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APG Asset Management

PRI reporting framework 2018

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

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
0 Screening alone
0 Thematic alone
0 Integration alone
100 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (financial)
0 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
100 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
0 Integration alone
100 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Securitised
0 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
100 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.

One of APG's investment beliefs is that the risk-return profile can be improved by factoring in non-financial elements in the investment process. To APG Asset Management Responsible Investment is a way to improve the investment portfolio's risk-return profile while simultaneously contributing to sustainable development. In order to enable this APG focuses on companies' financial performance as well as the way in which companies deal with the theme of sustainability and how the Executives of the companies deal with their shareholders. The best way to achieve this goal is to incorporate ESG as an integral part of our investment processes.

01.3. Additional information [Optional].

For corporates in capital markets, a so-called Inclusion Policy has been developed to enable us to meaningfully and systematically identify companies that are considered to be leading or lagging on ESG. In order to assess a company’s ESG performance APG developed its own framework whereby we review practices and policies related to the UNGC themes. Companies’ performance is assed in comparison with their peers, while still requiring them to meet industry specific normative ESG expectations. Where companies are considered lagging behind, we can only invest if we believe that they can be influenced through engagement to improve. The phased implementation of this policy has started in 2017. Every investment choice has to explicitly balance risk, return, costs and ESG so that our portfolio becomes more responsible and sustainable.

In addition to a strong focus on integration, APG has minimum standards and an exclusion policy built into its investment processes. On behalf of our clients we exclude companies that are involved in the production, sales and/or distribution of anti-personnel landmines, cluster munitions, chemical and biological weapons, and nuclear weapons made in violation of the Nuclear Non-Proliferation Treaty. APG also expects companies to operate in line with the UN Global Compact principles and, in its Responsible Investment Policy, APG also states that it may exclude companies that fail to act in accordance with the principles of the UN Global Compact and show no signs of changing their practices. In addition to the exclusion policy on corporates, we exclude sovereign bonds issued by countries that are subject to an arms embargo by the UN Security Council.

The exclusion policy was last evaluated in 2015 and on a semi-annual basis we determine the latest exclusion list of companies. Per January 2018 we exclude 19 companies that are directly, or through ownership, involved in production of anti-personnel landmines, cluster munitions or nuclear weapons in violation of the NPT, we exclude 3 companies that we consider to be in violation of the UN Global Compact principles. 10 countries currently feature on the exclusion list for sovereign bonds.


FI 02. ESG issues and issuer research

02.1. Indicate which ESG factors you systematically research as part of your analysis on issuers.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
Environmental data
Social data
Governance data

02.2. Indicate what format your ESG information comes in and where you typically source it

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

02.3. Provide a brief description of the ESG information used, highlighting any differences in sources of information across your ESG incorporation strategies.

See 02.4

02.4. Additional information. [Optional]

The majority of acquired ESG information is company related, including ESG ratings and scores, analysis of policies and performance on specific issues, news and controversies related to ESG issues, and broker analyses of ESG issues. Part of this information is made available to portfolio managers via a centralized knowledge management system (KMS) in which we track our engagement with companies as well as other relevant research, financial and ESG information. For more in-depth analysis, more detailed reports are used.

We procure specialist research that establishes how companies perform against specific standards (e.g. UNGC principles) or verifies the involvement with controversial weapons (cluster munitions). The latter forms the basis for our exclusion policy. If we deem companies to potentially be in breach of the UNGC principles, we start an intensive engagement program that could ultimately result in exclusion if the company does not show sufficient progress over a period of time.

We also acquire ESG research at a country level that provides insight into the risks of investing in sovereign debt and corporates in specific countries, due to the absence of environmental legislation and processes that protect basic human rights or the lack of an institutional governance framework that would protect property rights. This information is used by some investment teams in their country allocation models. In our EMD portfolio we integrate various ESG factors into our investment decisions (including rule of law and corruption) that enables us to better assess risks in a country.


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]

ESG related information is made available to portfolio managers via a centralized knowledge management system (KMS) in which we track our engagement with companies as well as other relevant research, financial and ESG information. For more in-depth analysis, more detailed reports are used.


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