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

Parnassus Investments

PRI reporting framework 2017

Export Public Responses
Pdf-img

You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income

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
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.

Parnassus Investments follows a responsible investment approach to understand the full impact of a company. We carefully consider a company's environmental, social and governance (ESG) factors. By incorporating ESG factors into our fundamental investment-process, we believe we can identify risks and opportunities that the market may have ignored, and identify responsible companies.

The responsible investment process begins by applying exclusionary screens to the list of investment ideas approved by a portfolio manager for due diligence. The screens eliminate companies (or agencies, as applicable to the Fixed Income Fund) that derive significant revenue from the manufacture of alcohol, tobacco or weapons, or have significant involvement with nuclear power, gambling or Sudan. From this investable universe the investment team then begins its fundamental analysis.

The next step in the responsible investment process is for a company to undergo a proprietary ESG evaluation. ESG research is fully integrated into the investment process such that both fundamental and ESG research analysts are able to identify and address company-specific ESG issues.

04.3. Additional information [Optional].


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 (financial)
Corporate (non-financial)
Securitised
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

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

Parnassus Investments applies exclusionary screens to the entire investment universe. The Parnassus exclusionary screens apply to all securities in the Fixed Income portfolio, including corporate, SSA and asset-backed securities. The purpose of the exclusionary screens is to avoid investment in companies and agencies that derive significant revenue from the following activities:

  • Manufacture alcohol or tobacco products
  • Direct involvement with gambling
  • Manufacture of weapons
  • Generation of electricity from nuclear power
  • Business involvement with Sudan

U.S. Treasuries are available for inclusion in the Parnassus Fixed Income Portfolio as they do not violate the firm's policy on exclusionary screens.

Regarding corporate bonds, Parnassus Investments also seeks to invest in companies with positive performance on ESG factors that include:

  • Corporate governance and business ethics
  • Employee benefits and corporate culture
  • Stakeholder relations
  • Product, customers and supply chain
  • Environmental impact

Regarding SSA-related organizations, Parnassus Investments considers environmental and social factors on a case-by-case basis.

07.3. Additional information. [Optional]


FI 08. Negative screening - overview and rationale

08.1. Indicate why you conduct negative screening.

SSA

SSA

Corporate (financial)

Corporate (fin)

Corporate (non-financial)

Corporate (non-fin)

Securitised

Securitised

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

Parnassus Investments applies exclusionary screens to the entire investment universe. The spirit of these exclusionary screens is to avoid investment in companies with negative impacts that outweigh any potential benefits from their business activities. Parnassus Investments does not invest in companies that derive significant revenue from the following activities:

  • Manufacture alcohol or tobacco products
  • Direct involvement with gambling
  • Manufacture of weapons
  • Generation of electricity from nuclear power
  • Business involvement with Sudan

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?
Positive/best-in-class screening

10.2. Additional information. [Optional]


(C) Implementation: Integration

FI 14. Integration overview

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

For corporate debt, the Fund subjects investment ideas to the same Responsible Investment Exclusionary Screens and Qualitative Assessments as the Advisor's other US funds. On a case‐by-case basis, the Advisor may alter ESG criteria from the Qualitative Assessment to accommodate debt instruments.

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

SSA

The Parnassus Investments Fixed Income Fund invests in U.S. Treasuries. Parnassus Investments recognizes that there are some social investors who question investing in U.S. Treasuries due to the Government's funding of the Department of Defense. However, the Parnassus screens focus on excluding companies that generate significant revenue from the manufacture of alcohol, tobacco or weapons, companies that have direct gambling operations, companies that generate electricity from nuclear power facilities, and companies with business involvement in Sudan. Since the U.S. Government does not fit those criteria, U.S. Treasuries are available for inclusion in the Parnassus Fixed-Income portfolio as they do not violate the firm's responsible investment policy.

The Fund may also invest in bonds issued by Supranational Organizations, which are subject to the same Responsible Investment Exclusionary Screens as our equity funds.

Corporate (financial)

For corporate debt, the Fund subjects investment ideas to the same Responsible Investment Exclusionary Screens and Qualitative Assessments as the Advisor's other US funds. On a case-by-case basis, the Advisor may alter ESG criteria from the Qualitative Assessment to accommodate debt instruments.

Corporate (non-financial)

For corporate debt, the Fund subjects investment ideas to the same Responsible Investment Exclusionary Screens and Qualitative Assessments as the Advisor's other US funds. On a case-by-case basis, the Advisor may alter ESG criteria from the Qualitative Assessment to accommodate debt instruments.

Securitised

Parnassus Investments will invest primarily in investment grade tranches of residential and commercial mortgage-backed securities, or agencies. We narrow the universe by reviewing the composite loans in different portfolios. Certain portfolios are selected for their overall composition, like high exposure to multi‐family loans and office loans. Other portfolios are avoided, if they have significant exposure to our exclusionary screens. Additional portfolios may be excluded if they have significant exposure to qualitative concerns.

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
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
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]

Parnassus Investments' responsible investment process begins by applying exclusionary screens to the list of investment ideas approved by a portfolio manager for due diligence. The screens eliminate companies that derive significant revenue from the manufacture of alcohol, tobacco or weapons, or have significant involvement with nuclear power, gambling or Sudan. From this investable universe the investment team then begins its fundamental analysis.

The next step in the responsible investment process is for an issuer or company to undergo a rigorous, proprietary ESG evaluation. ESG research is fully integrated into the investment process such that both fundamental and ESG research analysts are able to identify and address company-specific ESG issues.


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
SSA

Environmental

Social

Governance

Corporate (financial)

Environmental

Social

Governance

Corporate (non-financial)

Environmental

Social

Governance

Securitised

Environmental

Social

Governance

16.2. Please provide more detail on how you review E, S and G factors in your integration process.

SSA

The Parnassus Fixed Income Fund invests in U.S. Treasuries. Parnassus Investments recognizes that there are some social investors who question investing in U.S. Treasuries due to the Government's funding of the Department of Defense. However, the Parnassus screens focus on excluding companies that generate significant revenue from the manufacture of alcohol, tobacco or weapons, companies that have direct gambling operations, companies that generate electricity from nuclear power facilities, and companies with business involvement in Sudan. Since the U.S. Government does not fit those criteria, U.S. Treasuries are available for inclusion in the Parnassus Fixed Income Fund as they do not violate the firm's responsible investment policy.

The Fund may also invest in bonds issued by Supranational Organizations, which are subject to the same Responsible Investment Exclusionary Screens and Qualitative Assessments as the Advisor's other U.S. funds.

Corporate (financial)

For corporate debt, the Fund subjects investment ideas to the same Responsible Investment Exclusionary Screens and Qualitative Assessments as the Advisor's other U.S. funds. On a case‐by-case basis, the Advisor may alter ESG criteria from the Qualitative Assessment to accommodate debt instruments.

Corporate (non-financial)

For corporate debt, the Fund subjects investment ideas to the same Responsible Investment Exclusionary Screens and Qualitative Assessments as the Advisor's other U.S. funds. On a case‐by-case basis, the Advisor may alter ESG criteria from the Qualitative Assessment to accommodate debt instruments.

Securitised

The Parnassus Fixed Income Fund invests in agency mortgage-backed securities. The Fund will invest primarily in investment grade tranches of residential and commercial mortgage-backed securities, or agencies. We narrow the universe by reviewing the composite loans in different portfolios. Certain portfolios are selected for their overall composition, like high exposure to multi‐family loans and office loans. Other portfolios are avoided, if they have significant exposure to our exclusionary screens. Additional portfolios may be excluded if they have significant exposure to qualitative concerns.

16.3. Additional information.[OPTIONAL]


Top