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Principal Global Investors

PRI reporting framework 2018

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (A) Implementation: Screening

(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)
Securitised
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

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

ESG Integration within the investment process is utilized for the purposes of risk management and alpha generation. Our research teams are organized by areas of industry sector specialization, our analysts are responsible for providing essential insights into industry trends, and company-specific considerations, which may include certain ESG issues deemed material and relevant to the evaluation of sustainable earnings trends, sentiment, and valuation. Analysts at our largest boutique utilize a Fundamental, Technical, and Valuation (FTV) factor variable framework to establish a level of conviction and ultimately a portfolio recommendation at the security and industry level. They are also expected to provide timely insights on key risk considerations at a company-specific and industry level, which may also include qualitative ESG-related considerations and events. In addition, an ESG score is integrated in to our FTV scoring model. Both industries and issuers are scored using this model. In addition, we do have client-directed socially-responsible mandates, where a screened list supplied by the client is applied as an overlay to the ESG-integration investment process.  In the future our largest fixed income boutique will offer a norms-based screen as a portfolio construction option and our dedicated High Yield boutique plans to offer carbon-footprint portfolio reports.

04.3. Additional information. [Optional]


FI 05. Negative screening - overview and rationale

05.1. Indicate why you conduct negative screening.

Corporate (non-financial)

Corporate (non-fin)

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

ESG Integration within the investment process is utilized for the purposes of risk management and alpha generation. Our research teams are organized by areas of industry sector specialization, our analysts are responsible for providing essential insights into industry trends, and company-specific considerations, which may include certain ESG issues deemed material and relevant to the evaluation of sustainable earnings trends, sentiment, and valuation. Our analysts utilize a Fundamental, Technical, and Valuation (FTV) factor variable framework to establish a level of conviction and ultimately a portfolio recommendation at the security and industry level. They are also expected to provide timely insights on key risk considerations at a company-specific and industry level, which may also include qualitative ESG-related considerations and events. In addition, an ESG score is integrated in to our FTV scoring model. Both industries and issuers are scored using this model. In addition, we do have client-directed socially-responsible mandates, where a screened list supplied by the client is applied as an overlay to the ESG-integration investment process.  In the future our largest fixed income boutique will offer a norms-based screen as a portfolio construction option and our dedicated High Yield boutique plans to offer carbon-footprint portfolio reports.

 

 

05.3. Additional information. [Optional]

We manage fixed income mandates with specific ESG exclusions. For example, we manage some US-based public pension plan mandates that place restrictions on investing in Iran and Sudan and tobacco companies, as well as some European-based pension funds with cluster munition restrictions.  In addition, some client exclusions are based upon religious beliefs, while other clients exclude companies based on: serious violations of human rights; systematic environmental damage; or breaches of global norms.


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

          Our OMS/Compliance system was updated during 2017 to a hosted solution; receiving updates to our Compliance system real-time instead of periodic software updates.
        

07.2. Additional information. [Optional]

The exclusions are noted in the clients' Investment Management Agreements. These exclusions are applied through rules within our Compliance and Order Management System. 


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