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British Columbia Investment Management Corporation

PRI reporting framework 2019

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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.

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]


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