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

Alliance Bernstein

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
100 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%
Corporate (financial)
0 Screening alone
0 Thematic alone
27 Integration alone
73 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
27 Integration alone
73 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Securitised
0 Screening alone
0 Thematic alone
100 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.

The majority of our fixed income assets are managed using Integration. Our primary reason for choosing the integration strategy is that it most directly reflects our long-held philosophy on environmental, social, and governance ("ESG") factors, and is also most seamlessly aligned with our existing investment processes. AB has long recognized that ESG issues can impact the performance of investment portfolios, and we have long believed that the integration of ESG factors is critical to the success of a fundamental research process. As such, our analysts have carefully assessed ESG factors in their analysis if they believe those factors have, or could have, a material impact on our forecasts and investment decisions.

AB continues to strengthen the integration of ESG factors into our fixed income research and investment processes. Please see additional information below.

01.3. Additional information [Optional].

We continued to implement a more detailed ESG scoring system for our corporate issuers. We have a specific module within our Credit Research database that explicitly links the ESG rating each analyst assigns an issuer to the broader forward credit rating that issuer will receive, ensuring that ESG considerations are explicitly considered and weighted in AB's proprietary overall forward rating for each issuer.  In this way, our ESG scores have a direct influence on security selection decisions within our portfolios.

In December 2018, we launched a centralized ESG research tool that provides a standard ESG materiality framework and is used to capture ESG research and engagements across our Equities business unit globally.  The tool will also capture our fixed income analysts’ research views, and these analysts will have access to the tool so we are able to share ESG viewpoints and engagements across asset classes.

During 2018, we also continued to expand our efforts in impact and sustainable thematic investments.

We have managed a US Municipal Impact strategy since 2016, and continued to expand this strategy during 2018 to a broader range of clients and investment platforms, with assets now totalling over USD 400 million. The US municipal bond market is ripe with opportunities to invest in underserved communities and have social/environmental impact. It also allows us to meet the growing demand from our diverse client base and to provide investment strategies that deliver not only return, but also social/environmental benefits. Our US Municipal Impact strategy also provides ample opportunity to engage with issuers on ESG concerns.  During 2018, we engaged on health issues, particularly the opioid crisis, and issues involving access to healthcare in underserved rural areas.  We also engaged in collaboration with other organizations on juvenile justice reform. 

Our Impact strategy has an established investment structure in which municipal research analysts-in addition to their traditional fundamental analysis-score each issuer on Environmental, Social and Governance criteria. Bonds with an "impact score" below a certain threshold are not eligible for investment in the Municipal Impact Strategy.

Additionally, to meet the growing global investor interest in sustainability, we have developed a Sustainable Global Thematic Credit Strategy.  The strategy- expected to be seeded in the first half of 2019 -  invests in fixed income issuers whose businesses are aligned with the United Nations Sustainable Development Goals. 

We also utilize ESG screening within portfolios, primarily at our clients' direction as described later in this document. 


FI 02. ESG issues and issuer research

02.1. Indicate which ESG factors you systematically research as part of your analysis on issuers.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
Environmental data
Social data
Governance data

02.2. Indicate what format your ESG information comes in and where you typically source it

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

02.3. Provide a brief description of the ESG information used, highlighting any differences in sources of information across your ESG incorporation strategies.

We use a range of external ESG data providers, carefully selecting them to meet not only our high overall standards but also to meet certain product-specific needs. Our ESG Research Providers include:

MSCI: MSCI provides ESG ratings and qualitative research. This information is accessed by our analysts through a link into our analysts' research database. This research can "flag" potentially material issues that our analysts then incorporate into their own analysis.     We also use MSCI for negative screening in client portfolios, as well as best in class screening, including to code the resulting restricted securities in our pre- and post-trade compliance systems and trading platforms. We also subscribe to MSCI's Carbon Metrics tool to understand, measure and manage carbon risk in portfolios.

ISS-Ethix: We use Ethix for controversial weapons screening associated with our Luxembourg-based Fund platform and a number of client Portfolios.

Finally, we also utilize a variety of other external data sources, such as sell side research, NGO articles and industry body reports. 

02.4. Additional information. [Optional]


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]


(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
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

Within our Luxembourg Fund platform, we screen for controversial weapons based on research from a third-party service provider.

In addition, we implement other ESG exclusions within fixed income portfolios at the direction of our clients. Screens are generally developed in conjunction with our clients and discussed at regular client review meetings. Some clients provide us with a list of issuers to be restricted from their portfolio. Other clients prefer that we screen using a third-party research provider - these screens can take several forms, including industry screens as well as positive/best in class screening based on ESG factors. Once the issuers to be screened are identified, they are captured electronically in our compliance systems and monitored daily. Once a screen is in place, we dynamically monitor and manage it. Updates to these screens are made regularly - as our clients or our research providers provide updated data.

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

We perform negative screening for clients who request to generally restrict certain industries for environmental and social reasons such as nuclear, alcohol, tobacco, and adult entertainment from their portfolios, in addition to any other restricted issuers which may be provided. We utilise third party research to implement the screen and monitor the screen using our in-house pre- and post-trade compliance rules.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

In our UCITS funds and at the request of clients, we screen out issuers who are associated with controversial weapons according to data provided by a third party (ISS-Ethix).

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

We screen using a best-in-class approach for certain clients by investing in issuers who score in the higher tiers of ESG ratings by industry based on data provided by MSCI.

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]


(C) Implementation: Integration

FI 10. Integration overview

10.1. Describe your approach to integrating ESG into traditional financial analysis.

We have long incorporated ESG factors informally in our fixed income research and investment processes, but formalized this integration after becoming a PRI signatory in 2011. If we determine that the ESG aspects of an issuer's past, current, or anticipated behavior are material to its future expected returns, we address these concerns in our forecasts, research reviews, investment decisions, and engagement. Our research analysts utilize their own proprietary research, research from the sell side and other third parties, including an ESG data provider, to identify ESG issues. The analysts regularly discuss ESG matters with issuers as part of our investment research process when those issues are material, or we determine they are likely to become material enough to potentially impact the risk/return of our portfolios. Our research analysts, portfolio managers, and/or directors of research conduct thousands of issuer visits per year in order to understand the strategies, performance, and risks of issuers and address ESG concerns in those meetings. The issues are assessed and incorporated into our investment decisions. Importantly, our research and evaluation of ESG issues could lead us to view the issuer more positively or more negatively as an investment than the market consensus. If our research gives us confidence that ESG concerns are exaggerated, the security may be an excellent investment. If concerns are underestimated, the security may similarly be an undesirable investment.

We incorporate ESG factors into our fundamental research process for all our portfolios and continue to enhance our processes on ESG integration within our fundamental research teams. As such, during 2018 we continued to implement a more detailed ESG scoring system for our corporate issuers. We have a specific module within our Credit Research database that explicitly links the ESG rating each analyst assigns an issuer to the broader forward credit rating that issuer will receive, ensuring that ESG considerations are explicitly considered and weighted in AB's proprietary overall forward rating for each issuer. In this way, our ESG scores have a direct influence on security selection decisions within our portfolios. Companies are rated numerically on Environmental, Social and Governance criteria, and the scores are averaged into an overall ESG score. These scores can then be compared across the industry, across the broader corporate universe and to third-party providers like MSCI. All ratings are entered into our proprietary research database, for easy access to all investment professionals.

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

SSA

Sovereign:  Our economists consider ESG factors as part of their overall evaluation of a sovereign issuer. They evaluate how ESG issues are currently affecting the country's ability to meet payment obligations as well as how they may affect them in the future. If ESG factors are deemed material enough that they impact the risk/return profile of the sovereign issuer, that assessment will be reflected in the analyst's opinion and forecast for that issuer and will be discussed with the portfolio managers and the traders during regular research review/investment strategy meetings. ESG issues may also be addressed with government officials and central bankers via engagements. During 2018 we developed a proprietary ESG scoring model for sovereign issuers.  The model creates a baseline score for more than 100 countries based on more than 20 E, S and G factors, which our economists will then overlay their fundamental viewpoint. We will be implementing the model into our investment process during 2019.

Municipals:  Within the US municipal bond market, our Municipal Impact strategy has established an investment structure in which research analysts-in addition to their traditional fundamental analysis-score each issuer on Environmental, Social and Governance criteria (our “impact score”). Bonds with an impact score below a certain threshold are not eligible for investment in the Municipal Impact Strategy.

Our Impact scoring model weighs environmental and social considerations differently depending on the municipal sector under consideration: i.e., environmental criteria receive more weight for electric utilities and water systems; social criteria receive more weight for education and healthcare issuers. We recognize how essential strong municipal management is (including the stewardship of finances and debt, as well as transparency), and therefore the weight we assign to governance is consistent across all sectors. We adjust weights of the holdings within our impact portfolios to be higher/lower based on the bond's impact score (as well as traditional credit quality assessments).

An important component of our approach is active engagement with issuers included in our portfolios. We have established baselines associated with key performance indicators and will actively surveil progress made on those metrics. Should trends in metrics deviate significantly in any given year, AB analysts will attempt to ascertain the reason for the change. Through active engagement, should we conclude that a viable plan and strategy is in place and being implemented, we will maintain our position. If we ultimately question the probability of success of a particular strategy employed, we will either trim or sell out of position and reallocate proceeds to other investments that show better impact potential.

Corporate (financial)

For Corporate (financial) Issuers: Similar to our approach for non-financial corporate issuers, we incorporate ESG factors into our fundamental credit research process for financials within all portfolios. As part of their in-depth research, our financial sector analysts analyze all aspects of a company, including how ESG issues are currently affecting that company's profitability as well as how they may in the future. If they deem ESG factors material enough that they contribute to the risk of that issuer, that assessment will be reflected in the analyst's formal opinion and forecast and it will be discussed with the portfolio managers and the traders during regular credit meetings.

Our credit analysts are responsible for determining an ESG rating for each of the issuers in their investment universe, and it is their responsibility to monitor these issuers - including the ESG factors that may impact them - on an ongoing basis. In fact, we have developed a specific module within our Credit Research database that explicitly links the ESG rating each analyst assigns an issuer to the broader forward rating that issuer will receive, ensuring that ESG considerations are explicitly considered and weighted in the overall forward rating for each issuer. Analysts rate each issuer on a numeric scale on E, S and G factors, and then combine these ratings into an overall ESG score. This score is then used to influence the forward rating assigned to the issuer. In this way, our ESG scores have a direct influence on security selection decisions within our portfolios.

As an input and resource for their ESG assessments (but not the sole determinant), our analysts have access to ESG research from MSCI.

In particular, for financial issuers, our analysts focus on Governance and Social concerns. For example, analysts evaluate board structure as part of their evaluation of management quality. They consider remuneration policies as part of financial firms' expense structure. They evaluate how financial firms have adjusted their business practices in light of the 2008 global financial crisis and subsequent scandals (LIBOR, money laundering etc.) to institute improved controls, as well as greater transparency and simplicity in their consumer practices. Environmental factors such as climate-related exposures are a concern, but disclosure of these risks/exposures is not consistent in the sector.

Corporate (non-financial)

For Corporate (non-financial) Issuers: We incorporate ESG factors into our fundamental credit research process for all portfolios. As part of their in-depth research, our credit analysts analyze all aspects of a company, including how ESG issues are currently affecting that company's profitability as well as how they may in the future. If they deem ESG factors material enough that they contribute to the risk of that issuer, that assessment will be reflected in the analyst's formal opinion and forecast and it will be discussed with the portfolio managers and the traders during regular credit meetings.

In particular for corporate issuers, as part of their fundamental research on an issuer, our credit analysts are responsible for determining an ESG rating for each of the issuers in their investment universe, and it is their responsibility to monitor these issuers - including the ESG factors that may impact them - on an ongoing basis. In fact, we have developed a specific module within our Credit Research database that explicitly links the ESG rating each analyst assigns an issuer to the broader forward rating that issuer will receive, ensuring that ESG considerations are explicitly considered and weighted in the overall forward rating for each issuer.

Analysts rate each issuer on a numeric scale on E, S and G factors, and then combine these ratings into an overall ESG score. This score is then used to influence the forward rating assigned to the issuer. In this way, our ESG scores have a direct influence on security selection decisions within our portfolios.

As an input and resource for their ESG assessments (but not the sole determinant), our analysts have access to ESG research from MSCI.

Securitised

When it comes to the analysis of securitized issuers, our integration approach will vary somewhat depending on the type of securitization/collateral under consideration.

Agency MBS:  Mortgage-backed securities issued by Fannie Mae and Freddie Mac rate highly in our view from an ESG perspective.  After significant Governance deficiencies before the 2008 Global Financial Crisis, these agencies have reformed themselves under the conservatorship of the FHFA and now exhibit solid corporate governance in our view. From a social perspective, the agencies support mortgage lending to underserved communities through their Duty to Serve program commitments—through which they promote mortgage lending to low/medium income borrowers for manufactured housing, rural housing and affordable housing preservation.  From an environmental perspective, both are active in green financing to promote more environmentally sustainable housing markets.  Hence we are comfortable holding securitizations issued by these agencies within our portfolios.

Consumer Asset-Backed Securities: When evaluating the Governance of an issuer of an ABS securitization, where possible we leverage the analysis and scoring done by our corporate credit research team, as described earlier in this document. We seek to invest in deals originated by institutions with strong governance scores.  Social concerns are paramount within consumer ABS—we evaluate lending practices and avoid those employing predatory tactics. We recognize the tension between providing essential credit to lower-quality borrowers (e.g., facilitating purchase of an automobile to get to work) and the higher interest rates that typically accompany loans to such subprime borrowers.  Generally we favor encouraging the provision of credit for these lower quality borrowers.

Commercial Mortgage-Backed Securities: When evaluating the Governance of an issuer of a non-agency CMBS securitization, where possible we leverage the analysis and scoring done by our corporate credit research team, as described earlier in this document. We seek to invest in deals originated by institutions with strong governance scores.  Environmental considerations are more pronounced within CMBS—with many properties within CMBS deals now being LEED or similarly certified; climate change resiliency is also an important consideration.

In 2019 we are developing a more uniform framework of social and environmental lines of inquiry that we will utilize with issuers when evaluating deals in the ABS and CMBS markets.

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]


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

Sovereign:  Our economists consider ESG factors as part of their overall evaluation of a sovereign issuer. They evaluate how ESG issues are currently affecting the country's ability to meet payment obligations as well as how they may affect them in the future. If ESG factors are deemed material enough that they impact the risk/return profile of the sovereign issuer, that assessment will be reflected in the analyst's opinion and forecast for that issuer and will be discussed with the portfolio managers and the traders during regular research review/investment strategy meetings. ESG issues may also be addressed with government officials and central bankers via engagement.

During 2018 we developed a proprietary ESG scoring model for sovereign issuers.  The model creates a baseline score for more than 100 countries based on more than 20 E, S and G factors, which our economists will then overlay their fundamental viewpoint. We will be implementing the model into our investment process during 2019.

Municipal:  Within our Municipal Impact strategy, our Investment Policy Group convenes regularly to review potential investments for the Impact portfolios. We have established an investment structure in which research analysts-in addition to their traditional fundamental analysis-score each issuer numerically on Environmental, Social and Governance criteria. Bonds with an "impact score" below a certain level are not eligible for investment in the Municipal Impact Strategy.

Our impact scoring model weighs environmental and social considerations differently depending on the municipal sector under consideration: i.e., environmental criteria receive more weight for electric utilities and water systems; social criteria receive more weight for education and healthcare issuers. We recognize how essential strong municipal management is (including the stewardship of finances and debt, as well as transparency), and therefore the weight we assign to governance is consistent across all sectors.

Analysts' present their findings and recommendations to the Municipal Impact Investment Policy Group. This generates a dialogue designed to illuminate the strengths, weaknesses, opportunities, and threats underlying each potential impact investment. The output of our Municipal Impact Investment Policy Group sessions is a consensus on a set of approved bonds for inclusion across all impact client portfolios. We adjust weights of the holdings within our impact portfolios to be higher/lower based on the bond's impact score (as well as traditional credit quality assessments).

An important component of our approach is active engagement with issuers included in our portfolios. We have established baselines associated with key performance indicators and will actively surveil progress made on those metrics. Should trends in metrics deviate significantly in any given year, AB analysts will attempt to ascertain the reason for the change. Through active engagement, should we conclude that a viable plan and strategy is in place and being implemented, we will maintain our position. If we ultimately question the probability of success of a particular strategy employed, we will either trim or sell out of position and reallocate proceeds to other investments that show better impact potential.

Corporate (financial)

For Corporate (financial) Issuers: Similar to our approach for non-financial corporate issuers, we incorporate ESG factors into our fundamental credit research process for financials within all portfolios. As part of their in-depth research, our financial sector analysts analyze all aspects of a company, including how ESG issues are currently affecting that company's profitability as well as how they may in the future. If they deem ESG factors material enough that they contribute to the risk of that issuer, that assessment will be reflected in the analyst's formal opinion and forecast and it will be discussed with the portfolio managers and the traders during regular credit meetings.

Our credit analysts are responsible for determining an ESG rating for each of the issuers in their investment universe, and it is their responsibility to monitor these issuers - including the ESG factors that may impact them - on an ongoing basis. In fact, we have developed a specific module within our Credit Research database that explicitly links the ESG rating each analyst assigns an issuer to the broader forward rating that issuer will receive, ensuring that ESG considerations are explicitly considered and weighted in the overall forward rating for each issuer.

Analysts rate each issuer on a numeric scale on E, S and G factors, and then combine these ratings into an overall ESG score. This score is then used to influence the forward rating assigned to the issuer. In this way, our ESG scores have a direct influence on security selection decisions within our portfolios.

As an input and resource for their ESG assessments (but not the sole determinant), our analysts have access to ESG research from MSCI.

In particular, for financial issuers, our analysts focus on Governance and Social concerns. For example, analysts evaluate board structure as part of their evaluation of management quality. They consider remuneration policies as part of financial firms' expense structure. They evaluate how financial firms have adjusted their business practices in light of the 2008 global financial crisis and subsequent scandals (LIBOR, money laundering, etc.) to institute improved controls, as well as greater transparency and simplicity in their consumer practices. Environmental factors such as climate-related exposures are a concern, but disclosure of these risks/exposures is not consistent in the sector.

Corporate (non-financial)

For Corporate (non-financial) Issuers: We incorporate ESG factors into our fundamental credit research process for all portfolios. As part of their in-depth research, our credit analysts analyze all aspects of a company, including how ESG issues are currently affecting that company's profitability as well as how they may in the future. If they deem ESG factors material enough that they contribute to the risk of that issuer, that assessment will be reflected in the analyst's formal opinion and forecast and it will be discussed with the portfolio managers and the traders during the regular credit meetings.

In particular for corporate issuers, as part of their fundamental research on an issuer, our credit analysts are responsible for determining an ESG rating for each of the issuers in their investment universe, and it is their responsibility to monitor these issuers - including the ESG factors that may impact them - on an ongoing basis. In fact, we have developed a specific module within our Credit Research database that explicitly links the ESG rating each analyst assigns an issuer to the broader forward rating that issuer will receive, ensuring that ESG considerations are explicitly considered and weighted in the overall forward rating for each issuer.

Analysts rate each issuer on a numeric scale on E, S and G factors, and then combine these ratings into an overall ESG score. This score is then used to influence the forward rating assigned to the issuer. In this way, our ESG scores have a direct influence on security selection decisions within our portfolios.

As an input and resource for their ESG assessments (but not the sole determinant), our analysts have access to ESG research from MSCI.

Securitised

When it comes to the analysis of securitized issuers, our integration approach will vary somewhat depending on the type of securitization/collateral under consideration.

Agency MBS:  Mortgage-backed securities issued by Fannie Mae and Freddie Mac rate highly in our view from an ESG perspective.  After significant Governance deficiencies before the 2008 Global Financial Crisis, these agencies have reformed themselves under the conservatorship of the FHFA and now exhibit solid corporate governance in our view. From a social perspective, the agencies support mortgage lending to underserved communities through their Duty to Serve program commitments—through which they promote mortgage lending to low/medium income borrowers for manufactured housing, rural housing and affordable housing preservation.  From an environmental perspective, both are active in green financing to promote more environmentally sustainable housing markets.  Hence we are comfortable holding securitizations issued by these agencies within our portfolios.

Consumer Asset-Backed Securities: When evaluating the Governance of an issuer of an ABS securitization, where possible we leverage the analysis and scoring done by our corporate credit research team, as described earlier in this document. We seek to invest in deals originated by institutions with strong governance scores.  Social concerns are paramount within consumer ABS—we evaluate lending practices and avoid those employing predatory tactics. We recognize the tension between providing essential credit to lower-quality borrowers (e.g., facilitating purchase of an automobile to get to work) and the higher interest rates that typically accompany loans to such subprime borrowers.  Generally we favor encouraging the provision of credit for these lower quality borrowers.

Commercial Mortgage-Backed Securities: When evaluating the Governance of an issuer of a non-agency CMBS securitization, where possible we leverage the analysis and scoring done by our corporate credit research team, as described earlier in this document. We seek to invest in deals originated by institutions with strong governance scores.  Environmental considerations are more pronounced within CMBS—with many properties within CMBS deals now being LEED or similarly certified; climate change resiliency is also an important consideration.

In 2019 we are developing a more uniform framework of social and environmental lines of inquiry that we will utilize with issuers when evaluating deals in the ABS and CMBS markets.

12.3. Additional information.[OPTIONAL]


Top