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STANLIB Asset Management Ltd

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
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 (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.

Our ESG incorporation process includes both negative screening and integration. Companies engaging in certain practices are excluded from our investment universe at the outset. The outcome of an ESG assessent  on those companies included in our universe informs our portfolio positioning.

 

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
SSA
Corporate (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

The STANLIB Fixed Income team applies a negative screening to companies that engage in the following:

• Production or activities involving harmful or exploitive forms of labour;

• Any form of child labour;

• Manufacture of weapons, weapons support or warfare systems for terrorist related activities;

• Production and/or distribution of narcotic drugs;

• Production and/or trade of any product or activity deemed illegal by laws, regulations and/or international conventions (animal poaching, illegal harvested timber; environmental pollution, oil operations, pornography, etc.);

• A history of serious health and safety breaches;

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?

06.2. Additional information. [Optional]


(C) Implementation: Integration

FI 10. Integration overview

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

If a company is not involved in any of the activities listed in our exclusion list an investment case can be justified, a credit application is prepared and the overall credit rating is determined by means of a quantitative as well as a qualitative (mainly ESG) analysis which together inform the overall credit rating.

The qualitative analysis is performed on all potential deals submitted to the Credit Committee across all the asset classes in the fixed income investment space. All existing exposures are reviewed annually and a qualitative analysis is also done as part of the review and presented to the Credit Committee.

Examples of the factors considered are:

Environment:

 Electricity and water usage,

 Sustainable sourcing of materials,

 Rehabilitation of the land,

Social:

 Diversity of management team,

 Role in society,

 Use of local labour and materials,

 Social demographics,

Governance:

 Independence of board and chairman,

 Company shares held by chairman,

 Management integrity and compliance with regulatory standards/frameworks,

 Share incentive schemes and how funded and whether linked to KPIs,

 Management KPI’s include ESG,

 

These factors are weighted and scored out of 4. An overall score below 2.2 is a red flag. The Governance component must score above 2.2. Issuers that score below 2.2 and are weak on Governance are not recommended for investment. The yield or return on the investment does not override weak governance. The internal process followed when we identify concerns is:

- We engage directly with the management team to ensure robust processes and policies are in place to ensure that the Governance concerns are addressed. The direct engagement is a powerful mechanism to drive the correct and sustainable corporate behaviour.

- In instances where this engagement is not successful in bringing about change, the STANLIB Fixed Income team will engage with other STANLIB franchises and note our concern through our proxy voting.

- Non-participation in funding/auctions.

 

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

SSA

Same as above

Corporate (financial)

same as above

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)
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
SSA

Environmental

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.

SSA

Same as previously disclosed

Corporate (financial)

Same as previously disclosed

12.3. Additional information.[OPTIONAL]


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