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Universities Superannuation Scheme - USS

PRI reporting framework 2018

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » Implementation processes

実施プロセス

FI 01. Incorporation strategies applied

01.1. 以下を記載してください。 (1)組織でアクティブ運用する債券投資について、どのESG組み入れ戦略や組み合わせを使用しているか(2)各戦略が適用されるアクティブ運用債券投資合計の割合(+/- 5%)

SSA
0 スクリーニングのみ
0 テーマのみ
100 統合のみ
0 スクリーニング + 統合戦略
0 テーマ + 統合戦略
0 スクリーニング + テーマ戦略
0 3つの戦略すべての組み合わせ
0 組み入れ戦略を適用していない
社債(金融)
0 スクリーニングのみ
0 テーマのみ
100 統合のみ
0 スクリーニング + 統合戦略
0 テーマ + 統合戦略
0 スクリーニング + テーマ戦略
0 3つの戦略すべての組み合わせ
0 組み入れ戦略を適用していない
社債(非金融)
0 スクリーニングのみ
0 テーマのみ
100 統合のみ
0 スクリーニング + 統合戦略
0 テーマ + 統合戦略
0 スクリーニング + テーマ戦略
0 3つの戦略すべての組み合わせ
0 組み入れ戦略を適用していない

01.2. 特定のESG組み入れ戦略を選択している主な理由と、使用する戦略の組み合わせを説明してください。

Integration

We take a bottom up approach to stock picking and therefore we consider integration to be the best approach for capturing upside and managing downside risk arising from ESG factors. USS takes an integration approach, to ESG.  This includes the analysis of thematic ESG trends.

Thematic Research

In 2017 USS established a number of projects resourced by analysts and portfolio managers across the different investment teams.   The aim of this initiative was to analyse a number of long term themes and assess the potential impact on markets (including commodities), sectors and the USS portfolio.  The long term themes analysed included; the growth of renewables,  the transition to EV’s, battery storage technologies, ethical issues in the battery supply chain, environmental regulation (such as carbon pricing and subsidies).   The focus of this work was global and the working groups established provided an opportunity to take advantage of different perspectives and expertise of colleagues across Private Equity, Fixed Income,  Multi Asset and Responsible Investment teams.

In our internally manage credit portfolio, thematic research is combined with robust bottom up fundamental analysis.

Screening

USS does not have a mandate to screen out sectors or industries on ethical grounds. 

01.3. 補足情報 [任意]


FI 02. ESG issues and issuer research

02.1. 発行体に対する分析の一部として体系的に調査するESG要因を明示してください。

SSA
社債(金融)
社債(非金融)
証券化商品
Environmental data
Social data
Governance data

02.2. 入ってくるESG情報のフォーマットと主な情報源を明示してください。

この情報の提供者を説明してください
この情報の提供者を説明してください
この情報の提供者を説明してください
この情報の提供者を説明してください
この情報の提供者を説明してください

具体的に記載してください

          We combine the Transparency International Corruption Perceptions Index, UNDP Human Development Index, Yale ﹠ Columbia Environmental Performance Index, WSJ and Heritage Foundation Index of Economic Freedom
        

02.3. 使用されているESG情報を簡単に説明してください。ESG組み入れ戦略全体における情報源の違いを明らかにしてください。

SSA Country Analytics

The SSA mandates utilise an in-house tool, first developed in 2008 and updated annually, which ranks countries based on environmental, social and governance (ESG) risks. The tool is used in the selection processes for sovereign debt in emerging markets.

The rankings are based upon an equally weighted amalgamation of the component headline scores, rebased to one hundred to give a composite ranking score.

The four indices detailed below are used:

  • Transparency International Corruption Perceptions Index
  • UNDP Human Development Index
  • Yale & Columbia Environmental Performance Index and
  • The Wall Street Journal Heritage Foundation Index of Economic Freedom. 

Corporate Credit

For corporate fixed income, the scheme has sought to adapt its RI experience and processes developed for internal equity. The internal credit portfolio managers have access to quantitative ESG data from Bloomberg initially brought into the fund for equities analysis. Further, the Credit team now share access to the 'internal research hub' (IRH) which details the qualitative RI perspectives, meeting notes, voting and engagement records from the equities and RI departments. They also post their own research notes to this page contributing to the knowledge sharing that takes place between the credit and equity teams.

02.4. 補足情報 [任意]

SSA Country Analytics (continued from FI2.3 due to word count limits)

The SSA mandates utilise an in-house tool, first developed in 2008 and updated annually, which ranks countries based on environmental, social and governance (ESG) risks. The tool is used in the selection processes for sovereign debt in emerging markets.

The rankings are based upon an equally weighted amalgamation of the component headline scores, rebased to one hundred to give a composite ranking score.

The four indices detailed below are used:

  • Transparency International Corruption Perceptions Index
  • UNDP Human Development Index
  • Yale & Columbia Environmental Performance Index and
  • The Wall Street Journal Heritage Foundation Index of Economic Freedom. 

In all instances a higher score means better performance. The indices were selected due to their credibility and accessibility, and the range of social and environmental criteria that they combine. This includes (but is not restricted to):

  • Adult literacy and education enrolment
  • Air pollution
  • Biodiversity and habitat protection
  • Carbon intensity
  • Corruption
  • Female representation
  • Investment & regulatory restrictions
  • Life expectancy
  • Population below poverty line
  • Price controls
  • Private property rights
  • Water accessibility and quality

These indices are selected because of their credibility and accessibility, and the range of social and environmental criteria that they combine. When looked at in combination these indicators provide a stronger signal than if each one was looked at in isolation.

Process

For the Emerging Market Debt portfolio (local currencies), the composite index is one of the core tools used in portfolio construction. The results of the composite country score is combined with a fundamental credit assessment and integrated with two other factors to formulate the investment strategy.  Positive ESG country scores are viewed as an indicator of lower future default risk and negative ESG scores are viewed as being an indicator of higher future default risk.  Our investment approach attempts to avoid countries where risk of default is increasing, ESG country rankings contribute to this analysis but are not the only input.

For the dollar denominated sovereign debt mandate, the ESG country scores are used as a tie breaker between issuers, where other considerations (such as liquidity and duration) are equal.  However due to the tightening of credit spreads USS is not currently active in this market. 

Corporate Credit

For corporate fixed income, the scheme has sought to adapt its RI experience and processes developed for internal equity. The internal credit portfolio managers have access to quantitative ESG data from Bloomberg initially brought into the fund for equities analysis. Further, the Credit team now share access to the 'internal research hub' (IRH) which details the qualitative RI perspectives, meeting notes, voting and engagement records from the equities and RI departments. They also post their own research notes to this page contributing to the knowledge sharing that takes place between the credit and equity teams.

The examples in FI 19 illustrate how the process works for credit.


FI 03. Processes to ensure analysis is robust

03.1. 組織のESG調査プロセスの堅牢性を確保する方法を記載してください。

03.2. ESG情報または分析を投資チーム内で共有する方法を記載してください。

          Information is shared during regular scheduled and unscheduled interaction between FI, Equities, and RI Team members. The RI team monitors and communicates ESG controversies internally.
        

03.3. 補足情報 [任意]

Note to question  FI 03.1.  The ESG ratings that our credit portfolio managers see are refreshed on a real time basis, via an automated data feed from our research provider to our Bloomberg terminals. So when a score changes the Bloomberg terminal is updated the next day. 

MSCI ESG ratings are formally reviewed on an annual cycle however the governance scoring process, which is fully dynamic and applied consistently to all companies, is updated quarterly or more frequently.   If the Corporate Governance score changes significantly this will trigger an off-cycle analyst review and may result in the change in the ESG rating.   Major controversies may also trigger off cycle ratings reviews.  USS also has access to the MSCI controversy reports which are updated dynamically, i.e. when a significant controversy is reported.

Note to question FI 03.2. ESG information is a standard item on investment case notes prepared by the  Credit team and stored in the USS’s internal research home page on Bloomberg. Further, the Fixed Income teams sit in close proximity to the equities and RI teams, facilitating the flow of information between desks.

The credit team and the RI Team also met during 2017 to review ESG company rankings. 


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