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Wellington Management Company LLP

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

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

In addition to our ESG integration, we serve as investment manager for various screened investment portfolios, where we invest in, or exclude certain types of companies or countries based on pre-agreed guidelines and criteria from the client. Approximately 18% of FI assets under management are subject to an SRI screen.

Wellington Management sub-advises Domini Impact Investment's three US mutual funds- two equity, one fixed income. The Domini Impact Bond Fund is a domestic, intermediate term FI fund, with a focus on community economic development. The objective is to create a FI vehicle aligned with the goals of seeking universal human dignity and environmental sustainability, while achieving competitive financial returns. Potential investments are screened by Domini for approval based on Domini's own ESG criteria. Potential investments may be screened due to negative factors, and the approach seeks to proactively invest in issuers having a positive impact on society.

We also developed a global FI approach, AB-SEAS (Advanced Beta- Sustainable Environmental and Social Credit), designed to generate returns in line with the global investment grade corporate bond market by investing in industry leaders in their commitment to environmental and social sustainability, while avoiding companies with poor environmental and social sustainability practices.

04.3. Additional information. [Optional]


FI 05. Negative screening - overview and rationale

05.1. Indicate why you conduct negative screening.

SSA

SSA

Corporate (financial)

Corporate (fin)

Corporate (non-financial)

Corporate (non-fin)

Securitised

Securitised

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

In addition to our ESG integration process, we serve as the investment manager of various screened investment portfolios, where we invest in, or exclude certain types of companies or countries based on pre-agreed guidelines and criteria from the client.

Environmental and social screening is conducted through a proprietary quantitative research process.

05.3. Additional information. [Optional]


FI 06. Examples of ESG factors in screening process

06.1. Provide examples of how ESG factors are included in your screening criteria.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

We do not impose any firm-wide portfolio restrictions on the basis of controversial business activities but we do implement such restrictions at the request of our clients. For example, in several of the emerging markets debt portfolios we manage, we have set up restrictions not to contribute to the financing of cluster munitions or cluster bombs. This is an outright exclusion and does not depend upon any revenue threshold.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

We do not impose any firm-wide portfolio restrictions on the basis of controversial business activities but we do implement such restrictions at the request of our clients. For example, in several of the mortgage-backed securities (MBS) portfolios we manage, we have set up restrictions not to invest in securities that receive more than 10% or more than 30% of their revenues from gambling-related businesses. Clients can adjust their preferred revenue threshold upon request.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

We do not impose any firm-wide portfolio restrictions on the basis of controversial business activities but we do implement such restrictions at the request of our clients. For example, in several of the corporate bond portfolios we manage, we have set up restrictions not to invest in securities that are tied to tobacco production and manufacturing. This can take the form of an outright exclusion or a revenue-based exclusion; if the latter, clients can adjust their preferred revenue threshold upon request.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

We do not impose any firm-wide portfolio restrictions on the basis of controversial business activities but we do implement such restrictions at the request of our clients. For example, in several of the bank loan portfolios we manage, we have set up restrictions not to invest in securities issued by companies with any business operations in Iran. This is an outright exclusion and does not depend upon any revenue threshold.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

We do not impose any firm-wide portfolio restrictions on the basis of controversial business activities but we do implement such restrictions at the request of our clients. For example, in several of the high yield corporate bond portfolios we manage, we have set up restrictions not to invest in securities issued by companies with significant environmental violations. This is an outright exclusion and does not depend upon any revenue threshold.

06.2. Additional information.

Restricted lists are typically sourced from our primary screening vendor, MSCI ESG, or directly from the client at the inception of the mandate. Once agreed upon, this list or definitive rule is then coded into our trading systems. Wellington's guidelines monitoring team is responsible for oversight of this process.


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
Norms-based screening

07.2. Additional information. [Optional]


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