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Pendal

PRI reporting framework 2019

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

(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

  • Our Ethical/Exclusionary screening approach screens issuers based on material business involvement in activities, the most common being tobacco, alcohol, gaming, weapons, pornography, thermal coal and oil sands. Materiality is typically is 10% of revenue.
  • Our Best in Class / Sustainability process is based on a 'Best of Sector' Approach. Higher ratings will typically be favoured to those with lower scores and low ranked issuers will generally be excluded. 
  • In addition, "Use of Proceeds" holdings go through a two-step process where we assess the sustainability of the issuer and the security - both steps need to be cleared for a security to be deemed investable. The security is deemed investable if it is certified Green, Climate, Social or Sustainable based on an approved industry standard (e.g. Climate Bond Initiative or International Capital Markets Association Green Bond Principles). The issuer-based sustainability criteria is the same as that applied in our 'Best of Sector' process.
  • Our exclusion screening and 'Best of Sector' processes use data from internal and external sources.

  • Screening criteria is applied every month and portfolio changes are communicated in the monthly performance reports.

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process

05.1. Provide examples of how ESG factors are included in your screening criteria.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

In 2018, Pendal enhanced our SSA ESG analysis model given the significant proportion of Government securities in our Australian composite fixed interest funds. Our analysis identified opportunities to add value from a risk/return perspective at a State Issuer level, primarily on environmental issues. As a result of these enhancements and findings on relative ESG performance the Portfolio Manager adjusted holdings to overweight a State Issuer with a higher E score vs another State Issuer with a lower E score.

In addition, Pendal is engaging with State borrowing authorities to support issuance of specific-purpose bonds and to reflect the importance of ESG scores to our investment process.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

Our Sustainable Fixed Income Strategies apply a screening approach that screens issuers based on material business involvement in activities – the most common being tobacco, alcohol, gaming, weapons, pornography, thermal coal and oil sands. Materiality is typically 10% of revenue.

 

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

Our Positive / Best in Class / Sustainability process is based on a 'Best of Sector' Approach. Higher ratings will typically be favoured to those with lower scores and lower ranked issuers will generally be excluded. 

This framework focuses on industries with products and services that provide a direct benefit to social and/or environmental outcomes such as: environmental management or remediation environmental technologies; energy efficiency and renewable energy; low-impact products or products that reduce ecological footprint; sustainable buildings and property development; sustainable land use and food production; and improved health and community well-being.

It may also include companies we deem to demonstrate leading environmental and social practices. In assessing this, we have regard to sustainability strategy, policy, management and performance in areas such as:

  • environmental management including for example, climate change, greenhouse gas emissions, energy and water use; 
  • business ethics and conduct, including stakeholder relations; 
  • occupational health and safety management and performance; and 
  • human capital management (HCM), including workplace relations, equal opportunity, consultation and participation in the workplace and employee conditions and benefits.

 

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

Our Positive / Best in Class / Sustainability process is based on a Best of Sector Approach. Higher ratings will typically be favoured to those with lower scores and lower ranked issuers will generally be excluded. 

 

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

Our Sustainable Fixed Income Strategies apply a screening approach that screens issuers based on material business involvement in activities - the most common being tobacco, alcohol, gaming, weapons, pornography, thermal coal and oil sands. Materiality is typically in the range of 0-10% of revenue. 

 

05.2. Additional information.


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?
Positive/best-in-class screening

06.2. Additional information. [Optional]


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