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Bank of America Global Wealth and Investment Management

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
80 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
20 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (financial)
80 Screening alone
0 Thematic alone
0 Integration alone
20 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)
79 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
21 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.

U.S. Trust:  The following description applies only to the U.S. Trust Socially Innovative Fixed Income portfolio. U.S. Trust utilizes a proprietary Social Innovation screening process, by which fixed income investment universes (corporate or otherwise) are screened across 400 different data points related to ESG issues. U.S. Trust segments these data points into three categories: Environmental Stewardship, Human Capital Engagement, and Corporate Citizenship. The Social Innovation screening process serves to narrow down the investment universe to only those issuers that exemplify top stewards of the above mentioned categories. The screening process is proprietary and dynamic which allows the portfolio managers to customize for our clients based on specific ESG concerns. 

MSG/MAA:  MAA offers negative screening capability for corporate fixed income strategies at the direction/request of the client.  Screening alone accounts for 100% of MSG/MAA’s approach.

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]

US Trust:  The Social Innovation screen seeks to find companies that are best-in-class across the three focus areas within the screening process: Environmental Stewardship, Human Capital Engagement, and Corporate Citizenship. We also employ a Performance Review which is designed to measure how effectively corporations implement the policies and procedures described and evaluated in the previous step, and whether the company capitalizes on external incentives for good corporate behavior. We believe the the 400 data points used in the screening process identify companies that are having positive social impact while simulataneously creating economic advantages for their businesses. The scoring process takes place after each quarter-end and the portfolios are adjusted accordingly. Given U.S. Trust's discretionary approach, changes are implemented and clients may speak with their portfolio managers to be made aware of any changes in a client's portfolio. 

MSG/MAA: For the discretionary investment management in Merrill Lynch, MAA uses screens provided by a third party provider to negatively screen accounts. These research screens encompass religious, industry, country, sector, and individual company screens. At present time, clients and/or beneficiaries are not notified when changes to the underlying screened components are adjusted. 


(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

US Trust:  For positive best-in-class screening, we test the companies broadly against the key characteristics that are designed to identify corporations that achieve positive social impact through progressive policies believed to be creators of value. This description applies only to the UST Socially Innovative Fixed Income portfolio.

MSG/MAA:  For the discretionary investment management in Merrill Lynch, MAA uses 38 screens provided by a third party provider to negatively screen accounts. These research screens encompass religious, industry, country, sector, and individual company screens.

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.

U.S. Trust and MAA only apply negative screening of certain issuers at the specific request of clients.

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?
Positive/best-in-class screening

07.2. Additional information. [Optional]

US Trust:  Boxes are checked with respect to US Trust activity.  Breaches are brought directly to the portfolio managers of the strategy and an attempt to clarify client-initiated exceptions are made. It is common for clients to direct breaches that must be documented in the clients' investment contract with U.S. Trust (Investment Policy Statement. Applies only to UST Socially Innovative Fixed Income portfolio.)

MSG/MAA:  MSG Business Governance performs quarterly oversight reviews working closely with the MAA team that utilize the third party data provider’s sector and industry security classification to implement and monitor client restrictions.

 


(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.

Not applicable.

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]

U.S. Trust: The above response applies to U.S. Trust Socially Innovative Investing Fixed Income customization only.


(C) Implementation: Integration

FI 11. Integration overview

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

US Trust:  The GWIM CIO Portfolio Oversight Team measures the portfolio management team’s ability to meet their stated investment objective through consistent execution of their philosophy and process.

The GWIM CIO Portfolio Oversight Team performs one of the risk management functions for all U.S. Trust equity and fixed income strategies.  The GWIM CIO Portfolio Oversight Team conducts a biannual review that analyzes management, research, and investment factors to influence a model portfolio’s performance. On a biannual basis, the The GWIM CIO Portfolio Oversight Team and portfolio management teams will review the qualitative and quantitative output of the working group and identify sources of under/over performance.  Factors analyzed include currency exposure, geographic exposure, cap bias, and interest rate exposure, among others.  The The GWIM CIO Portfolio Oversight Team is chaired by a senior member of the Portfolio Analytics and Consulting team, including members of the Investment Solution team, and U.S. Trust’s Compliance Risk Management team.

This process is applied on biannual basis to all equity and fixed income internally managed solutions.  GWIM CIO Portfolio Oversight Team is independent of the Socially Innovative Investing team. 

MSG/MAA:  MAA does not integrate ESG into traditional financial analysis for it's screening capabilities.

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

Corporate (financial)

US Trust:  The GWIM CIO Portfolio Oversight Team measures the portfolio management team’s ability to meet their stated investment objective through consistent execution of their philosophy and process.

The GWIM CIO Portfolio Oversight Team performs one of the risk management functions for all U.S. Trust equity and fixed income strategies.  The GWIM CIO Portfolio Oversight Team conducts a biannual review that analyzes management, research, and investment factors to influence a model portfolio’s performance. On a biannual basis, the The GWIM CIO Portfolio Oversight Team and portfolio management teams will review the qualitative and quantitative output of the working group and identify sources of under/over performance.  Factors analyzed include currency exposure, geographic exposure, cap bias, and interest rate exposure, among others.  The The GWIM CIO Portfolio Oversight Team is chaired by a senior member of the Portfolio Analytics and Consulting team, including members of the Investment Solution team, and U.S. Trust’s Compliance Risk Management team.

This process is applied on biannual basis to all equity and fixed income internally managed solutions.  GWIM CIO Portfolio Oversight Team is independent of the Socially Innovative Investing team. 

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)
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]

U.S. Trust – The selections above only apply to the UST Socially Innovative Fixed Income customization.


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

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

Corporate (financial)

U.S. Trust: The portfolio management team leverages approximately 400 ESG data points, provided by a third party data provider, that are incorporated into the social innovation positive screening process. This process only applies to the U.S. Trust Socially Innovative Fixed Income customization.

13.3. Additional information.[OPTIONAL]


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