by the credit portfolio managers when making their decision to buy or sell bonds and to determine position size for the funds that we manage. The Head of Credit Research is responsible for ensuring the consistency and quality of the ESG inputs.

Counterparty Reviews

We annually review and rate our counterparties on a number of factors including ESG. The counterparty review relies on external ESG service providers, commentary from our analysis, and in 2017 will also include a survey of our counterparties where they are not adequately covered by our external providers.

The counterparty review is provided to the counterparties and has been the source of engagement with some counterparties on their ESG performance. The reviews also determine how much and whether we will trade with different counterparties. All other things being equal, a low ESG rating will make it less likely that we will trade with a particular counterparty. 

社債(非金融)

Credit and Fixed Income Teams

Assessment and monitoring

Analysts identify ESG risks during their bottom-up credit research. We use customised ESG rankings as a starting point for assessments. Analysts consider these alongside their own research with reference to a variety of other external sources. Where external ESG ratings are often not available there is a greater reliance on the analysts assessments. 

By analysing and assessing ESG issues within a company, we can identify sources of non-financial risk. In line with our credit philosophy of avoiding the losers, we are able to identify companies with a higher default risk than the balance sheet implies. This gives us greater insight than that offered by a rating from a traditional credit agency.

Integration

The team assigns a proprietary internal credit rating (ICR) to every bond we review. The ICR is a forward looking measure of default risk and is one of the key outputs of our research process. It reflects all risks relevant for that issuer, including ESG risk. Our ICR is on the same scale as ratings assigned by the ratings agencies but is often materially different for individual issuers.

The ICR is also used by the credit portfolio managers when making their decision to buy or sell bonds and to determine position size for the funds that we manage. The Head of Credit Research is responsible for ensuring the consistency and quality of the ESG inputs.

 

証券化商品

Credit and Fixed Income Teams

Assessment and monitoring

Analysts identify ESG risks during their bottom-up credit research. We use customised ESG rankings as a starting point for assessments. The only difference between securitised bonds and corporate bonds is that external ESG ratings are often not available on so there is a greater reliance on the analysts assessments. 

By analysing and assessing ESG issues within a company, we can identify sources of non-financial risk. In line with our credit philosophy of avoiding the losers, we are able to identify companies with a higher default risk than the balance sheet implies. This gives us greater insight than that offered by a rating from a traditional credit agency.

Integration

The team assigns a proprietary internal credit rating (ICR) to every bond we review. The ICR is a forward looking measure of default risk and is one of the key outputs of our research process. It reflects all risks relevant for that issuer, including ESG risk. Our ICR is on the same scale as ratings assigned by the ratings agencies but is often materially different for individual issuers.

The ICR is also used by the credit portfolio managers when making their decision to buy or sell bonds and to determine position size for the funds that we manage. The Head of Credit Research is responsible for ensuring the consistency and quality of the ESG inputs.

14.3. 補足情報。 [任意]


FI 15. Integration - ESG information in investment processes

15.1. ESG情報が、通常、投資プロセスの一部としてどのように使用されるのか記載してください。

当てはまるものをすべて選択してください
SSA
社債(金融)
社債(非金融)
証券化商品​
ESG分析をファンダメンタル分析に組み込んでいる
ESG分析を証券ウェイト判断に組み込んでいる
ESG分析をポートフォリオ構築判断に組み込んでいる
ESG分析は組織内の信用格付けまたは評価の標準要素になっている
発行体のESG分析が、投資委員会の標準議題になっている
組織内の調査レポートまたは同様文書で定期的にESG分析が取り上げられる
ESG分析は、進行中のポートフォリオ監視の標準項目に入っている
ESG分析は、すべての組織内の発行体概要または同様文書に含まれる
その他(具体的に記載してください)

15.2. 補足情報 [任意]


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

16.1. 組織の統合プロセスでESG問題をどのように検討するか示してください。

E(環境)
S(社会)
G(ガバナンス)
SSA

Environmental

Social

Governance

社債(金融)

Environmental

Social

Governance

社債(非金融)

Environmental

Social

Governance

証券化商品

Environmental

Social

Governance

16.2. 組織の統合プロセスでE/S/G要因を検討する方法を詳しく説明してください。

SSA

ESG issues can impact on a sovereign's ability to generate sustainable revenues or potentially increase its future costs, affecting its ability to repay bond holders.

For the emerging market debt team ESG factors are incorporated in the following way.

Issues are identified and considered in the course of the team's investment analysis. At the core of their process is the Key Factor Model (KFM). The KFM is comprised of six factors, or angles, from which we approach the analysis of the issuers in the team's investment universe. Three of these factors are intimately related to RI and stewardship: fiscal policy, politics, and structural reform.

The team seeks to monitor the investment restrictions put in place by the national and supranational entities relevant to their universe including: national foreign policy measures, United Nations sanctions, European investment restrictions, among others.

The majority of information the team needs in order to analyse sovereign issuers is publicly available through National Statistics Offices. However, it is important for the analysts to spend time on the ground and observe country conditions first-hand to verify whether the statistics or the news is giving the full picture. This time spent on the ground can include meetings with government officials, but a great deal can also be gauged simply by observing the surrounding environment.

For the Fixed Income and Credit teams ESG factors are incorporated in the following way:

The team is still at an initial stage of incorporating ESG issues into our assessment for sovereign issuers. Many of the indicators and data the team use to arrive at their assessment of ESG risks do not apply for certain sovereign issuers. For instance, country or corporate criteria for assessing ESG risks do not apply for supranationals. These issuers have a social or sustainable policy objective but there is limited reporting on ESG performance to enable bond investors to assess and monitor these risks. The challenge is to find the appropriate data in order to assess the risks for a range of sovereign issuers and to understand how ESG risks impact the risk of default for these issuers.

社債(金融)

Credit and Fixed Income Teams

Assessment and monitoring

Analysts identify ESG risks during their bottom-up credit research. We use customised ESG rankings as a starting point for assessments. Analysts consider these alongside their own research with reference to a variety of other external sources.

By analysing and assessing ESG issues within a company, we can identify sources of non-financial risk. In line with our credit philosophy of avoiding the losers, we are able to identify companies with a higher default risk than the balance sheet implies. This gives us greater insight than that offered by a rating from a traditional credit agency.

Integration

The team assigns a proprietary internal credit rating (ICR) to every bond we review. The ICR is a forward looking measure of default risk and is one of the key outputs of our research process. It reflects all risks relevant for that issuer, including ESG risk. Our ICR is on the same scale as ratings assigned by the ratings agencies but is often materially different for individual issuers.

The ICR is also used by the credit portfolio managers when making their decision to buy or sell bonds and to determine position size for the funds that we manage. The Head of Credit Research is responsible for ensuring the consistency and quality of the ESG inputs.

Counterparty Reviews

We annually review and rate our counterparties on a number of factors including ESG. The counterparty review relies on external ESG service providers, commentary from our analysis, and in 2017 will also include a survey of our counterparties where they are not adequately covered by our external providers.

The counterparty review is provided to the counterparties and has been the source of engagement with some counterparties on their ESG performance. The reviews also determine how much and whether we will trade with different counterparties. All other things being equal, a low ESG rating will make it less likely that we will trade with a particular counterparty. 

社債(非金融)

Credit and Fixed Income Teams

Assessment and monitoring

Analysts identify ESG risks during their bottom-up credit research. We use customised ESG rankings as a starting point for assessments. Analysts consider these alongside their own research with reference to a variety of other external sources.

By analysing and assessing ESG issues within a company, we can identify sources of non-financial risk. In line with our credit philosophy of avoiding the losers, we are able to identify companies with a higher default risk than the balance sheet implies. This gives us greater insight than that offered by a rating from a traditional credit agency.

Integration

The team assigns a proprietary internal credit rating (ICR) to every bond we review. The ICR is a forward looking measure of default risk and is one of the key outputs of our research process. It reflects all risks relevant for that issuer, including ESG risk. Our ICR is on the same scale as ratings assigned by the ratings agencies but is often materially different for individual issuers.

The ICR is also used by the credit portfolio managers when making their decision to buy or sell bonds and to determine position size for the funds that we manage. The Head of Credit Research is responsible for ensuring the consistency and quality of the ESG inputs.

証券化商品

Credit and Fixed Income Teams

Assessment and monitoring

Analysts identify ESG risks during their bottom-up credit research. Analysts consider these alongside their own research with reference to a variety of other external sources. The only difference between securtised bonds and corporate bonds is that external ESG ratings are often not available on so there is a greater reliance on the analysts assessments. 

By analysing and assessing ESG issues within a company, we can identify sources of non-financial risk. In line with our credit philosophy of avoiding the losers, we are able to identify companies with a higher default risk than the balance sheet implies. This gives us greater insight than that offered by a rating from a traditional credit agency.

Integration

The team assigns a proprietary internal credit rating (ICR) to every bond we review. The ICR is a forward looking measure of default risk and is one of the key outputs of our research process. It reflects all risks relevant for that issuer, including ESG risk. Our ICR is on the same scale as ratings assigned by the ratings agencies but is often materially different for individual issuers.

The ICR is also used by the credit portfolio managers when making their decision to buy or sell bonds and to determine position size for the funds that we manage. The Head of Credit Research is responsible for ensuring the consistency and quality of the ESG inputs.

16.3. 補足情報。 [任意]


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