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QBE Insurance Group Limited

PRI reporting framework 2019

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
98 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
2 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
97 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
3 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
99 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
1 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.

In selecting and assessing the credit worthiness of corporate and supra borrowers, the sustainability of the business is a key consideration. Strong governance that includes effective management of material ESG factors increases the likelihood that a company will continue to perform and manage risks effectively.

In 2018, QBE continued to iterate ESG integration within Fixed Income and extended it to Supranational issuers also. 

The key principles guiding credit selection encompasses developed market corporate, financial and structured debt. Each corporate entity under consideration is subject to an ESG Assessment, including independent external ESG ratings and the Portfolio Manager assessment. Selection and monitoring includes materially negative ESG developments.

The inclusion of the formal ESG Assessment helps to identify companies at risk of poor performance, this improving the risk and return of the investment, and as a debt investor to exert some influence on business operations and improve practices is a key focus for including ESG factors in our investment decisions.

In addition to the above, a thematic approach supports QBE’s commitment to green bonds and social bonds. All issuers are screened subject to QBE Global Sanctions Policy.

01.3. Additional information [Optional].


FI 02. ESG issues and issuer research (Private)


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)
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

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

All issuers are screened subject to QBE Global Sanctions Policy and the Group Investment Sanctions Policy.

 

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process (Private)


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?

06.2. Additional information. [Optional]


(B) Implementation: Thematic

FI 07. Thematic investing - overview (Private)


FI 08. Thematic investing - themed bond processes

08.1. Indicate whether you encourage transparency and disclosure relating to the issuance of themed bonds as per the Green Bonds Principles, Social Bond Principles, or Sustainability Bond Guidelines..

08.2. Describe the actions you take when issuers do not disburse bond proceeds as described in the offering documents.

Under the QBE Green Bond and QBE Gender Equality Bond framework, investments support the Framework and compliance with the framework, including Reporting, and verification of use of proceeds.

08.3. Additional information. [Optional]


FI 09. Thematic investing - assessing impact

09.1. Indicate how you assess the environmental or social impact of your thematic investments.

09.2. Additional information. [Optional]

QBE has Thematic Investments related to the QBE Green Bond and QBE Gender Equality Bond, which align with the Green Bond Principles and Social Bond principles respectively, including reporting and assurance.      In addition, other thematic investments which are part of the Premiums4Good program are reviewed for reporting, verification and impact.


(C) Implementation: Integration

FI 10. Integration overview

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

The key principles guiding Credit selection encompasses developed market corporate, financial and structured debt. Each corporate entity under consideration is subject to an ESG Assessment, including independent external ESG ratings and the Portfolio Manager assessment.

Adverse ESG findings will automatically reduce the issuer rating and a further review is completed considering materiality of factors and based on the internal assessment of the Portfolio Manager.

Issuers that have been flagged with an ESG rating below a defined rating threshold are then put on a more frequent ESG review cycle.

In addition to this assessment process publicly sourced Controversies research is used to identify any market sensitive ESG developments which could affect credit outlook for entities.

Materially negative developments may result in the entity being included in the final monitoring and watch list process.

All entities are screened subject to QBE Global Sanctions Policy, and the Group Investments Sanctions Policy.

Monitoring - All issuers are subject to ongoing monitoring by Portfolio Managers with a focus on credit rating, news flow or changes in financial outlook of the company, including daily monitoring. ESG considerations complement these practices, including issuers where there is increased potential for risk including emerging controversies.

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

Corporate (financial)

Our integration process is the same for Corporate (financial) and Corporate (non-financial) and Supranationals.

Corporate (non-financial)

Our integration process is the same for Corporate (financial) and Corporate (non-financial) and Supranationals.

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)

In selecting and assessing the credit worthiness of corporate borrowers, the sustainability of the business is a key consideration. Strong governance that includes effective management of ESG factors increases the likelihood that a company will continue to perform and manage risks effectively.

The selection process considers material factors, based on the internal assessment of the Credit Portfolio Manager.  Investment monitoring considers market sensitive ESG developments which could affect credit outlook for entities, Materially negative developments result in the entity being included in the final monitoring and watch list process.

Companies which perform poorly on ESG factors are down-weighted within the existing investment analysis framework.

Corporate (non-financial)

In selecting and assessing the credit worthiness of corporate borrowers, the sustainability of the business is a key consideration. Strong governance that includes effective management of ESG factors increases the likelihood that a company will continue to perform and manage risks effectively.

The selection process considers material factors, based on the internal assessment of the Credit Portfolio Manager.  Investment monitoring considers market sensitive ESG developments which could affect credit outlook for entities, Materially negative developments result in the entity being included in the final monitoring and watch list process.

Companies which perform poorly on ESG factors are down-weighted within the existing investment analysis framework.

12.3. Additional information.[OPTIONAL]


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