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Lombard Odier

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 (financial)
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)
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%

04.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

- Negative screening is applied to all funds regarding our corporate exclusion policies reflecting our organization's choices to not invest or lend money to companies which produce or distribute controversial weapons and neither participate in speculation on "essential food commodities" prices.

- Other screening strategies are applied on specific accounts to meet client demand. Others screening strategies based on ESG scores (best in class selection / worst in class exclusion / value-based screening / norm-based screening - controversies indicators) are also applied on some specific funds.

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)
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

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

1. Negative screening: exclusion of companies involved in the production or distribution of controversial weapons, Financial instruments directly linked to 'essential food commodities' (wheat, rice, soy, corn) or sectors that can be considered as 'unethical' (i.e., tobacco, alcohol, gambling, pesticides etc.). Exclusion of countries sanctionned by UN, EU or Swiss government.

2. Positive selection is designed to identify 'best in class' companies (i.e., companies displaying superior management of significant ESG risks - such as the consumption of resources, climate change, fair governance or other key social issues). Our proprietary, innovative and dynamic ESG/CAR approach (consciousness, action, results) aims to differentiate those companies simply claiming good intentions from those which demonstrate showing actual results from actions undertaken. We have developed a similar tool for sovereign bonds, even it is not yet applied in our portfolios.

3. Norm-based screening: exclusion of companies that breach internationally agreed standards or norms (i.e., child labour and other complicit violations of human rights as defined by the United Nations Global Compact principles)

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)

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

We conduct negative screening not only to ensure legal comliance of our investments, but also to match our corporate and clients values and to anticipate possible future regulations.

Companies involved in the production or distribution of controversial weapons and financial instruments directly linked to 'essential food commodities' (wheat, rice, soy, corn) are systematically excluded from our investment universe. Other negative screening are based on our clients value and range from companies companies that breach internationally agreed standards or norms (i.e., child labour) or sectors that can be considered as 'unethical' (i.e., tobacco, alcohol, gambling, pesticides etc.)

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
Norms-based screening

10.2. Additional information. [Optional]

When breaches of fund screening criteria are identified, portfolio managers are immediately notified by an email from our compliance department. Then the compliance will closely monitor the position in contact with the fund manager until the breach disappears. This process is the same for every breaches detected in the portfolio management for the Group. For the specific SRI funds, the compliance team receives daily and electronically the complete investible universe of the fund integrating the SRI constraints and filterings. They can then automatically check the fund holdings.


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