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Addenda Capital Inc.

PRI reporting framework 2018

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ESG incorporation in actively managed fixed income

Implementation processes

FI 01. Incorporation strategies applied

01.1. 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
95 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
5 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (financial)
0 Screening alone
0 Thematic alone
0 Integration alone
95 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
5 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
0 Integration alone
95 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
5 All three strategies combined
0 No incorporation strategies applied
100%

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

Addenda Capital’s approach to sustainable investing is guided by the following principles:

3.1 Good ESG policies, practices and performance have a positive influence on long-term corporate financial performance and investment performance.

3.2 Considering ESG practices and encouraging good ESG practices will help us protect and enhance the long-term value of investments for our clients.

3.3 Sustainable investing will help us fulfill our duty to act in the best long-term interests of our clients.

3.4 Our approach to sustainable investing must be continuously improved and we have a duty to proactively contribute to the development and promotion of sustainable investing globally.

3.5 Cooperation with other investors and stakeholders can help us improve our approach and can increase the effectiveness of our activities.

3.6 Sustainable investing will help us better align our investment activities with the broader objectives of our clients and the best interests of society.

Based on these principles, we have determined that using ESG integration across the board for all of our investments is the best way to incorporate ESG into our strategy. 

01.3. Additional information [Optional].


FI 02. ESG issues and issuer research (Private)


FI 03. Processes to ensure analysis is robust

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

specify description

          Work with credit ratings agencies to incorporate ESG risks.
        

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

          ESG information is in databases and some is directly accessible by relevant staff while some is accessible in co-ordination with the Sustainable Investing Team.
        

03.3. Additional information. [Optional]


(A) Implementation: Screening

FI 04. Types of screening applied

04.1. 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

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

Our clients determine the screening criteria they would like to employ. In some cases, Addenda Capital helps customize the criteria.

04.3. Additional information. [Optional]


FI 05. Negative screening - overview and rationale

05.1. Indicate why you conduct negative screening.

Corporate (financial)

Corporate (fin)

Corporate (non-financial)

Corporate (non-fin)

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

Our clients determine the screening criteria they would like to employ. In some cases, Addenda Capital helps customize the criteria.

05.3. Additional information. [Optional]


FI 06. Examples of ESG factors in screening process (Not Completed)


FI 07. Screening - ensuring criteria are met

07.1. 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?

07.2. Additional information. [Optional]


(B) Implementation: Thematic

FI 08. Thematic investing - overview (Private)


FI 09. Thematic investing - themed bond processes

09.1. Indicate whether you encourage transparency and disclosure relating to the issuance of themed bonds as per the Green Bonds Principles, Social Bond Principles, or Sustainability Bond Guidelines..

09.2. Describe the actions you take when issuers do not disburse bond proceeds as described in the offering documents.

We have yet to experience such a situation, but should it happen in the future, we would analyze the disbursement to see if we would still consider it robust enough for our internal standards. Should certain projects no longer meet our green criteria, we would no longer classify the investment (or a portion of it, if applicable) as impact themed, and would remove it from our impact reporting.

09.3. Additional information. [Optional]


FI 10. Thematic investing - assessing impact

10.1. Indicate how you assess the environmental or social impact of your thematic investments

10.2. Additional information. [Optional]


(C) Implementation: Integration

FI 11. Integration overview

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

We strongly believe monitoring ESG factors for our fixed income mandates provide better risk management, hence leading to superior returns. We also undertake ESG screening and thematic investing when our clients demand it.

A key aspect of our approach is the explicit integration of ESG issues into our investment decisions. We do not reduce our investment universe by screening out industries or business practices for ethical reasons – we rather enhance our investment decisions by considering ESG factors that could have a material impact on financial or investment performance. The team is supported by the Sustainable Investing team working together to proactively identify and assess ESG risks and opportunities in our existing investment process.

When considering the purchase of a new security, the investment team incorporates ESG considerations into their investment analysis. The investment team receives ESG analysis from Addenda's sustainable investing team that draws upon a variety of ESG sources of information.

The investment team incorporates the ESG information and analysis into their decision, along with a variety of other considerations including corporate structure, management quality, relative value and liquidity.

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

SSA

With the help of the sustainable investing team, portfolio managers consider ESG information when it comes to the fundamental analysis of new issuers. The sustainable investing team also provides information on specific ESG issues on an ad hoc when they judge it material.

Corporate (financial)

With the help of the sustainable investing team, portfolio managers consider ESG information when it comes to the fundamental analysis of new issuers. The sustainable investing team also provides information on specific ESG issues on an ad hoc when they judge it material.

Corporate (non-financial)

With the help of the sustainable investing team, portfolio managers consider ESG information when it comes to the fundamental analysis of new issuers. The sustainable investing team also provides information on specific ESG issues on an ad hoc when they judge it material.

11.3. Additional information [OPTIONAL]


FI 12. Integration - ESG information in investment processes

12.1. 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

12.2. Additional information [OPTIONAL]


FI 13. Integration - E,S and G issues reviewed

13.1. 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

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

SSA

In their analysis of sovereign issuers, portfolio managers include variables such as demographics as part of the research process.

Corporate (financial)

Investment teams are responsible for incorporating material ESG information. For corporate fixed income analysis, this could mean using data from ESG research providers such as MSCI, Sustainalytics, or Bloomberg, and identifying the best or worst performers in the portfolio on various E, S, and G, metrics. When looking at new issuers, fixed income teams may work with the equity teams to see if any ESG analysis has been previously done by the equity teams. We also compare our portfolios' weighted average carbon footprints to those of their benchmarks on a quarterly basis.

Corporate (non-financial)

Investment teams are responsible for incorporating material ESG information. For corporate fixed income analysis, this could mean using data from ESG research providers such as MSCI, Sustainalytics, or Bloomberg, and identifying the best or worst performers in the portfolio on various E, S, and G, metrics. When looking at new issuers, fixed income teams may work with the equity teams to see if any ESG analysis has been previously done by the equity teams. We also compare our portfolios' weighted average carbon footprints to those of their benchmarks on a quarterly basis.

13.3. Additional information.[OPTIONAL]


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