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Zürcher Kantonalbank

PRI reporting framework 2018

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

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
10 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
90 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%

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

1. All listed corporates (Financials/non-Financials):

=> Exclusion of producers-of-controversial-weapons

 

2. Sustainable Investments

We distinguish between two different product-lines:

 

2.1 Corporates (Financials/Non-Financials) =>Product-line "Responsible":

=> Ex-ante exclusion criteria for companies (details see  additional information below)

Laggard-out process: The application of the exclusion criteria is followed by a sector analysis: The aim is to exlude around 20% of the worst companies in their respective industries and regions in terms of environmental protection, social and governance issues.

 

2.2 Corporates (Financials/Non-Financials) =>Product-line "Sustainable"

=>Ex-ante exclusion criteria (details see additional information below)

The application of the exclusion criteria is followed by a sector analysis with a strong focus on companies with a high "Sustainability Impact".

 

2.3 SSA (Analysis Countries) =>Product-line "Sustainable"

The latest government sustainability rating of Zürcher Kantonalbank encompasses 67 countries, among them the OECD member states, the EU and the BRIC countries. The sustainability assessment is based on 83 environmental, social and government criteria (ESG), most of which are measured by quantitative and some by qualitative factors. Each of the three dimensions has a weighting of one third in the rating. Exclusion criteria for countries see below (addtional information).

Special research process exists for different types of fixed income of supranationals and cities.

01.3. Additional information [Optional].

Additional Information to:

1. All listed corporates (Financials/non-Financials)

We systematicly exclude producers of controversial weapons.

Definition of controversial weapons:

  • Anti-personnel landmines
  • Biological and chemical weapons
  • Nuclear weapons
  • Small and light arms (added 2017)
  • Munitions and explosives for weapons
  • Cluster bombs and cluster munition

 

 

Additional Information to:

2.1 Corporates (Financials/Non-Financials) =>Product-line "Responsible"

Laggard-out process: The application of the exclusion criteria is followed by a sector analysis: The aim is to exlude around 20% of the worst companies in their respective industries and regions in terms of environmental protection, social and governance issues. The quantitative analysis compares roughly 50 environmental, social and corporate governance indicators (same process as product-line "Sustainable").

Details Ex-ante exclusion criteria for companies:

=> Anthropogenic climate change

  • Companies with coal reserves

=>Loss of biodiversity

  • Genetic engineering

=> Threat to society and health

  • Nuclear energy
  • Production of arms and war material
  • Production of tobacco and smoking products
  • Production of alcohol (turnover threshold 5%)
  • Gambling (turnover threshold 5%)
  • Child labour (own operations)
  • Pornography

 

 

Additional Information to

2.2  Analysis of Corporates (Financials/Non-Financials) in detail =>Product-line "Sustainable"

In order to define the range of sustainable products, the analysts apply a selection of very stringent exclusion criteria. The ex-ante exclusion criteria make sure that our clients do not invest in companies that contribute to the world's most serious environmental problems and social risks. Further problem areas such as the compliance ILO principles are reviewed in the analysis and monitored constantly and companies breaching standards are excluded ex-post.

Ex-ante exclusion criteria:
=> Anthropogenic climate change 

  • Companies with coal reserves
  • Extraction of fossil fuels
  • Operation of fossil-fuel power stations
  • Production of cars and aircrafts
  • Airlines 

=> Endangerment of the Earth's atmosphere

  • Production of substances that deplete the ozone layer

=>Loss of biodiversity

  • Not sustainable forestry
  • Not sustainable fishery and fish farming
  • Not sustainable palm-oil plantations
  • Genetic engineering

=> Threat to society and health

  • Nuclear energy
  • Production of arms and war material
  • Production of tobacco and smoking products
  • Production of alcohol (turnover threshold 5%)
  • Gambling (turnover threshold 5%)
  • Child labour (own operations)
  • Pornography

The application of the exclusion criteria is followed by a sector analysis: The aim is to extract those companies in their respective industries and regions that set an example by excelling at taking responsible actions in terms of environmental protection, social and governance issues. The selection of is based on a multi-step process. The quantitative analysis compares roughly 50 environmental, social and corporate governance indicators. The data is obtained from specialized providers (such as Asset4, Trucost, MSCI ESG Research & Governance Metrics or RepRisk). Then, we carry out a qualitative product and sector analysis, which is mainly built on the know-how, experience and industry-specific knowledge of our analysts.

The sector analysis is followed by a fundamental bond analysis with a strong focus on companies with a high "Sustainability Impact". The following investment opportunities were defined: Energy: Renewable energy, energy efficiency. Sustainable Mobility: Public transport, Individual transport. Knowledge: Education/Research, Interlinking. Health: Access to basic health supply, Preservation of health. Finance: Access to financial services, Financial infrastructure. Resources: Efficient use of water, resource efficiency.

 

 

Additional Information to:

2.3 SSA (Analysis Countries) =>Product-line "Sustainable"

We exclude the following countries:

  • Paris Climate Agreement not signed
  • Development of nuclear energy
  • Carrying out the death penalty
  • Violation of fundamental rights for human rights and democracy
  • Very high military budgets

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

          Zürich Kantonalbank's external RI Advisory Committee constantly checks whether the securities in the sustainable funds satisfy Zürich Kantonalbank's strict sustainability requirements.
        

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

03.3. Additional information. [Optional]

In 2016 we incorporated ESG-Data into the portfolio managementtool of our fixed-income fundamental management  team. Training of portfolio managers of fixed income fundamental team on ESG was done.


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