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Ashmore Group plc

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

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

Ashmore’s funds and segregated accounts each have a specific investment mandate which sets out the parameters for investment. Within the Equities and Corporate Debt themes Ashmore is able to screen client portfolios to meet client requirements for geographic, sector and stock specific restrictions. Stock specific restrictions may include securities which meet clients’ own criteria.

Examples of investment areas where screening of portfolios can be offered based on (or informed by) client requirements (using recognised investment industry identifiers and coding into Ashmore’s portfolio management system) include alcohol, animal / food products, armaments manufacturers or dealers, gambling, pornography and tobacco.

Ashmore screens for, and prohibits, investment in companies manufacturing cluster munitions banned under the Oslo Convention. Ashmore seeks to comply  at all times with all sanctions imposed by applicable government authorities, and also, at a geographical level, screens across all investment themes for countries which are on the United Nations Security Council and EU/UK Sanctions and the US Office of Foreign Assets and Control (OFAC) lists, (for example during the  Russia/Ukraine crisis).

04.3. Additional information. [Optional]

Ashmore manages a number of bespoke segregated mandates with customised exclusion lists as per client requirements. 

 


FI 05. Negative screening - overview and rationale

05.1. Indicate why you conduct negative screening.

SSA

SSA

Corporate (non-financial)

Corporate (non-fin)

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

Ashmore’s funds and segregated accounts each have a specific investment mandate which sets out the parameters for investment. Within the Equities and Corporate Debt themes Ashmore is able to screen client portfolios to meet client requirements for geographic, sector and stock specific restrictions. Stock specific restrictions may include securities which meet clients’ own criteria.

Examples of investment areas where screening of portfolios can be offered based on (or informed by) client requirements (using recognised investment industry identifiers and coding into Ashmore’s portfolio management system) include alcohol, animal / food products, armaments manufacturers or dealers, gambling, pornography and tobacco.

Ashmore screens for, and prohibits, investment in companies manufacturing cluster munitions banned under the Oslo Convention. Ashmore seeks to comply  at all times with all sanctions imposed by applicable government authorities, and also, at a geographical level, screens across all investment themes for countries which are on the United Nations Security Council and EU/UK Sanctions and the US Office of Foreign Assets and Control (OFAC) lists, (for example during the  Russia/Ukraine crisis).

05.3. Additional information. [Optional]

Ashmore manages a number of bespoke segregated mandates with customised exclusion lists as per client requirements.


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?
Positive/best-in-class screening

07.2. Additional information. [Optional]

Ashmore’s chosen method of importing ESG considerations efficiently into our investment processes is based substantially on our own rigorous research (country visits, research trips, analysis of significant events such as elections) and the ranking of such considerations alongside other key risk and investment criteria (valuations, technical, fundamentals, politics). 

As described in last year’s PRI questionnaire, Ashmore Portfolio managers make a forward-looking assessment of ESG risks, and the likely impact on sovereign and quasi-sovereign bond prices (both External Debt and Local Currency Debt) should that risk materialise. Historical data on relevant ESG factors may be reviewed. However, this data tends to be infrequent and is of limited use in forward looking assessments. More important are the findings from Ashmore’s own investment teams from frequent country visits and discussions with policy makers. The risk assessment is therefore mainly qualitative in nature and captured in scores of 1, 2, 3 for low, medium, and high risk. The impact assessment, similarly using scores of 1, 2, 3 for low, medium and high impact on bond prices, is also mainly qualitative in nature. While for some ESG factors, such as a particular environmental disaster, the likely economic costs can be calculated; the actual risk to the country’s ability and willingness to pay its debt, and the impact on bond prices, is not a straightforward conclusion from such economic costs. This has to be assessed based on Ashmore’s own assessment of the likely reaction of policy makers. These assessments are done ad-hoc whenever new information become available (for instance following a research trip), and in a formal meeting once a quarter for all 70+ countries in which Ashmore invests. The Country Risk Scores are discussed in every weekly Fixed Income Investment Committee meeting. These are a direct input, among others, in investment decision-making.

Ashmore has now formally introduced a quarterly review of the following data, to provide context for the scoring methodology and ensure portfolio managers take the latest available data into account when they make their assessments. The data sets they review are:

 

 Environment:        - ND Gain Index by Notre Dame University

                                  - CO2 Consumption per capita by The Global Carbon Project

 

 Social:                    - Human Development Index by the UN

                                   - Index of Economic Freedom by Heritage Foundation

 

 Governance:         - Corruption Perception Index by Transparency International

                                  - Democracy Index by the Economist Intelligence Unit

                                  - Government Effectiveness Index by World Bank  


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