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Sompo Asset Management Co., Ltd.

PRI reporting framework 2019

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income

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)
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
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.

We think that adopting ESG incorporation strategy will lead to reducing downside risks. We negative screening and ESG integration with ESG data, provided by our ESG research group company, Sompo Risk Management Inc.. We incorporate negative screening with ESG data, provided by our ESG research group company, Sompo Risk Management Inc..

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  

specify description

          We remove sovereign fixed income that is issued by countries under United Nations arms embargo from our investment universe.
        

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

We refer to ESG data of cluster munitions and of countries under UN arms embargoes for negative ESG screening. We do not invest in companies that produce cluster munitions nor do we invest in countries' fixed income under UN arms embargoes.

For ESG integration, we use ESG data provided by our ESG research group company, Sompo Risk Management Inc..

 

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]


(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

Below describes our screening approach:

We exclude the following entities from our investment universe:

 A company that engages in any business which seems to be doubtful in its legality

A company that undertakes significant anti-social behaviors

We exclude the following entities from our investment universe:

Entities that involve in producing cluster munitions and countries that are under UN arms embargoes.

We will continue to adopt the above screening criteria going forward.

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

We exclude the following entities from our investment universe: entities that involve in producing cluster munitions .

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

We exclude the following entities from our investment universe:  countries that are under UN arms embargoes.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

We exclude the following entities from our investment universe: 

 A company that engages in any business which seems to be doubtful in its legality

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

We exclude the following entities from our investment universe: 

A company that undertakes significant anti-social behaviors

05.2. Additional information.


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?

other description

          We have created a table to confirm that corporate bonds which are holding do not breach  criteria.
        
Norms-based screening

06.2. Additional information. [Optional]


(C) Implementation: Integration

FI 10. Integration overview

10.1. Describe your approach to integrating ESG into traditional financial analysis.

In the past, we have been analyzing corporates' credits based on their financial data. Specifically, using ”Credit Spread model” that we create, we score credit risks based on their financial data. And we measure corporates’ credit risks according to the score. Judging from several factors, we score credit risks based on their financial data and we create our own original credit spread model. In addtion to the above traditional original approach, we have started to utilise ESG scores provided by our group ESG research company, Sompo Risk Management Inc..

Firstly, we calcurate ESG score based on ESG data provided by our group ESG research company for ESG integration. Secondly, We add the ESG score to a score derived from credit spread model. Through this ESG integaration, we can get the credit evaluation for our investment. We add the score we receive from the company to the score we get from our own credit spread model. Through this ESG integaration, we get the credit evaluation for our investment .

10.2. Describe how your ESG integration approach is adapted to each of the different types of fixed income you invest in.

Corporate (financial)

The way we integrate ESG into our investment is the same as FI10.1.

Corporate (non-financial)

The way we integrate ESG into our investment is the same as FI10.1.

10.3. Additional information [OPTIONAL]


FI 11. Integration - ESG information in investment processes

11.1. Indicate how ESG information is typically used as part of your investment process.

Select all that apply
Corporate (financial)
Corporate (non-financial)
ESG analysis is integrated into fundamental analysis
ESG analysis is used to adjust the internal credit assessments of issuers.
ESG analysis is used to adjust forecasted financials and future cash flow estimates.
ESG analysis impacts the ranking of an issuer relative to a chosen peer group.
An issuer's ESG bond spreads and its relative value versus its sector peers are analysed to find out if all risks are priced in.
The impact of ESG analysis on bonds of an issuer with different durations/maturities are analysed.
Sensitivity analysis and scenario analysis are applied to valuation models to compare the difference between base-case and ESG-integrated security valuation.
ESG analysis is integrated into portfolio weighting decisions.
Companies, sectors, countries and currency and monitored for changes in ESG exposure and for breaches of risk limits.
The ESG profile of portfolios is examined for securities with high ESG risks and assessed relative to the ESG profile of a benchmark.
Other, specify

11.2. Additional information [OPTIONAL]


FI 12. Integration - E,S and G issues reviewed

12.1. Indicate the extent to which ESG issues are reviewed in your integration process.

Environment
Social
Governance
Corporate (financial)

Environmental

Social

Governance

Corporate (non-financial)

Environmental

Social

Governance

12.2. Please provide more detail on how you review E, S and/or G factors in your integration process.

Corporate (financial)

Our ESG research group company, Sompo Risk Management Inc., evaluates companies in respect of Environment, Social and Governance in each category.

We think that Governance is an especially important factor to consider among all the ESG element for fixed income investment. Thus, we place more weight on the governance score. For only high ranking corporation, we integrate ESG factor into the financial analysis through adding ESG score to the evaluation that we gained from the financial analysis. 

Corporate (non-financial)

Our ESG research group company, Sompo Risk Management Inc., evaluates companies in respect of Environment, Social and Governance in each category.

We think that Governance is an especially important factor to consider among all the ESG element for fixed income investment. Thus, we place more weight on the governance score. For only high ranking corporation, we integrate ESG factor into the financial analysis through adding ESG score to the evaluation that we gained from the financial analysis. 

12.3. Additional information.[OPTIONAL]


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