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Nykredit Realkredit Group

PRI reporting framework 2018

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You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes

Implementation processes

LEI 01. Percentage of each incorporation strategy

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate (1) which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities and (2) the breakdown of your actively managed listed equities by strategy or combination of strategies (+/- 5%)

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied
26 %
Percentage of active listed equity to which the strategy is applied
70 %
Percentage of active listed equity to which the strategy is applied
4 %
Total actively managed listed equities 100%

01.2. Describe your organisation’s approach to incorporation and the reasons for choosing the particular ESG incorporation strategy/strategies.

The systematic ESG-strategy builds on top of the responsible investment policy of screening against breaches of international rights and exclusion/engagement. The ESG integration into quant strategies is limited to risk evaluation. 

Nykredit believes that ESG can be a catalyst for better returns and lower risk. As a desirable biproduct we get support for a more sustainable future.

01.3. If assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]

The 4% is a fossil free fund which combines exclusions of fossil fuels and controversial companies, i.e. weapons and tobacco, with a positive selection based on ESG.


LEI 02. Type of ESG information used in investment decision

02.1. Indicate what ESG information you use in your ESG incorporation strategies and who provides this information.

Type of ESG information

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 

Indicate who provides this information 

02.2. Provide a brief description of the ESG information used, highlighting any different sources of information across your ESG incorporation strategies.

The main source of ESG information is provided by MSCI ESG Research. When relevant we build on this with additional publicly available information provided by the companies themselves or organisations i.e. CDP, UN OECD. More and more frequently we get useful ESG-analysis from sell-side brokers.

02.3. Indicate if you incentivise brokers to provide ESG research.

02.4. Describe how you incentivise brokers.

The ESG-research is part of their research offering to Nykredit, and they have been chosen for that complete package.

02.5. Additional information.[Optional]


LEI 03. Information from engagement and/or voting used in investment decision-making

03.1. Indicate if your organisation has a process through which information derived from ESG engagement and/or (proxy) voting activities is made available for use in investment decision-making.

03.2. Additional information. [Optional]

Background and evaluation on all engagements are available to portfolio managers and the cases are discussed on an ongoing basis. When relevant, the engagement with the company is done with the portfolio manager.


(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

All companies producing weapons in conflict with the Oslo and Ottawa Conventions are excluded. Moreover, two equity funds and two corporate debt funds apply a negative SRI-screening that excludes producers and distributors of alchohol, tobacco, weapons, pornography and gambling as well as companies in breach with our normsbased screening. 

Screened by

Description

Screenings based on ESG-ratings are applied to the focus funds and thematic fund with systematic ESG-integration, but more important the ESG-data is used for the fundamental analysis and evaluation done by the PM's. 

Screened by

Description

All funds are screened on a quarterly basis against these criteria. 

04.2. Describe how the screening criteria are established, how often the criteria are reviewed and how you notify clients and/or beneficiaries when changes are made.

The screening criteria are decided by the Nykredit Forum on Sustainable Investments and, when relevant, the boards of the mutual funds. The criteria are discussed with clients and reviewed internally on an ongoing basis as part of the general yearly review of the policy. Changes are always communicated to clients. Most often changes are made as a result of dialogue with clients.


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]


LEI 06. Processes to ensure fund criteria are not breached

06.1. Indicate which processes your organisation uses to ensure fund criteria are not breached

06.2. If breaches of fund screening criteria are identified - describe the process followed to correct those breaches.

No breaches during the reporting year. Pretrade screening against the exclusion list is in place.

If a breach is identified, group compliance and the committee on responsible investment will be informed. Analysis to uncover the fault will be initiated. On the basis of the conclusions of the analysis, measures will be implemented to insure the breach will not happen again.

06.3. Additional information.[Optional]


(B) Implementation: Thematic

LEI 07. Types of sustainability thematic funds/mandates

07.1. Indicate the type of sustainability thematic funds or mandates your organisation manages.

07.2. Describe your organisation’s processes relating to sustainability themed funds. [Optional]

The fund combines exclusion of fossil fuels with a positive ESG selection proces as well as active ownership.


(C) Implementation: Integration of ESG issues

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate which ESG factors you systematically research as part of your investment analysis and the proportion of actively managed listed equity portfolios that is impacted by this analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

The ESG-data is, as previously mentioned, systematically integrated into our internally managed equity funds. In the quant fund, ESG is only used as a risk measurement and evaluation tool.


LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on a robust analysis.

09.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your integration strategy.

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information.[Optional]

A portfolio ESG-analysis are conducted of all funds quarterly and this is used to follow development according to benchmark, but also historically.


LEI 10. Aspects of analysis ESG information is integrated into

New selection options have been added to this indicator. Please review your prefilled responses carefully.

10.1. Indicate which aspects of investment analysis you integrate material ESG information into.

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

10.2a. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

10.3. Describe how you integrate ESG information into portfolio weighting.

ESG is used to identify the structural risk in the benchmark. 

10.4a. Describe the methods you have used to adjust the income forecast / valuation tool

In some portfolios the exposure to different sectors is directly adjusted based on ESG-analysis. For other portfolios with more narrow benchmarks, the company's exposure to the structural risk in their sector is valued by quantification of their exposure relative to peers. This is also used in the dialogue with the company.  

Proportion of actively managed listed equity exposed to investment analysis

10.2b. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

10.4b. Describe the methods you have used to adjust the income forecast / valuation tool

For the global portfolios, the ESG-rating of the individual company plays directly into the quantification tool that converts quality indicators into a valuation.

10.5. Additional information.


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