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 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.