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

Macquarie Asset Management

PRI reporting framework 2019

Export Public Responses
Pdf-img

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.

We have a structure under which autonomous - or independent -- investment teams are supported by a global shared-services platform. Our teams have the autonomy to leverage their specialized skill sets and define their individual investment approaches and decision-making processes, whilst benefitting from a comprehensive operational support platform. The incorporation of ESG factors in the investment process varies by investment team as each team owns its own investment process.

A central belief amongst all of our capabilities is a commitment to proprietary, in-depth fundamental research. Inherent in this commitment is a strong focus on the management of the downside, considering capital preservation to be paramount.  As such, ESG issues may be considered throughout the credit selection process as we recognize the potential of ESG issues to negatively impact creditworthiness.  Aspects of our credit analysis may include an examination of industry dynamics, visits with company management, competitive positioning comparisons, and an analysis of both overall credit and ESG specific ratings trends.

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

SSA

Each of our investment teams employs a consistent ESG integration approach across all types of fixed income instruments in which that particular team invests.

Corporate (financial)

Each of our investment teams employs a consistent ESG integration approach across all types of fixed income instruments in which that particular team invests.

Corporate (non-financial)

Each of our investment teams employs a consistent ESG integration approach across all types of fixed income instruments in which that particular team invests.

Securitised

Each of our investment teams employs a consistent ESG integration approach across all types of fixed income instruments in which that particular team invests.  For securitised instruments, credit analysis includes a focus on the risks associated with adverse behaviour of issuers regarding environmental, social and governance factors.

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]

The responses provided above represent an aggregate of different practices employed by our independent investment teams and do not necessarily indicate that each team employs all of these practices.

Specific examples of our use of ESG information in the investment process is provided in section FI 13.


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

All of our independent investment teams recognize ESG factors as a part of their investment analysis but their approach towards reviewing ESG information in the integration process varies by investment team.  See below for specific examples.

Corporate (financial)

All of our independent investment teams recognize ESG factors as a part of their investment analysis but their approach towards reviewing ESG information in the integration process varies by investment team.  See below for specific examples.

Corporate (non-financial)

All of our independent investment teams recognize ESG factors as a part of their investment analysis but their approach towards reviewing ESG information in the integration process varies by investment team.  See below for specific examples.

Securitised

All of our independent investment teams recognize ESG factors as a part of their investment analysis but their approach towards reviewing ESG information in the integration process varies by investment team.  See below for specific examples.

12.3. Additional information.[OPTIONAL]

Our fixed income teams incorporate the analysis of ESG factors into their fundamental issuer credit analysis, which is consistent with the teams’ investment philosophy of avoiding downside risks.  Inherent to the teams’ investment process is an in-depth analysis of economic, competitive and other factors that may influence future revenues and earnings, including factors that have been identified as material from an ESG perspective.                

Following are a few examples of the many ESG factors that have been reviewed in the integration process.  Specific examples of our use of ESG information in the investment process is provided in section FI 18.

  • Review of all companies covered that have performed poorly on ESG from a bondholder perspective
  • Jurisdiction risk assessment to help identify corruption risk, especially for emerging markets
  • Evaluation of the independence of an issuer’s board by checking for the percentage of unaffiliated board members
  • Analysis of the environmental remediation and liability concerns including coal ash cleanup, nuclear asset retirement obligations, and wildfires for utility companies
  • Investigation of litigation against chemical companies stemming from environmental/health concerns
  • Requirement of super majority vote needed for budget passage or to raise revenues for US states
  • Analysis of nuclear construction risks for US-based public utilities
  • Determination of the percentage of loans in a security that are dedicated to senior and/or low-income housing
  • Comparison of governance practices of a particular issuer of a securitization instrument relative to peers.

Top