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Impax Asset Management

PRI reporting framework 2019

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (C) Implementation: Integration

(C) Implementation: Integration

FI 10. Integration overview

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

Each fixed income asset class has unique and varying degrees of ESG risk and opportunity. Issuers with credit risk most exposed to ESG-related risks, but impact-related opportunities are available across all fixed income asset classes.

For corporate (financial/non-financial) and select securitized bonds, ESG is integrated to enhance our credit analysis and facilitate:

  • Avoidance of ESG laggards. ESG analysis helps avoid companies with unacceptable ESG risks and/or operating in industries that are at greater risk in the transition to a more sustainable economy, which we view as unacceptable credit risk.
  • Enhanced Risk Management. ESG analysis provides additional insights into a company’s ability to manage operational and reputational risks and minimize exposure to disrupted industries. Analysis is key to managing credit risk and is the primary input into portfolio construction.
  • Identifying well positioned companies. ESG analysis helps identify companies positioned to benefit from the transition to a more sustainable economy.

For SSA, with few exceptions, IAM LLC considers U.S. government-related entities to be central in providing liquidity, stability and affordability in several key markets of the U.S. economy.

For these reasons, U.S. treasury securities, certain U.S. agency bonds and mortgage-backed securities are generally available for investment.

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

SSA

Incorporation strategies are not applied to U.S. Treasury Securities, but are applied to other SSA issuers.

Corporate (financial)

ESG analysis is integrated into fundamental analysis. 

Corporate (non-financial)

ESG analysis is integrated into fundamental analysis

Securitised

ESG analysis is integrated into fundamental analysis. 

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
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
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
SSA

Environmental

Social

Governance

Corporate (financial)

Environmental

Social

Governance

Corporate (non-financial)

Environmental

Social

Governance

Securitised

Environmental

Social

Governance

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

SSA

Incorporation strategies are not applied to U.S. Treasury Securities, but are applied to other SSA issuers.

Corporate (financial)

For any corporate issuer (financial or nonfinancial) IAM LLC examines the ESG profile of the issuer with the heaviest weight on key performance indicators for the sector of the issuer. The key issues vary widely among ESG-related criteria, depending on the sector. For example, for the four sectors that are the heaviest emitters of greenhouse gases and other pollutants--utilities, materials, energy and industrials--we place great weight on companies' performance and policies on emissions control, pollution management and prevention, and development of clean tech alternatives.

Corporate (non-financial)

For any corporate issuer (financial or nonfinancial) IAM LLC examines the ESG profile of the issuer with the heaviest weight on key performance indicators for the sector of the issuer. The key issues vary widely among ESG-related criteria, depending on the sector. For example, for the four sectors that are the heaviest emitters of greenhouse gases and other pollutants--utilities, materials, energy and industrials--we place great weight on companies' performance and policies on emissions control, pollution management and prevention, and development of clean tech alternatives.

Securitised

Asset backed securities, for example, reflect contractual obligations to finance certain activities, such as financing higher education, or the purchase of an automobile. Our ESG analysis is focused on the underlying collateral and, when appropriate, the lending practices associated with the underlying collateral.

12.3. Additional information.[OPTIONAL]


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