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Federal Finance

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.
SSA
100 Screening alone
0 Thematic alone
0 Integration alone
0 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.

We have chosen to apply a negative screening on all our assets. This screening is based on UN Global Compact Principles.

Some of our fixed income funds are SRI funds applying a Best in class approach.

A majority of our fixed income assets are managed on behalf of our first customer who is involved in integration ESG issues in the management of its assets. We set an investment limit for assets with the worst ESG ranking. They can't exceed 10% of annual investment flows.

In addition, since 2018, all our credit analysis include an ESG analysis based on extrafinancial risks and opportunities.

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  

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.

For corporates (financial and non financial), we use the same analysis scheme that we have built for equities assessment. Our philosophy is to have a single ESG score for each company whether it issues equity or debt.

On the other side, we have an ESG analysis scheme dedicated to sovereigns. For this purpose, we collect data from the World Bank, OECD, NGO (Transparency International, Reporters without borders...). This analysis is in-house realized, we don't use any provider or external consulting company to provide us rating or data.

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:

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
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

For corporates, we apply the same methodology as for listed equity, that is to say :

- UN Global Compact norm's screening

- a best in class approach to assess the ESG performance of each company regarding its peers.

 

For SSA, we have 6 topics in our exclusionary screening :

Index of governance, index of corruption, countries in conflict, child labor, fundamental human rights, authoritarian regime and tax heaven (country on the list published by the French State)

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

Countries that have a low index of governance or a high index of corruption are excluded from our responsible investment universe

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

Countries in which child labor has been noticed by NGO are excluded of our responsible investment universe.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

In a bank's ESG analysis, corporate governance and ethics are major topics. In a SRI rating, governance issues are overweighted. Considering that majors bank's controversis deal with corporate governance, we have decided to put the emphaiss on this topic and to assess risk/opportunites for all bank's analysis. A high level of risks will have a negative impact on financial recommandation.

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?
Positive/best-in-class screening
Norms-based 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.

Each issuer is analysed by a credit analyst and an ESG analyst. Both analysts work closely to analyse the issuer on a 360° basis. For each sector they have determined ESG topics that have materiality, that is to say, that can have an impact on financial metrics. The ESG analyst determines if the issuer is exposed to ESG risks and if it is able to manage adequately this exposure. A high level of ESG risk can have a negative impact on the target price or on the credit rating.

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

Corporate (financial)

As mentionned previously, ESG topics have been determined for each sector in order to have a relevant analysis.

The ESG integration strategy described above is adapted to financial corporates as it includes a strong analysis of governance risks. Governance is a topic with high materiality on financial companies.

Corporate (non-financial)

As mentioned previously, ESG topics have been determined for each sector in order to have a relevant analysis. For non-financial companies, ESG topics will be analysed regarding their materialty on the issuer.

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)
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]


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

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.

Corporate (financial)

ESG factors are part of each issuers analysis. These factors are determined on a sector level. A company will be assessed regarding its exposure to this topic and assessed on its ability to manage this exposure.

Corporate (non-financial)

ESG factors are part of each issuers analysis. These factors are determined on a sector level. A company will be assessed regarding its exposure to this topic and assessed on its ability to manage this exposure.

12.3. Additional information.[OPTIONAL]


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