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Danske Bank

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%
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.

Fixed Income (corporate) adhere to the same Sustainable Invesment policy as Listed Equity.

This type of screening intends to ensure that the investors do not hold assets in companies that are in breach of international normas as well as ensuring that no funds are invested in certain aspects of nuclear arms production and other controversial weapons (cluster munition and anti-personal mines), as well as our investment resctricions on Thermal Coal and Tar Sand. In addition, funds that exclude selected controversial sectors such as alcohol and gambling are screened to ensure that applicable exclusions are in place.

We integrate environmental, social and governance (ESG) considerations in our investment practices, as we believe that management of environmental and social risks and well-functioning corporate governance is a precondition for an optimiszation of the risk-adjusted return. In 2018 a new strategy & policy was published where we analyse environmental, social, corporate governance and financial factors, to better understand the companies we invest in; their business models, positions, risks and opportunities. This is not a side issue - it is an integrated part of our processes, products and advisory. We call it ‘ESG Inside’.

01.3. Additional information [Optional].

Guideline on investing in Fixed income:

The guideline for publicy listed sovereign bonds is inteded to assure customers that their funds are invested with due respect for human right and with a precautionary approach to avoid financing human right abuses.

We base our guidelines for investing in government bonds on the Worldwide Governance Indicators (WGI) The WGI methodology was develped and is updated by the World Bank Development Research Group, and it ensures that our decisions are based on a wide range of official and non-officail sources. The WGI measures countries' strength on six paremeters:

  • Voice and accountability
  • Political stability and absence of violence
  • Government effectiveness
  • Regulatory quality
  • Rule of law
  • Control of corruption

The guideline represents a precautionary approach to investing in sovereign bonds issues by countries and other sovereign entities that are affected by armed conflict or particulary weak public governance. The guideline supplements sanctions imposed by the UN and EU, and suppoerts our commitment to UN Guiding Principles and UN Global compact.


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]

In 2018 we have started to develop a materiality tool, which are available for all investment teams regardless of the strategy. This tool incorporates data from severeal data providers and in order to develop this, a deep understanding of the data providers methodology as well as the correlation between these had to be undertaken. The tool supports not only ESG scores, but focuses on what is material for the sector or company in question. When looking up a company the portfolio manager are presented with severeal data points and also suggestions to engagement questions. The tool enhances the investment analysis and the materiality framework. 

Due to the size and quality of the tool, it is still being adjusted and going under review of both the Sustainable Investment team and investment teams. We aim for a launch during Q1 2019. 


(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
SSA
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

The fixed income strategies must comply with the same Sustainable Investment policy and investment restrictions as the listed equity funds.

Best-in-class screening only applies for our European Corporate Sustainable Bond Fund.

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process (Not Completed)


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]


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