This report shows public data only. Is this your organisation? If so, login here to view your full report.

Ashmore Group plc

PRI reporting framework 2019

Export Public Responses
Pdf-img

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
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%

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

Environmental, social and governance (ESG) analysis is explicitly integrated into our bottom up process across all our Fixed Income strategies. Our process is fundamentally driven and our issuer analysis encompasses a multitude of factors, including ESG.

Our assessment of an issuer’s ability to manage ESG successfully is integral to our determination of fair value (local currency) and fair spread (credit). Both governments and corporate management teams that can demonstrate strong ESG credentials are more likely to boost economic development and financial performance with lower volatility over time. Consequently, ESG factor analysis is integrated into our investment process, acting as a form of risk management and a source of alpha generation. We also consider it part of our fiduciary duty as stewards of our clients’ capital.

The ESG integration is overlaid by Ashmore's norms-based screening process, where investments that do not meet minimum standards are excluded from client portfolios. Ashmore fully supports the Oslo convention, which prohibits investment in companies manufacturing cluster munitions. Ashmore seeks to comply with applicable government authorities, and at a geographical level, screens across all investment themes for countries on the UN Security Council and EU/UK Sanctions and the US Office of Foreign Assets and Control lists.

01.3. Additional information [Optional].

Ashmore is able to customise client portfolios to meet specific requirements for geographic, sector and stock specific restrictions, such as alcohol, animal/food products, armaments manufacturers or dealers, gambling, pornography, tobacco and coal.


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

          Use of recognised industry identifiers and coding into Ashmore's portfolio management system. Use of UN, EU/UK sanctions and US OFAC country lists.
        

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 (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

Ashmore’s funds and segregated accounts each have a specific investment mandate which sets out the parameters for investment. Within the Corporate Debt theme Ashmore is able to screen client portfolios to meet client requirements for geographic, sector and stock specific restrictions. Stock specific restrictions may include securities which meet clients’ own criteria.

Examples of investment areas where screening of portfolios can be offered based on (or informed by) client requirements (using recognised investment industry identifiers and coding into Ashmore’s portfolio management system) include alcohol, animal / food products, armaments manufacturers or dealers, gambling, pornography and tobacco.

Ashmore screens for, and prohibits, investment in companies manufacturing cluster munitions banned under the Oslo Convention. Ashmore seeks to comply  at all times with all sanctions imposed by applicable government authorities, and also, at a geographical level, screens across all investment themes for countries which are on the United Nations Security Council and EU/UK Sanctions and the US Office of Foreign Assets and Control (OFAC) lists, (for example during the  Russia/Ukraine crisis).

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?
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.

 

Environmental, Social and Governance (ESG) risk analysis is explicitly integrated into our bottom up process across all our Fixed Income and Equity strategies. Our process is fundamental driven and our issuer analysis encompasses a multitude of factors, including ESG.

Our assessment of an issuer’s ability to manage ESG successfully is integral to our determination of fair value (equity) and fair spread (credit). Both governments and corporate management teams that can demonstrate strong ESG credentials are more likely to boost economic development and financial performance over time; for example by growing faster, reducing the cost of capital and generally managing risks better compared to their peers. Consequently, ESG factor analysis is integrated into our investment process in the same way as we assess macroeconomic risk, financial performance and credit metrics. It acts as both a form of risk management and a source of alpha generation. We also consider it part of our fiduciary duty as stewards of our clients’ capital.

Portfolio managers / analysts score all issuers using a consistent series of questions and data points to inform their view of an issuer’s current ESG performance alongside their forward-looking prospects. The portfolio manager / analyst explicitly records their view in a dedicated ESG scorecard. Scores are reviewed at a minimum every 12 months.

In keeping with our process, the investment thesis report, including the ESG score, for an issuer is reviewed, challenged and agreed at the relevant theme sub-Investment Committee. The ESG risk / opportunity is incorporated through financial estimates and/or the valuation assessment. Taken in combination with other macro and micro economic risk drivers, investment time horizon, liquidity considerations and the investable universe, ESG risk assessment therefore has a direct impact on our investment decisions and portfolio construction.

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

SSA

Ashmore has adopted a unified approach to ESG integration across all types of fixed income invested in. The process is described above. For SSA issuers the data areas used by portfolio managers to assess issuers are listed below:

Environment: Carbon emissions, clean energy / climate adoption strategies, natural disaster risk and preparedness, resource use, and environmental regulation.

Social: Population basic needs, societal stability, human development, economic freedom, labour rights, and inequality.

Governance: Progress to sustainability, institutional strength, rule of law, democratic processes, corruption.

These ESG factors are combined with traditional financial analysis to inform our investment decisions.

Corporate (non-financial)

Ashmore has adopted a unified approach to ESG integration across all types of fixed income invested in. The process is described above. For Corporate (non-financial) issuers the data areas used by portfolio managers to assess issuers are listed below:

Environment: Global impact and GHG emissions, local impact and water and waste management, incidents of environmental pollution, energy management, and use of green energy, policies and innovations to limit  negative impact.

Social: Employee diversity and inclusion, customer welfare, human rights and community relations, labour practices and health and safety, supply chain management, materiality of philanthropy spend, product quality and safety.

Governance: Transparency and disclosure, governance structure, minority interest fair representation, public listing and report, management accessibility, long-term incentive scheme KPIs, strategies to mitigate the impact of ESG risks.

These ESG factors are combined with traditional financial analysis to inform our investment decisions.

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 (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
SSA

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.

SSA

Our assessment of an issuer’s ability to manage ESG successfully is integral to our determination of its fair spread. Both governments and corporate management that can demonstrate strong ESG credentials are more likely to boost economic development and financial performance over time. Consequently, ESG factor analysis is integrated into our investment process. It acts as a form of risk management and alpha generation. We also consider it part of our fiduciary duty as stewards of our clients’ capital.

Portfolio managers score each issuer by asking two questions for each of the environmental, social and governance aspects: 1/ the issuer’s current level of performance against global best ESG practice and 2/ the quality of their policies and initiatives designed to improve their ESG performance. The issuer is scored for each of the six questions on a scale of 1 – 5 (very poor to very good). The portfolio manager / analyst explicitly records their view in a dedicated ESG scorecard. Scores are reviewed at a minimum every 12 months.  

With more than 90 investment staff dedicated to Emerging Markets, Ashmore has always relied on its own proprietary research. The approach to ESG analysis relies on a similar process, Portfolio Managers use a variety of external secondary data sources, which are complemented by research visits and meetings with issuers, which add depth of understanding, and substantiate the secondary data. For SSA issuers the data areas used by portfolio managers to assess issuers are listed below:

Environment: Carbon emissions, clean energy / climate adoption strategies, natural disaster risk and preparedness, resource use, and environmental regulation.

Social: Population basic needs, societal stability, human development, economic freedom, labour rights, and inequality.

Governance: Progress to sustainability, institutional strength, rule of law, democratic processes, corruption.

In keeping with our process, the investment thesis report, including the ESG score, for an issuer is reviewed, challenged and agreed at the relevant theme sub-Investment Committee. The ESG risk / opportunity is incorporated through financial estimates and/or the valuation assessment. Taken in combination with other macro and micro economic risk drivers, investment time horizon, liquidity considerations and the investable universe, ESG risk assessment therefore has a direct impact on our investment decisions and portfolio construction.

Corporate (non-financial)

Our assessment of an issuer’s ability to manage ESG successfully is integral to our determination of its fair spread. Both governments and corporate management that can demonstrate strong ESG credentials are more likely to boost economic development and financial performance over time. Consequently, ESG factor analysis is integrated into our investment process. It acts as a form of risk management and alpha generation. We also consider it part of our fiduciary duty as stewards of our clients’ capital.

Portfolio managers score each issuer by asking two questions for each of the environmental, social and governance aspects: 1/ the issuer’s current level of performance against global best ESG practice and 2/ the quality of their policies and initiatives designed to improve their ESG performance. The issuer is scored for each of the six questions on a scale of 1 – 5 (very poor to very good). The portfolio manager / analyst explicitly records their view in a dedicated ESG scorecard. Scores are reviewed at a minimum every 12 months.  

With more than 90 investment staff dedicated to Emerging Markets, Ashmore has always relied on its own proprietary research. The approach to ESG analysis relies on a similar process, Portfolio Managers use a variety of external secondary data sources, which are complemented by research visits and meetings with issuers, which add depth of understanding, and substantiate the secondary data. For Corporate (non-financial) issuers the data areas used by portfolio managers to assess issuers are listed below:

Environment: Global impact and GHG emissions, local impact and water and waste management, incidents of environmental pollution, energy management, and use of green energy, policies and innovations to limit  negative impact.

Social: Employee diversity and inclusion, customer welfare, human rights and community relations, labour practices and health and safety, supply chain management, materiality of philanthropy spend, product quality and safety.

Governance: Transparency and disclosure, governance structure, minority interest fair representation, public listing and report, management accessibility, long-term incentive scheme KPIs, strategies to mitigate the impact of ESG risks.

In keeping with our process, the investment thesis report, including the ESG score, for an issuer is reviewed, challenged and agreed at the relevant theme sub-Investment Committee. The ESG risk / opportunity is incorporated through financial estimates and/or the valuation assessment. Taken in combination with other macro and micro economic risk drivers, investment time horizon, liquidity considerations and the investable universe, ESG risk assessment therefore has a direct impact on our investment decisions and portfolio construction.

12.3. Additional information.[OPTIONAL]


Top