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LocalTapiola Asset Management Ltd

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

Our issuer specific ESG analysis is fully integrated in our in-house fixed income analysis. The ESG analysis is performed by the portfolio managers, simultanously with the traditional financial analysis. Based on the ESG analysis each issuer is also given an ESG score. The scores are updated regularly when required. Scores and information on which the ESG score is based on are documented and saved in our database that is accessible to all porfolio managers. We also publish the distributions of our ESG scores for the LocalTapiola direct corporate loan funds in the monthly fund fact sheets.

We integrate ESG issues into the SWOT-analysis, and specifically assess the risks and opportunities involved. We rarely adjust forecasts or rates based on ESG.

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

SSA

Our investment universe consists of euro denominated bonds issued mainly by EU/OECD based issuers. We consider ESG aspects in our investment criteria, particularly when looking outside our main investment universe. We also discuss ESG themes with issuers when meeting them for instance during road shows.

Euro area goverment issuers are under constant scrutiny and we follow ESG issues both through relevant media and also through special reports from industry sources. When investing in a government new to us we are particularly thourough on matters like human rights, enviromental issues. We engage issuers face to face when possible ( road shows ).

Corporate (financial)

Our general method described in FI 04.2 and FI 14.1 applies to Corporate (financial) instruments. In addition, we monitor our bank senior Green Bond investments using the green bond reports. We pay special attention to evaluating and comparing the green bond frameworks from each financial corporate issuers.

Corporate (non-financial)

Our general method described in FI 04.2 and FI 14.1 applies to Corporate (non-financial) instruments. In addition, we monitor our industrial and utilities' green bond investments using the green bond reports.

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)
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]

Additionally we have defined carbon intensive industries within our corporate bond investment universe and within these industries we only invest in best in class companies in terms of the carbon intensity.  


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

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

SSA

As our investment universe consists of euro denominated bonds issued mainly by EU/OECD based issuers, we review E and S aspects only occasionally, when deemed necessary. We consider G issues less relevant for the issuers in question. We also discuss ESG themes with issuers when meeting them for instance during road shows.

Corporate (financial)

In the environmental part of our ESG analysis, we evaluate the issuers' efforts and goals to reduce CO2 and GHG emissions, and to save in energy consumption. In addition we evaluate the issuers' other efforts to protect environment. We contact the issuers if we don't find information on their carbon footprint. In the case of bank issuers, we look what kind of criteria the banks use when assessing the borrowers' environmental impact in their corporate loan books. We asses the proportion of environmentally friendly projects and green assets funded in the banks' corporate lending, if possible, and encourage the banks to provide more specific information on their environmental impact of their lending books.

In the social part of our ESG analysis, we evaluate the issuers' efforts and goals to offer employment opportunities equally to both genders and all kind of employees incl. possibly different minorities, nationalities and races. Also, we assess what kind of initiatives the issuers' have made to promote well-being of their employees and the communities where they operate, to improve the sustainability of their employee and community relationships.

In the governance part of our ESG analysis, we evaluate how adequately the issuers' organisations are set up to cope with the increasing challenges in corporate governance. Especially, we look how the top executive officers take the responsibility of the sustainability of their operations. In our opinion, it's important that the whole management of the company takes the responsibility, and not just outsource "sustainability issues" to specific task groups, to polish the image of the company. In the case of financial institutions, there has been a lot of misconducts and sometimes frauds revealed, often originated from the past and by former management teams. Here, we asses how the companies manage the issues and past misconducts. We evaluate and discuss with the issuers, how the current management has changed to avoid similar kind of problems going forward. An essential part is to evaluate the quality of the financial and operational risk management of financial institution issuers.

Corporate (non-financial)

In the environmental part of our ESG analysis, we evaluate the issuers' efforts and goals to reduce CO2 and GHG emissions, and to save in energy consumption. We contact the issuers, if we don't find information on their carbon footprint. In addition we evaluate the issuers' other efforts to protect environment. Especially, we asses the impact on the use of energy, different resources like land and water, where that's relevant to the issuers' operations. Also, the possibility to use waste material in the production process is evaluated.

In the social part of our ESG analysis, we evaluate the issuers' efforts and goals to offer employment opportunities equally to both genders and all kind of employees incl. possibly different minorities, nationalities and races. Also, we assess what kind of initiatives the issuers' have made to promote well being of their employees and the communities where they operate, to improve the sustainability of their employee and community relationships. Depending on the operating environment, we evaluate if the issuers have potential problems with labor practices, like use of child labor or poor working conditions and salaries. For many more issuers more relevant is to evaluate, how the issuers monitor their supply chain, so that their suppliers don't violate acceptable standards regarding labor policies.

In the governance part of our ESG analysis, we evaluate how adequately the issuers' organisations are set up to cope with the increasing challenges in corporate governance. Especially, we look how the top executive officers take the responsibility of the sustainablitiy of their operations. In our opinion, it's important that the whole management of the company takes the responsibility, and not just outsource "sustainability issues" to specific task groups, to polish the image of the company. Some companies struggle with different accusations of misconduct or illegal actions. We discuss those issues with the issuer representatives, and asses whether the management takes the accusations seriously enough, and if those organisations have made necessary steps and changes to prevent possible misconducts in the future.

16.3. Additional information.[OPTIONAL]


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