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KLP

PRI reporting framework 2019

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ESG incorporation in actively managed fixed income

Implementation processes

FI 01. Incorporation strategies applied

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
100 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (financial)
100 Screening alone
0 Thematic alone
0 Integration alone
0 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)
100 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Securitised
100 Screening alone
0 Thematic alone
0 Integration alone
0 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.

As our ESG policy is primarily norm-based, it is important to screen 100% of our investments. We engage with issuers when an ESG controversy arises and ESG factors are considered when deciding on a line of credit. For the active fixed income portfolios covering the Norwegian market there is a contniues monotoring of the issuers. 

KLP has some work conserning integration strategies as well, however 100 % screening is still most important.

 

01.3. Additional information [Optional].


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  

02.3. Provide a brief description of the ESG information used, highlighting any differences in sources of information across your ESG incorporation strategies.

KLP uses external service providers for information on environmental, social and governance (bribery and anti-corruption) metrics. These are screening-based. KLP conducts in-house analysis primarily on Norwegian issuers, but also on foreign issuers in the case of serious violations.

Government bonds: KLP shall not invest in bonds issued by countries where the state or government officials are the object of UN or EU economic sanctions to which Norway adheres. KLP shall not invest in the lowest-ranked countries in the World Bank's Worldwide Governance Indicators (WGI). Excluding a government bond from the investment universe does not normally require the exclusion of other forms of investment in the same country.

KLP shall also monitor developments in companies subject to UN and EU sanctions to which Norway adheres, and consider freezing purchases of, or divesting, the relevant companies' securities.

 

 

02.4. Additional information. [Optional]

The financial department in KLP define the limits for credit-investments. Credit limits are approved by KLP's credit committee. The asset management company, KLP Kapitalforvaltning, follow these limits. When "private placements" are made, ESG issues are part of the assessments taken.


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.

          Companies where ESG issues have been identified and should be considered before investment in the company are flagged for the PMs.
        

03.3. Additional information. [Optional]

Issuers are given the opportunity to comment on pending exclusion decisions. KLP conducts a benchmarking process of different ESG providers before entering any cooperation agreement. We use several different service providers, such that we can compare the quality of analysis on a regular basis. KLP also engages in in-house analysis and dialogue with companies, which helps us to evaluate the quality of ESG providers.


(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

KLP screens all holdings according to norm-based criteria. The KLP list of excluded companies includes those in which KLP previously held fixed income investments. 

KLP's active SSA fixed income includes primarily Norwegian municipal or other government issuers. These are subject to screening by our external service provider as well, but the risk is consiered low and we have not had any ESG-related cases arise thus far.

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process

05.1. 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

KLP may not invest in fixed income issued by companies on the KLP-list of excluded companies. The guidelines for responsible investment by KLP are based on our endorsement of the United Nations Global Compact (GC) and the UN Principles for Responsible Investmentii (PRI).  

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

KLP does not permit investments in sovereign debt for countries subject to UN or EU sanctions or that are among those that score lowest on the Worldwide Governance Indicators.

05.2. Additional information.

A full list of excluded companies are available at KLP.no: https://www.klp.no/om-klp/samfunnsansvar/hva-vi-ikke-investerer-i


FI 06. Screening - ensuring criteria are met

06.1. 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?
Norms-based screening

06.2. Additional information. [Optional]

KLPs investment universe is continuesly monitored for breaches to KLPs guidelines for responsible investments by our service provider. In addition there is pre-trade-compliance checks so that PMs do not trade with companies on KLPs exclusion list and freeze list.


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