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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 » Implementation processes

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
0 Integration alone
100 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
0 Integration alone
100 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
100 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Securitised
0 Screening alone
0 Thematic alone
0 Integration alone
100 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.

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.

We screen out cluster munition and land mine manufacturers in accordance with our cluster munitions policy. We also screen sanctioned and some high risk (of sanction) countries, businesses and people. 

04.3. Additional information [Optional].


FI 05. ESG issues and issuer research

05.1. Indicate which ESG factors you systematically research as part of your analysis on issuers.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
Environmental data
Social data
Governance data

05.2. Indicate what format your ESG information comes in and where you typically source it

Indicate who provides this information  

specify description

          Multiple external sources including NGO, academic, multilateral, development organisation and government research sources etc.
        

Indicate who provides this information  

specify description

          Multiple external sources including NGO, academic, multilateral, development organisation and government research sources etc.
        

Indicate who provides this information  

specify description

          Multiple external sources including NGO, academic, multilateral, development organisation and government research sources etc.
        

Indicate who provides this information  

specific description

          Multiple external sources including NGO, academic, multilateral, development organisation and government research sources etc.
        

Indicate who provides this information  

specify description

          Multiple external sources including NGO, academic, multilateral, development organisation and government research sources etc.
        

05.3. Provide a brief description of the ESG information used, highlighting any differences in sources of information across your ESG incorporation strategies.

We subscribe to a number of ESG research services including Sustainalytics, MSCI Governance research and Reprisk. Raw ESG data is also available through Bloomberg. We have integrated these external ESG research providers ratings with Bloomberg to provide efficient access for analysts.

In addition to these sources we have access to sell side research, NGO, academic, multilateral, development organisation and government research sources.

For example for sovereign issuers we use sources like: the Corruption Perception Index (Transparency International) Human Development Index (United Nations Development Program) Ease of Doing Business (World Bank) Fragile State Index (Fund For Peace) Government Effectiveness Index (World Bank) Energy Sustainability Index (World Energy Council) among others.

The responsible investment team also distribute research reports and other information to the investment teams, however the primary responsibility for sourcing information rests with each team.

We have found company level information easier to source but not always relevant at the fixed income security level.

 

05.4. Additional information. [Optional]


FI 06. Processes to ensure analysis is robust

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

specify description

          The credit research process has a quality check by Head of Research / Manager Credit who also reviews all ESG assessments to ensure they're robust.
        

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

06.3. Additional information. [Optional]

We have a centralised research database and opinion management system (ION) which all teams have access to. ESG ratings and assessments are captured in this system.

The quality of the ratings we receive from external providers is monitored by the responsible investment team using our ESG Portfolio Monitor tool . This includes feedback from investment teams on where they disagree with ratings which in turn is fed back to the providers. This process forms part of the quarterly investment committee reporting process. In addition, as part of this process, we compare ratings from our controversy monitoring provider (RepRisk) and our ESG research providers (Sustainalytics and MSCI Governance). 

We have also initiated a regular process where we compare the ratings from three ESG research providers (Regnan, Sustainalytics and MSCI Governance) providers for our Australian equities coverage. 


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