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Quoniam Asset Management GmbH

PRI reporting framework 2019

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities

ESG incorporation in actively managed listed equities

Implementation processes

LEI 01. Percentage of each incorporation strategy

01.1. Indicate (1) which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities and (2) the breakdown of your actively managed listed equities by strategy or combination of strategies (+/- 5%)

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied
30 %
Percentage of active listed equity to which the strategy is applied
52 %
Percentage of active listed equity to which no strategy is applied
18 %
Total actively managed listed equities 204%

01.2. Describe your organisation’s approach to incorporation and the reasons for choosing the particular ESG incorporation strategy/strategies.

The full incorporation strategy, as  implemented e.g. in the Quoniam Funds Selection SICAV, follows internationally accepted guidelines and builds on 3 pillars listed below (in segregated accounts, Quoniam may not be mandated to execute all dimensions):

1. Thematic themes: we take into account the legal and regulatory requirements associated with:

-UN Global Compact
-EFAMA Code of External Governance
-Oslo Convention on Cluster Munitions
-PRI
-BVI-Code of Conduct
-BVI-Responsible Investment Policy
-OFAC sanction list

2. Screening – Quoniam's sustainable investment policy exclude securities according to the following criteria, which identifies controversial business practices and controversial business activtities:

Norges Bank exlusion list (Norwegian government pension fund exclusion list)
Producers of cluster munitions and anti-personnel landmines
Violation of labour standards (ILO)
Violation of human rights
Environmental pollution scandals
Corruption
Tobacco
Additional mandate specific negative or positive screening criteria/lists

We are open to discuss additional screenings, as already employed in the context of existing mandates.

3. Integration - includes the systematic application of KPIs in our investment universe

Environment;
Social
Governance
other KPIs i.e sustainable business, carbon and environmental footprint etc.

01.3. If assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]

Screening techniques aim to avoid controverial business practices and controversial activities, filtering out companies affected altogether:

  • Business practices include companies which violate human rights or carry out systematic violations against labour rights, companies which caused environmental harm or are convicted to corruption.
  • Controversial business activities comprise the production of controversial weapons, such as anti-personnel mines and cluster munitions or tobacco.

Integration of ESG KPIs

  • Standardized KPIs on environmental, social and government metrics are used during portfolio construction to "shift" the portfolio towards better ESG characteristics.
  • The objective is to achieve a superior ESG performance at the portfolio level (not at the single asset level), while not compromising on main objectives such as an optimal return/risk profile.
  • ESG exposure is used as a risk factor, not a return generator.

LEI 02. Type of ESG information used in investment decision (Private)


LEI 03. Information from engagement and/or voting used in investment decision-making (Private)


(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

A negative screening on companies with activities in the production of controversial weapons is applied to all mandates.

A more advanced principles based screening is applied wherever mandated by customers, e.g. in the Quoniam Funds Selection SICAV, which follows internationally accepted guidelines such as the UN Global Compact, the Principles of Responsible Investment and the Oslo convention. In addition to the basic screening, this excludes companies with controversial practices or activities in areas such as human and labour rights, environment and climate change, corruption, and tobacco.

Clients may choose to to select other / additional screening criteria if they have additional needs (e.g. norms based). They may also choose to use negative lists provided by external service providers customers have selected independently.

Screened by

Description

Clients may choose to use specific positive (i.e. "white list") screening lists based on a variety of criteria. Such screens are typically provided by external service providers customers have selected independently.

Screened by

          Universal Declaration of Human Rights.
        

Description

Norms based screening is applied when it is mandated from customers, e.g. in the Quoniam Funds Selection SICAV, which follows internationally accepted norms.

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

Screening criteria are established by our SRI commitee, which analyses systematically the incormporation of screening criteria from both internal research in cooperation with external research providers. Screening lists are reviewed on a regular basis. We encourage clients to include information on these reviews in their customized reporting. See also answer LE02.1.

 


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

In a first stage, Quoniam systematic analysis incorporates  ESG data from MSCI ESG Research and also incorporate the  capabilities from a dedicated ESG team of our parent company, Union Investment , who compiles and validates data from various research providers such as MSCI, Reprisk,Trucost and the world Bank and links them to the capital market data structures of five asset classes.

In a second stage, this data, which covers 32,000 securities, 14,000 issuers, 8000 companies and 104 countries is automatically imported in our data base.

In a third stage a validation process starts. In this stage, after we validate the data quality, we incorporate our in-house research and other external sources e.g. the exclusion list published by the Norwegian government fund.  

In a fourth stage, we formally incorporate systematically the ESG/Responsible investment policy of our clients applying either positive/exclusionary lists or ESG factors in the investment process. If the exclusions lists are applied to reduce the individual universe of each fund, then the automated investment process can only choose equities from the reduced fund's universe. Further, these lists are part of the daily investment monitoring process. This includes an analysis of the complete company structure, which reflects corporate actions such as mergers and acquisitions.

In the last stage, the negative, positive and norm-based ESG lists applied in the portfolio management process also feed into the audit system from Princeton (MIG 21). Therefore changes to the lists will lead to passive ESG guideline breaches and trigger appropriate guideline conform actions in portfolio management.


LEI 06. Processes to ensure fund criteria are not breached (Private)


(B) Implementation: Thematic

LEI 07. Types of sustainability thematic funds/mandates

07.1. Indicate the type of sustainability thematic funds or mandates your organisation manages.

07.2. Describe your organisation’s processes relating to sustainability themed funds. [Optional]

Depending on clients' needs, themed funds are implemented via either

  1. Screening - White or Blacklists excluding significant parts of the investment universe - e.g. christian values or shariah compliant investments
  2. Screening and Integration - e.g. for environmentally themed funds.

For example, for an environmentally themed fund screening would disallow investments in companies with controversies regarding environmental issues, having a high carbon intensity in their production process or business model and a high level of stranded assets. During the integration step in portfolio construction (see LEI 10) the portfolio would be tilted towards better performance in environmental KPIs.


(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the ESG factors you systematically research as part of your investment analysis and the proportion of actively managed listed equity portfolios that is impacted by this analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]


LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on a robust analysis.

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information.[Optional]


LEI 10. Aspects of analysis ESG information is integrated into (Private)


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