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PRI reporting framework 2019

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

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
90 Screening alone
0 Thematic alone
0 Integration alone
10 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%

01.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

SSA: We use negative screening based on UN PRI principals and European sovereign bonds investments we rank the countries by looking at several governance indicators. Only the top 25% ranking countries are eligible for inclusion. We take into account Governance data from the World Bank Worldwide Governance Index.

EMD: We use negative screening based on UN PRI principals and ESG criteria (based on a set of ESG indices such as ND-GAIN, Human Development Index, WB Gov indicators etc., which are updated yearly) to provide a minimum level of ESG standards in the portfolio. This results in excluding around 50% of the amount of countries.

When we’ve established the investable universe, we do a deep-dive in each country that we are allowed to invest in and we take into account data that covers E, S and G. The analysis done is updated regularly and consists indicators like United Nations Human Development Index, World Bank Worldwide Governance Index, Heritage Index of Economic Freedom, World Bank Ease of Doing Business Index, environmental data to analyze countries.

Credits, see FI 01.3

01.3. Additional information [Optional].

Apart from a company specific ESG paragraph, we construct specific ESG sector reports for sector which are most sensitive to these factors, such as Utilities, Climate, Energy and Tobacco. In these sector ESG reports, we explain what subsectors/group of companies are preferred from a risk perspective, which serves as an important input factor for our bottom-up company analysis.

We use negative screening based on UN PRI principals and on specific ESG risks which we have identified on a sector basis for sectors which are most prone to those risks. We use a positive screening in instrument selection (green bonds). Subsequently, we (analyst is in the lead, but portfolio managers are also involved) perform a downside risk analysis which is most important to bondholders. Risks and opportunities with respect to environmental, social and governance issues are explicitly taken into account and fully integrated in our analysis. As it could have impact on credit quality or even threaten the viability of a company's business model. Thematic is used when all companies within a sector are heavily exposed to a certain trend and therefore the risk is more systemic.


 


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:

specify description

          Discuss with other asset managers key ESG challenges/how to leverage our combined knowledge; - organize and participate in internal Education sessions regarding specific ESG themes.
        

03.2. Describe how your ESG information or analysis is shared among your investment team.

          We keep track of our ESG activities, discuss the progress on climate issues from the cross-asset Climate Task Force.
        

03.3. Additional information. [Optional]

SSA: Our investable universe is determined by either positive (Rates) or negative (EMD) screening. After the investable universe is determined we use multiple ESG indicators and multiple providers of ESG research to determine where to most efficiently invest the money for our clients. As such ESG is an integral part of our investment decision/process and can take on different forms depending on the country at hand. To determine that ESG research is robust we use different providers for similar ESG indicators to check for consistency. We participate in country visits to determine if the 'on the ground' situation is reflected in the reported ESG criteria.

Credits: our investable universe is determined by negative screening. Subsequently, we use various ESG indicators, depending on sector and issuer specific characteristics and use various ESG sources and use recent ESG specific news flow for determining the most imminent issues. We also compare ESG performance within heterogeneous sectors and assess whether or not we see risks for credit quality and if so when (short or long term) this could materialize. Our inhouse ESG analyst researches and collects raw data from numerous sources to create our own ESG database of issuers.


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