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Dana Investment Advisors

PRI reporting framework 2018

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ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

New selection options have been added to this indicator. Please review your prefilled responses carefully.

13.1. Indicate if your organisation executes scenario analysis and/or modelling in which the risk profile of future ESG trends at portfolio level is calculated.

Is this scenario analysis based on a 2°C or lower scenario?

SG 13.1a CC. Pleased describe the resilience of your organisation’s strategy, considering different future climate scenarios.

Strategy affected
Changes to strategy
Description of scenario and time-horizon
How analysis has been used
          All investment Strategies
        
          We are embracing ESG across AUM
        
          Now and over next few years we expect to see greater impacts
        
          The analyses affect security selections
        

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]

As active equity and fixed income investors, we see opportunity to distinguish ourselves as ESG factors grow in materiality versus passive investors. So, we believe we our business and our client strategies are positioned well for the future. In the U.S., 2 degree scenario analysis is increasing, but lagging European counterparts. We learn more via collective and individual engagements and can compare with our quantitative metrics.

We do not take ESG issues into consideration in allocation efforts because the majority of our client assets are in single asset class strategies (U.S. Equity or Fixed Income). Also, our Equity Strategies are sector neutral relative to the benchmark and our corporate bond holdings are divided between financial and nonfinancials and the bands are narrow. These are intentional risk controls and part of our investment process.


SG 14. Long term investment risks and opportunity

14.1. Describe the process used to identify short, medium and long-term risks and opportunities that could have a material impact on your organisation and its activities.

As active equity and fixed income investors, we see opportunity to distinguish ourselves as ESG factors grow in materiality versus passive investors. The majority of our fixed income instruments are short term, with primary goal of preservation of capital, thus our preference for instruments with diversified loan pools and AAA credits. We are incorporating ESG analysis across our intermediate duration strategies and have already positioned for a low carbon economy. This is true for the vast majority of equity AUM as well.

14.1 CC. Describe the processes used to determine which climate-related short, medium and long-term risks and opportunities could have a material impact on your organisation and its activities.

In addition to our quantitative modeling, our fundamental analysis focuses on disruptive forces, for example,  renewables versus fossil fuels, EVs versus ICE, semiconductor growth with smart grid, and smart city expansion. We believe these shifts are happening faster than anticipated.

14.2. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following you act on.

14.2a cc. Please describe how you define “short”, “medium” and “long term”, and describe your material climate-related issues over these time horizons.

Definition
Description of material climate-related issues
Short term
          One year or less
        
          Benchmark companies on carbon intensity/footprint and energy use and efficiency
        
Medium term
          One to five years
        
          What policies do companies have in place to manage climate-impacting activities? What commitments have been made to renewable energy sources? How sensitive is a company's operations and financial performance related to energy costs?
        
Long term
          Beyond five years
        
          Estimate the potential impact of long-term changes in energy sources and consumption on a company, through demand for its products, changes in cost structure, or potential disruption in the supply chain
        

14.3. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

14.4. Indicate which of the following tools you use to manage emissions risks and opportunities

other description (1)

          Regulatory impacts
        

14.4a CC. Please provide further details on these key metric(s) used to assess climate related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Metric Trend
Limitations / Weaknesses
Weighted average carbon intensity
          
        
          
        
          
        
          
        
          
        
          
        
Carbon footprint (scope 1 and 2)
          
        
          
        
          
        
          
        
          
        
          
        
Carbon intensity
          
        
          
        
          
        
          
        
          
        
          
        

14.5. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

SG 14.4a CC: We interpreted this as a chart for our firm. As a small firm, we have not measured our own carbon footprint, however in moving to new offices (Q42016), we took a number of initiatives to be more sustainable and reduce electricity consumption. We deployed LED lighting and used recycled materials for carpeting (fishing nets). The office design used other sustainable and energy-saving materials, maximized daylight and limited plastics and vinyls.

For our investment strategies, we use carbon metrics from CDP and Trucost for our investable universe of companies. Other vendors also have carbon metrics incorporated in their scores. For example, we use Total Carbon Emissions (tCO1e) and Total Footprint (tCO2e/$M). We do the same for water, where we look at Total Water Usage and Water Footprinting. These include Direct, Purchased and Supply Chain contributions. (Please see 14.10 as well).

Our original case study is summarized publicly on the Trucost website: https://www.trucost.com/case-study/dana-investment-advisor/

 

14.6. Additional information [Optional]

14.7 CC. Describe your risk management processes for identifying, assessing, and managing climate-related risks.

Please describe

We consider climate-related risks across all sectors. We believe climate-related risks are systemic and both producers and consumers (entire supply chain) must adopt strategies to transition to low carbon economy. 

14.8 CC. Describe your processes for prioritising climate-related risks.

For equities and corporate nonfinancial bonds, we focus on sectors that are the largest part of the benchmark and/or have highest materiality impact. For example, the Technology sector is large by weight in the S&P 500  Index. Semiconductors are high intensity water and energy users. For corporate bonds, financials comprise 50% of the weigting, thus insurance company underwriting and bank loan exposures are critical.

14.9 CC. Do you conduct engagement activity with investee companies to encourage better disclosure and practices around climate-related risks?

Please describe

Engagement examples include food companies (holdings and nonholdings) and their supply chain as well as major integrated oil companies and others. See Active Ownership.

14.10 CC. Describe how you use data from climate-related disclosures.

Disclosed climate-related data are used along with a host of other metrics to help Dana make holistic investment decisions. Disclosed data is suplemented by modeled data on non-disclosing companies so that relevant metrics are available across our investable universe. The data are initially used in conjuntion with a variety of other environmental factors and ratings to calculate our internal environmental pillar score. (This environmental pillar score is then rolled up into an overall ESG score.)


SG 15. Allocation of assets to environmental and social themed areas

New selection options have been added to this indicator. Please review your prefilled responses carefully.

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.


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