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Quoniam Asset Management GmbH

PRI reporting framework 2019

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.
Corporate (financial)
0 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
45 Screening + thematic strategies
1 All three strategies combined
54 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
52 Screening + thematic strategies
0 All three strategies combined
48 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 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. Additional information [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.

 

 

 


FI 02. ESG issues and issuer research (Private)


FI 03. Processes to ensure analysis is robust

03.1. Indicate how you ensure that your ESG research process is robust:

specify description

          ESG screening lists are regularly updated and integrated in investment guideline audit systems.
        

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

03.3. Additional information. [Optional]

Since last year we have incorporated the sustainability dimension in our monthly performance review in order to discuss the current exposure to key ESG issues and how we can improve the investment process regarding ESG themes.


(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

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.

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process (Private)


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
Norms-based screening

06.2. Additional information. [Optional]

Data for negative and positive screens are sourced from reliable sources and automatically mapped to ensure a comprehensive analysis of all issuers in the investment universe.

Positive / white list screening is applied where clients have mandated the use of positive screening.

Norms based screening is integrated in positive/negative screening.

Positive and negative screens are automatically applied during portfolio construction and also monitored in an independent investment guideline compliance system (MIG 21).


(B) Implementation: Thematic

FI 07. Thematic investing - overview (Private)


FI 08. Thematic investing - themed bond processes

08.1. Indicate whether you encourage transparency and disclosure relating to the issuance of themed bonds as per the Green Bonds Principles, Social Bond Principles, or Sustainability Bond Guidelines..

08.2. Describe the actions you take when issuers do not disburse bond proceeds as described in the offering documents.

We engage with issuers and disinvest if no corrective action is taken

08.3. Additional information. [Optional]


FI 09. Thematic investing - assessing impact

09.1. Indicate how you assess the environmental or social impact of your thematic investments.

09.2. Additional information. [Optional]


(C) Implementation: Integration

FI 10. Integration overview

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

Quantitative ESG KPIs such as E,S, G and aggregate ESG scores are sourced for all issuers in the investment universe. These are subsequently translated into standardized scores. The standardized scores are then used during portfolio construction to "shift" the portfolio towards superior ESG characteristics. In addition, carbon footprint analysis is conducted using carbon intensity as a key metric.

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

Corporate (financial)

The above mentioned process is not applied to SSA and covered bonds but to the entire corporate and financials segment. There is no difference in the process between corporates and financials.

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
Corporate (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]

In Quoniam's quantititative investment process, portfolio weightings are determined in a systematic portfolio construction process. It calculates optimal weights combining forecasts for returns, risk, transaction costs as well as ESG KPIs such as average ESG score and carbon intensity. The ESG metrics are treated as risk factors, so that the process is typically allocating towards superior ESG metrics at the portfolio level.


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
Corporate (financial)

Environmental

Social

Governance

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

Corporate (financial)

In Quoniam's quantititative investment process, portfolio weightings are determined in a systematic portfolio construction process. It calculates optimal weights combining forecasts for returns, risk, transaction costs as well as ESG KPIs such as average ESG score and carbon intensity. The ESG metrics are treated as risk factors, so that the process is typically allocating towards superior ESG metrics at the portfolio level.

12.3. Additional information.[OPTIONAL]


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