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Public Sector Pension Investment Board

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
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)
0 Screening alone
0 Thematic alone
0 Integration alone
100 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)
0 Screening alone
0 Thematic alone
0 Integration alone
100 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.

As part of its investment process for internally managed fixed income securities, PSP Investments looks to identify and consider any material risks, which would include ESG material risks. In particular, we consider whether all  risks including ESG, are appropriately reflected in the pricing of fixed income securities of corporate issuers. The materiality of all factors including ESG factors is assessed based on the sector, region, timescale and leverage of the issuer. This approach offers the required flexibility to take under consideration the ESG risks that are relevant and material to a company’s financial performance and, ultimately, credit worthiness and valuation. We also engage with corporate issuers in respect to ESG issues. Finally, PSP Investments is committed to effectively and efficiently implementing legally-binding investment restrictions it is subject to, and any other investment restrictions that may be determined from time to time by the Board of Directors. Currently, the restrictions apply to issuers engaged in activities related to controversial weapons or subject to trade and economic sanctions. Any countries or issuers that are restricted will be blocked (negative/exclusionary screening) on the trading platform.

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:

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

03.3. Additional information. [Optional]

PSP Investments ensures that the screening of countries and issuers is based on robust analysis. With the assistance of service providers, the Responsible Investment Group of PSP Investments undertakes comprehensive research to determine ESG issues. The research is updated regularly to ensure that portfolio holdings comply with PSP Investments' investment policies. A periodic review of the quality of the research undertaken and provided is also carried out.


(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

PSP Investments is committed to effectively and efficiently implementing legally-binding investment restrictions it is subject to, and any other investment restrictions that may be determined from time to time by the Board of Directors. Currently, the restrictions apply to issuers engaged in activities related to controversial weapons or subject to trade and economic sanctions. Any countries or issuers that are restricted will be blocked (negative/exclusionary screening) on the trading platform.

04.3. Additional information. [Optional]


FI 05. Negative screening - overview and rationale

05.1. Indicate why you conduct negative screening.

SSA

SSA

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.

PSP Investments is committed to effectively and efficiently implementing legally-binding investment restrictions it is subject to, and any other investment restrictions that may be determined from time to time by the Board of Directors. Currently, the restrictions apply to issuers engaged in activities related to controversial weapons or subject to trade and economic sanctions. Any countries or issuers that are restricted will be blocked (negative/exclusionary screening) on the trading platform.

05.3. Additional information. [Optional]


FI 06. Examples of ESG factors in screening process (Private)


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?

other description

          If new entries are added to the list of restricted countries or issuers, a portfolio audit will be performed to assess exposure.
        

07.2. Additional information. [Optional]


(C) Implementation: Integration

FI 11. Integration overview

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

As part of its investment process for internally managed fixed income securities, PSP Investments looks to identify and consider any material risks, which would include ESG material risks. In particular, we consider whether all  risks including ESG, are appropriately reflected in the pricing of fixed income securities of corporate issuers. The materiality of all factors including ESG factors is assessed based on the sector, region, timescale and leverage of the issuer. This approach offers the required flexibility to take under consideration the ESG risks that are relevant and material to a company’s financial performance and, ultimately, credit worthiness and valuation.  We also engage with corporate issuers in respect to ESG issues.

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

Corporate (financial)

As part of its investment process for internally managed fixed income securities, PSP Investments looks to identify and consider any material risks, which would include ESG material risks. In particular, we consider whether all  risks including ESG, are appropriately reflected in the pricing of fixed income securities of corporate issuers. The materiality of all factors including ESG factors is assessed based on the sector, region, timescale and leverage of the issuer. This approach offers the required flexibility to take under consideration the ESG risks that are relevant and material to a company’s financial performance and, ultimately, credit worthiness and valuation. We also engage with corporate issuers in respect to ESG issues.

Corporate (non-financial)

As part of its investment process for internally managed fixed income securities, PSP Investments looks to identify and consider any material risks, which would include ESG material risks. In particular, we consider whether all  risks including ESG, are appropriately reflected in the pricing of fixed income securities of corporate issuers. The materiality of all factors including ESG factors is assessed based on the sector, region, timescale and leverage of the issuer. This approach offers the required flexibility to take under consideration the ESG risks that are relevant and material to a company’s financial performance and, ultimately, credit worthiness and valuation. We also engage with corporate issuers in respect to ESG issues.

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
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
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.

Corporate (financial)

As part of its investment process for internally managed fixed income securities, PSP Investments looks to identify and consider any material risks, which would include ESG material risks. In particular, we consider whether all  risks including ESG, are appropriately reflected in the pricing of fixed income securities of corporate issuers. The materiality of all factors including ESG factors is assessed based on the sector, region, timescale and leverage of the issuer. This approach offers the required flexibility to take under consideration the ESG risks that are relevant and material to a company’s financial performance and, ultimately, credit worthiness and valuation. We also engage with corporate issuers in respect to ESG issues on occasion.

Corporate (non-financial)

As part of its investment process for internally managed fixed income securities, PSP Investments looks to identify and consider any material risks, which would include ESG material risks. In particular, we consider whether all  risks including ESG, are appropriately reflected in the pricing of fixed income securities of corporate issuers. The materiality of all factors including ESG factors is assessed based on the sector, region, timescale and leverage of the issuer. This approach offers the required flexibility to take under consideration the ESG risks that are relevant and material to a company’s financial performance and, ultimately, credit worthiness and valuation.  We also engage with corporate issuers in respect to ESG issues on occasion.

13.3. Additional information.[OPTIONAL]


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