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Community Capital Management, INC.

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

Our firm was started for community investing for banks and has grown since that time to include all types of institutional and individual investors looking for fixed income impact/ESG solutions.  We invest in high quality, well-researched bonds that have positive societal impacts, requiring transparency into the specific use of the proceeds, and measurement of their anticipated corresponding impact.  We are able to customize and report to our clients by geographies as well as by impact themes.

01.3. Additional information [Optional].


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:

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 (non-financial)
Securitised
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

04.2. Describe your approach to screening for internally managed active fixed income

Each of the bonds that we select for the portfolio must meet our stringent impact and financial criteria.  

Our impact criteria include:

The use of the proceeds must positively impact a community in one or more ways.  The areas of focus (what we call “impact themes”) include:  affordable health/rehab care, affordable housing, arts & culture, disaster recovery, education/childcare, enterprise development/jobs, environmental sustainability, gender lens, government supported communities, healthy communities, human empowerment, minority neighborhoods, neighborhood revitalization, rural community development, seniors/disabled, sustainable agriculture, and transit-oriented development.
Transparency into the use of the bond’s proceeds.  Without that transparency, we might never know whether the funds raised will provide the positive impact our clients are seeking. Ability to quantify the expected impact and/or explain the qualitative benefits of the investment. Quantitative data can include the number of jobs created or the number of affordable housing units as well as dollar amounts invested in impact themes. Qualitative research is the “story,” so to speak, which includes detailed explanations of what the bond is financing.

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
Positive/best-in-class screening

other description

          The investment team utilizes a proprietary tracking system that reports on the positive outcomes of our fixed income holdings from a quantitative and qualitative perspective.
        

06.2. Additional information. [Optional]


(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.

Each of the bonds that we select for the portfolio must meet our stringent impact and financial criteria.  We will not invest in a bond where we cannot measure, monitor, and track the enviromental and social outcomes.

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.

We seek to invest in high quality, well-researched bonds that have positive societal impacts, requiring transparency into the specific use of the proceeds, and measurement of their anticipated corresponding impact; actively manage the portfolio to take advantage of opportunities and reduce unnecessary risks; build a portfolio that keeps risks lower, income higher, and diversification benefits better than the broad investment grade bond market.  Each of the bonds must meet our stringent impact and financial criteria.  We need to be able to measure, monitor, and track the positive impact outcomes of every bond.

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

Corporate (non-financial)

The team focuses on the ability for the borrower to meet its debt obligations.  This is done by analyzing the offering statements and corresponding financial information, and then discussions with the banker/issuer to get further insight or clarifications.  Emphasis is placed on redemption features and/or covenants, any credit enhancements, and the sources that will be used for the payment of interest and repayment of principal. The process also serves as a verification of the purpose of the project to ensure that the impact criteria are indeed met. We need to have transparency into the use of the bond's proceeds to ensure the funds raised will provide provide environmental and social outcomes that can be measured, monitored, and tracked.  Each bond goes through our rigorous research process which includes impact and financial analysis and is tagged by geography and with one or more of our 18 impact themes.  

Securitised

The team focuses on the voluntary and non-voluntary principal prepayments and any potential delinquencies. For single family agency MBS, our focus on low-to-moderate income borrowers has historically provided more consistent prepayment protection than what external pricing models would suggest, alleviating some of the issues around accelerated cashflows when rates fall and generating better total returns.We need to have transparency into the use of the bond's proceeds to ensure the funds raised will provide provide environmental and social outcomes that can be measured, monitored, and tracked.  Each bond goes through our rigorous research process which includes impact and financial analysis and is tageed by geography and with one or more of our seventeen impact themes. 

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 (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
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.

Corporate (non-financial)

When capturing impact for fixed income securities, we employ a proprietary quantitative and qualitative approach to understand what each bond is financing and to report on its multiple positive impact/ESG outcomes.  Quantitative data can include the number of jobs created or the number of affordable housing units as well as dollar amounts invested in impact themes. Qualitative research is the “story,” so to speak, which includes detailed explanations of what the bond is financing. This data and research is primarily focused on subsectors of the bond market where we can identify, record, and track the environmental and social activity that each transaction supports.

Securitised

When capturing impact for fixed income securities, we employ a proprietary quantitative and qualitative approach to understand what each bond is financing and to report on its multiple positive impact/ESG outcomes.  Quantitative data can include the number of jobs created or the number of affordable housing units as well as dollar amounts invested in impact themes. Qualitative research is the “story,” so to speak, which includes detailed explanations of what the bond is financing. This data and research is primarily focused on subsectors of the bond market where we can identify, record, and track the environmental and social activity that each transaction supports.

12.3. Additional information.[OPTIONAL]


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