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Nykredit Realkredit Group

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
100 Screening + integration strategies
0 Thematic + integration strategies
0 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
100 Screening + integration strategies
0 Thematic + integration strategies
0 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.

The most advanced ESG-integration approach is used for SSA. This involves using ratings and internally produced evaluation based on input from numerous governmental organisation and NGO's. This is used to termine if the SSA should be excluded, but is also used in dialogue with external manager, who have their own analytical tool to integrate ESG in the investment decision.

For financial and non-financial corporates the ESG-data is mainly used for risk-surveilance and analysis. The research and procedures capture a number of ESG-elements, but Nykredit has yet to launch a systemtic approach to use ESG data as part of the valuation of a specific company. Nykredit is working on a model for this. These corporate bond portfolios all have ESG-ratings above their benchmarks.

The securitised bond are the most challenging in this context. The issuers are screened and rated. As there are only few Danish issuers of these, this is not challenging. The bond rating companies are working on incorporating ESG, and naturally this rating plays a vital role in our proces. The credit rating procedures of the individual issuers are also analyzed and used together with the ESG-rating. 

01.3. Additional information [Optional].

The really challenging part is integrating ESG in the securitised bonds. The big issue is the proceeds/ loans pooled and financed by the issued bond. Most of these finance a variety elements - housing and small businesses - in the Danish society. Most frequently we use the Danish society as a proxy for the ESG-aspects of the bond. However this is does not satisfy us and thus we are in dialogue with the two largest issuers on the possibilities better data insights to the ESG loan characteristica behind the 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.

The main source of ESG-data is our dataprovider MSCI ESG-research. Nykredit uses Bloomberg for carbon foot printing. This is supplemented by sell side research and data from NGO's.

For corporates the approach is quite similar to our approach to listed equities. The data is used for quarterly screens and ESG-risk assessments. And the data is used by the PM's, however not as systematically as on listed equities.

For SSA the data is sourced from OECD, UN and a number of NGO's to construction in-house custom made screen and ratingapproach used for the analysis of the SSA. The approach has a high emphasis on political freedoms and democratic procedures.

The securitized bonds have a number of sources. The issuers are rated, but Nykredit also uses the credit approach. The bond rating agencies play a vital role. Nykredit is in dialogue with the two largest issuers to get better data from the underlying loans/proceeds behind the issued bonds.

 

02.4. Additional information. [Optional]


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]

All funds are screened and rated each quarter. This is part of the ongoing dialogue between the CIO, PM and ESG-teams. Biannually the CIO, PM and ESG-teams discuss each portfolio.

All data are up dated weekly to the PM's systems. 

Nykredit uses a critical approach to all the data and does own analysis as part of assurance. All data providers are reevaluated every three years, where the quality of data is compared to peers. 


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