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Legal & General Investment Management (Holdings)

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
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

  • Our Controversial Weapons Policy applies to all active fixed income funds. The policy screens out companies involved in manufacture and production of cluster munitions, antipersonnel landmines, biological and chemical weapons.
  • It was adopted on the grounds of principle and in recognition of our support for international conventions and treaties that deem use of such weapons  unacceptable. In many jurisdictions these international legal instruments prohibit the production, stockpiling, transfer and use of certain controversial weapons.
  • Through implementation of this policy, we commit to supporting clients to comply with national and international regulation and to avoid where possible investments in companies producing weapons that contravene a key principle of international humanitarian law.
  • The screening criteria have been developed in-house by our Corporate Governance and Responsible Investment team.
  • We contract a third-party data provider to provide the research and data on company-specific involvement.
  • The screening criteria of our policy are reviewed on an annual basis, while the exclusion list is reviewed on a semi-annual basis
  • We will publish any changes to our policy on our website

04.3. Additional information. [Optional]

The policy applies to active fixed income and equity funds, certain index funds and client specific portfolios. Please see our full Controversial Weapons Policy for more information.

http://documentlibrary.lgim.com/documentlibrary/literature.html?cid=64550&lib=55458


FI 05. Negative screening - overview and rationale

05.1. Indicate why you conduct negative screening.

Corporate (non-financial)

Corporate (non-fin)

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

LGIM applies a negative screen, excluding companies involved in the manufacture and sale of cluster munitions, antipersonnel landmines, and biological and chemical weapons from all our active equity and fixed income funds.

The decision to exclude these companies was taken due to three principal reasons:

  • Firstly, we want to help our clients meet their regulatory obligations; in certain jurisdictions it is illegal to invest in the debt and equity of these companies.
  • Secondly, in many more jurisdictions it is illegal to use these weapons; therefore as a responsible investor we do not want to be financing them.
  • Thirdly, the market for such weapons is very limited and involvement in it brings reputational risk. We therefore believe it makes business and investment sense for companies to reconsider their involvement.

Our exclusion list was developed with a third-party service provider. Public, private and state-owned companies are excluded on the following basis:

  • The company is involved in the core weapons system, or components/services of the core weapons system, considered tailor-made and essential for lethal use
  • The company is involved in the production, maintenance/service, or R&D of the core weapons system

Please see our Controversial Weapons policy for more information: http://documentlibrary.lgim.com/documentlibrary/literature.html?cid=64550&lib=55458

05.3. Additional information. [Optional]


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?

07.2. Additional information. [Optional]

  • Fund screening criteria are coded into our portfolio monitoring systems.
  • Additionally fund managers are sent an email with updated screening criteria upon review of the list and they are required to respond to indicate that they have acknowledged receipt and reviewed the list
  • Should post-trade monitoring identify a breach then compliance will contact PMs and Corporate Governance so that necessary action is taken

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