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

British Columbia Investment Management Corporation

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 (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%
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.

The combination of screening and integration of ESG factors is a critical component to identifying and managing the credit risk associated with our fixed income holdings. Screening from our vendors provides an initial high level overview of ESG issues with specific issuers.  As we delve deeper into potential investment opportunities integration becomes a more critical component of our process and allows us to identify further issues that are sometimes missed by the initial screening.

For mortgage holdings, we have developed a risk rating process that incorporates ESG factors as a contributor to the evaluation and pricing methodologies when identifying and managing credit risk.  This process continues to evolve as new information becomes available.  Integration of new strategies are tested and reviewed before implementation.

 

 

 

 

01.3. Additional information [Optional].


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)
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  

specify description

          For our Mortgage investments, we require ESG data directly from our borrowers.
        

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.

Information from an external ESG research provider and sell-side research is combined with in-house information and analysis from our fixed income team and dedicated ESG team.  As ESG information from sell-side credit analysis is sometimes limited, our Fixed Income team will utilize information from equity reports.  A recent amalgamation of fixed income and equities under a single Public Markets group will further enhance the collaboration and sharing of information going forward. 

To conduct a carbon footprinting exercise for our fixed income portfolio, BCI has entered into a contract in 2018 with a data provider.

 

 

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:

specify description

          ESG research by external providers is regularly benchmarked for quality against other providers.
        

03.2. Describe how your ESG information or analysis is shared among your investment team.

03.3. Additional information. [Optional]

ESG is a required component of our credit research reports and is integrated into our investment decision making process. For Private Credit, the ESG analysis a required component of all investment recommendations and is a standard agenda item for all investment committee meetings.

 

 


(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

Negative screening ensures compliance with legal sanctions that are in place with respect to foreign states.  Additionally, BCI excludes companies whose activities would violate the Anti-Personnel Landmines Convention or the Convention on Cluster Munitions from our investment universe.

For corporate bonds (non-financial), including private credit, certain industries and companies are avoided based on specific ESG criteria. 

 

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 screen our investible universe to avoid companies whose activities would violate the Anti-Personnel Landmines Convention or the Convention on Cluster Munitions. This is applicable to all asset classes in our firm. Negative screening also ensures compliance with legal sanctions that are in place with respect to foreign states.

 

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

For corporate bonds (non-financial), including private credit, certain industries and companies are avoided based on ESG criteria.

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?

06.2. Additional information. [Optional]


(C) Implementation: Integration

FI 10. Integration overview

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

Our credit research reports have a dedicated section on ESG which forms an important part of our overall risk assessment of an investment.  BCI's fixed income team has recently increased engagement with our team of dedicated ESG professionals to improve our understanding of evolving issues in ESG.  Even when ESG factors are not sufficient to warrant an exclusion of a corporate issuers we assess as part of our research process the potential for ESG factors to produce negative credit outcomes.  In credit research, we are much more focused on potential negative outcomes as part of our process irrespective of if potential outcomes are ESG related or not due to the asymmetric nature of the asset class. Our credit team also tracks and assesses controversies related to ESG issues.

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

SSA

ESG forms a key part of our risk assessment in our credit research reports that evaluate the credit worthiness of issuers.  Our SSA investments are almost always limited to bonds issued by the Canadian government, provinces and municipalities.  We consider governance factors in our credit assessments for these investments.   

Corporate (financial)

ESG forms a key part of our risk assessment in our credit research reports that evaluate the credit worthiness of issuers.   Even when ESG factors are not sufficient to warrant an exclusion of a corporate issuers we assess as part of our research process the potential for ESG factors to produce negative credit outcomes.  In credit research we are much more focused on potential negative outcomes as part of our process irrespective of if potential outcomes are ESG related or not due to the asymmetric nature of the asset class generally.  

Corporate (non-financial)

ESG forms a key part of our risk assessment in our credit research reports that evaluate the credit worthiness of issuers.   Even when ESG factors are not sufficient to warrant an exclusion of a corporate issuers we assess as part of our research process the potential for ESG factors to produce negative credit outcomes.  In credit research we are much more focused on potential negative outcomes as part of our process irrespective of if potential outcomes are ESG related or not due to the asymmetric nature of the asset class.

BCI has recently made an allocation to the private debt market.  When opportunities arise we perform an initial assessment of the creditworthiness of a borrower. If the opportunity passes this intital test, it is then subjected to more intensive due diligence, including ESG considerations, and ultimately presented to a formal credit committee that authorizes the investment. Each investment recommendation includes an ESG section.  BCI has passed on certain investments due to ESG concerns.

 

 

 

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)
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]

To facilitate our reporting in line with the TCFD recommendations, BCI calculated a carbon footprint of our corporate bond portfolio (financial and non-financial).  The overall carbon footprint is compared to that of the performance benchmark.


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

12.2. Please provide more detail on how you review E, S and/or G factors in your integration process.

SSA

ESG forms a key part of our risk assessment in our credit research reports that evaluate the credit worthiness of issuers.  Our SSA investments are almost always limited to bonds issued by the Canadian government, provinces and municipalities.  We systematically consider governance factors in our credit assessments for these investments.   

Corporate (financial)

ESG forms a key part of our risk assessment in our credit research reports that evaluate the credit worthiness of issuers.   Even when ESG factors are not sufficient to warrant an exclusion of a corporate issuers we assess as part of our research process the potential for ESG factors to produce negative credit outcomes.  In credit research we are much more focused on potential negative outcomes as part of our process irrespective of if potential outcomes are ESG related or not due to the asymmetric nature of the asset class.

Corporate (non-financial)

 

BCI has recently made an allocation to the private debt market.  When opportunities arise we perform an initial assessment of the creditworthiness of a borrower. If the opportunity passes this intital test, it is then subjected to more intensive due diligence, including ESG considerations, and ultimately presented to a formal credit committee that authorizes the investment.  An ESG section is a required component of all investment recommendations that come to the committee.

12.3. Additional information.[OPTIONAL]


Top