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Universities Superannuation Scheme - USS

PRI reporting framework 2018

Export Public Responses

You are in Direct - Fixed Income » Outputs and outcomes


FI 18. Financial/ESG performance

18.1. 債券におけるESG分析の組み入れが投資結果やESG実績に与えている影響を組織が測定するのかどうかを明示してください。


18.2. その方法を説明してください [任意]

Carbon Footprint

We carbon footprint our fixed income portfolio’s by comparing the carbon intensity of the portfolio to the carbon intensity of the corresponding benchmark.  We find this a useful starting point from which to identify potential hotspots in our portfolios.

Back test

Back testing / modelling was employed in the development of the new investment process for the Emerging Markets Debt (local currencies) portfolio which uses the ESG country ranking as one of three core components for portfolio construction.


USS takes an integration approach to Responsible investment. We consider that it would be very difficult to attribute portfolio performance specifically to ESG factors.   It may  be easier to identify the impact on portfolio performance when screening out sectors (but this is not our approach).

We assess ESG performance at stock level rather than portfolio level.    We do not necessarily agree with all of the analysis and rankings produced by our external research providers.  We find it much more useful to analyse the detail behind the rankings and scores and leverage internal expertise.  This is more consistent with our bottom up approach to stock analysis.

18.3. 補足情報 [任意]

FI 19. Examples - ESG incorporation or engagement

19.1. ESG分析の組み入れや発行体のエンゲージメントが、報告年度中に組織の債券投資結果に与えている影響例を示してください。



Risks associated with the transition to a lower carbon economy as they apply specifically to the autos industry.



The auto's industry faces a number of headwinds associated with the transition to a lower carbon economy and the innovation of disruptive technology,  particularly around autonomous driving and car sharing.

The product portfolio of a well known autos manufacturer was analysed and despite impressive fundamentals, a decision not to invest was taken for a number of reasons.  The company's reliance on diesel powertrains and lack of progress in terms of developing electric powertrain alternatives were important considerations in assessing potential downside risks over the medium to long term.



Concerns around the independence and entrenchment of the board were raised along with the combined role of CEO and Chairman.


The credit analyst reviewed the corporate governance arrangements at a large international holding company with the assistance of the RI Team.  It was concluded that the issues identified did not present material financial downside risks and therefore were not material in the context of fixed income investments.    The risk of material financial misstatement,  bribery & corruption and fraud were not raised.   Therefore there was no impact on the analyst's view of the company.  


Risks associated with the transition to a lower carbon economy and potential bottle necks in the supply of key commodities required for the development of electric vehicles and associated battery technology.


The Credit Team increased their weight in a large integrated mining company.  An analysis was conducted into the potential demand for seaborne thermal coal and the potential upside to demand for cobalt and copper resulting from the  transition to EV and demand for improved battery storage.  These considerations along with the company's improved balance sheet formed were key elements in the team's decision to increase their exposure.   The RI team conducted a review of ethical issues associated with the supply of cobalt.   This review included an analysis of the potential for ethical supply and political risk in DRC. 


Transition to a lower carbon economy and the risk of assets stranding both in terms of a lower for longer oil price and the potential impact of a carbon tax/ trading scheme


Climate change risk is an integral part of the credit team's analysis of the Oil & Gas sector.   This includes analysis of the cost of extraction v predicted price for oil.  Companies with assets at the higher end of the cost curve present more risk and are avoided.   This provides some protection against the potential impact of a carbon price/ tax.   This analysis was an integral part of the Credit team's decision to invest in a large integrated oil & gas company which had a relatively favourable portfolio cost profile.  The Credit team liaises closes with Oil & Gas analysts in the Equity team when analysing this sector.


Transition to a lower carbon economy and the risk of asset stranding.


Analysed oil and gas exploration company.  Found that the breakeven point of production was coming down.  This  made the company more attractive as an investment because of improved margins and less exposed to increasing regulatory risks such as carbon tax/ carbon pricing.  It also provided some protection against deflated oil prices.  Final investment decision pending.

19.2. 補足情報 [任意]

We do not make a distinction between Corporate financial and Corporate non-financial.