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Oquendo Capital

PRI reporting framework 2020

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
100 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied

01.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

Oquendo carries out a broad, all-encompassing materiality assessment. This materiality assessment aims to appraise a potential investment's performance in a series of ESG criteria, in order to thus evaluate what ESG risks the investment poses. On top of that, there is an investment restriction process that shuns certain activities and sectors.

During 2019, Oquendo has started to work on a new ESG scoring system that will be fully operational during 2020. This will help us to better understand the drivers for the ESG performance in our portfolio and establish improvement measusres.

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:

specify description

          We use Forética´s assistance: (i) update on sustainability trends; (ii) train staff on ESG matters; (iii) establish dialogue with governments and financial regulators

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)
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

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

Our funds do not invest in companies related to:

- the production or trade with tobacco or distilled alcoholic beverages and related products,

- the financing of the production of weapons or ammunition of any kind,

- the development of casinos or equivalent enterprises

- the production, development or holding and/or management of real estate 

- the research, development or technical applications relating to electronic data programs or solutions regarding internet gambling, online casinos, pornography or are intended to enable the illegally download electronic data.

- the research, development or technical applications relating to human cloning for research or therapeutic purposes or genetically modified organisms (GMOs)


On the other hand we systematically monitor compliance with the following norms:

- The UN Global Compact 10 Principles

- The OECD Principles of Corporate Governance

- The Universal Declaration of Human Rights (UDHR)

- The Equator Principles 

04.3. Additional information. [Optional]

ESG is embeded in our financial analysis, so we factor in ESG performance as a proxy for quality in our valuation models. Due to our investment style - investors in private debt with lack of comparables - we do not pursue a best in class approach.

In its responsible investment policy Oquendo establishes several principles that rule the activities carried out by the organisation and its investees. Some of those principles are listed below:

ENVIRONMENTAL: Oquendo designs and implements a proactive behavior to environmental challenges. This includes the assessment, management and communication of risks and it is aimed at avoiding or minimizing environmental damage. All players directly or indirectly responsible for environmental damage are obliged to undertake appropriate remedies and offer compensation as soon as they are aware of the damage causation.

We are also focused on complying with environmental laws and regulations and follow international standards and principles, such as limitation of emissions of harmful substances and waste and use of natural resources responsibly such as water and materials.

Additionally, we achieve cost savings and other value creation through improved eco-efficiencies and investment in sustainable products, services and technologies, rather than other non-sustainable, no matter of the cost difference


SOCIAL: We are also focused on complying with environmental laws and regulations and follow international standards and principles, such as limitation of emissions of harmful substances and waste and use of natural resources responsibly such as water and materials.

Additionally, we achieve cost savings and other value creation through improved eco-efficiencies and investment in sustainable products, services and technologies, rather than other non-sustainable, no matter of the cost difference.

We provide healthy and safe-working environments, including the adoption of appropriate precautionary measures to protect employees, service providers, the local community and any other players affected.

We promote diversity and equal treatment without consideration for age, gender, marital or parental status, sexual orientation, ethnic or national origin, culture, political affiliation, physical ability, appearance, education or religious background.

Elimination of discrimination in respect of employment and occupation, fighting against discriminatory practices in recruiting, promoting and rewarding employees is also critical for Oquendo. Specifically, policies, procedures and practices are not applied in ways that may negatively impact a particular employee or a specific group of employees or potential employees.

Oquendo promotes and contributes to the elimination of all forms of forced or compulsory labor and, specifically, the abolishment of child labor. Oquendo respects the internationally recognized labor rights, which enables workers to express their opinions, including claims and complaints and protecting their rights with regard to working conditions to the extent permitted under local law.


CORPORATE GOVERNANCE: Oquendo promotes professional and best-in-class corporate governance. Assess companies’ corporate governance performance in light of compulsory regulations, local rules and regional best practice in their own markets.

We support effective board structures, with an appropriate allocation of executive responsibilities and balance between executive and independent directors, with fair and consistent remuneration to the employees and key roles according to the performance of their functions, fully aligned with the interests of the company and stakeholders.

Oquendo designs an independent audit and transparent policies in order to ensure conducts of the companies are law-abiding and proportionated, maintaining business integrity, being compliant with relevant international standards, conventions and agreements on business integrity, anti-corruption and anti-bribery and appropriate management of associated risks.


We are currently formalizing additional detailed guidelines to further strengthen monitoring and the deployment of ESG factors in our portfolio management.

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
Negative/exclusionary screening

other description

          Periodic reviews
Norms-based screening

other description

          Periodic reviews

06.2. Additional information. [Optional]

Periodic reviews

Oquendo combines a three-tier structure for reviewing its portfolio companies.

(i) Our portfolio managers track companies activities in an ongoing basis and specifically analyse their consistency with our ESG policies and guidelines.
(ii) On top that, we conduct a thorough review on ESG performance through a questionnaire containing 74 specific items. We do this once a year and report progress to our investors.
(iii) Our role as directors or our influence on the companies´ boards.

We conduct a review every year to gauge a progress on ESG issues at our investees. We also oversee most of our investees by sitting at their boards.

(C) Implementation: Integration

FI 10. Integration overview

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

Oquendo performs a top-down and bottom-up analysis of each investment in which many factors are taken into consideration in order to provide a good estimate of a company's future financial performance. The range of inputs that is incorporated into our financial models includes traditional variables such as market analysis, demographics, competition, peer review, SWOT analysis, but also ESG elements, which are fully integrated as key qualitative factors of such analysis.

We have developed several tools in order to improve our portfolio ESG performance:

- ESG checklist for all our companies; Our check-list is used by portfolio managers to gauge ESG preparedness of potential investible companies. This tool is also used to keep track of those companies once they are integrated in our portfolio.

- Rating system to evaluate ESG portfolio performance; We established a scoring system to assess the ongoing performance of our portfolio companies. In order to do that, we have established a base line of expected ESG performance to cross against each individual company. This enables us to establish improvement recommendations and follow up on progress.

- ESG materiality matrix; This matrix reflects our exposure to the main ESG risks and opportunities.

- Climate change strategy; we are developing a Climate Change Strategy to fully align our activities with the TCFD recommendations for asset managers.

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)

Our ESG integration approach is generally applied in all of our investments since we do a quick check list of general ESG factors that the company is already implementing. On of the investment committee tasks is to analyze if the company assess is engaged with ESG factors.

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)
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 in Additional Information

11.2. Additional information [OPTIONAL]

Since Oquendo invest primarily in private debt peer group comparison is not always feasible. That´s why we conduct a bottom up approach to integrate ESG in our financial performance assessment.

ESG analysis is embedded in our financial valuation models through two main value-creation channels:
Impact on profitability: we look at ESG factors and their potential role as drivers for profitability. Our framework tries to estimate sustainability´s contribution to enhancing the brand and reputation, improve resource and human capital productivity and increase market opportunities. Impact on risk premia: we factor in ESG performance as a potential driver of risk premia by reducing the likelihood for experiencing shocks that might affect internal operations, disruptions in value chain and legal, ethical and governance crisis.

FI 12. Integration - E,S and G issues reviewed

12.1. Indicate the extent to which ESG issues are reviewed in your integration process.

Corporate (non-financial)




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

Corporate (non-financial)

Oquendo’s sustainability approach is embraced through-out its whole investment process. Oquendo’s Responsible Investment Policy is the mainstay when integrating environmental, social and governance issues in its making decision processes

In the asset allocation process, Oquendo operates an “exclusions and concerns” dynamic filter. The investment committee has established some exclusion criteria such as alcohol, pornography, gambling and tobacco manufacturing.

During the investment selection stage, Oquendo carries out a broad, all-encompassing materiality assessment. This materiality assessment aims to appraise a potential investment’s performance in a series of ESG criteria, in order to evaluate what ESG risks the investment poses. Moreover, an ESG report is always requested from external advisors including situation assessment, areas of improvement and potential deal breakers.

At the execution stage of the investment process, Oquendo’s team monitors potential ESG controversies during company visits, management interviews, etc. If they identify that a company has a high potential impact or issue in terms of Human Rights, Labour, Environmental or Corruption they carry out a more meticulous due diligence and close monitoring. A management plan will be drawn up to include actions to solve non-severe ESG issues and to improve key metrics. The Investment Committee takes into the account all this information when submitting an investment recommendation. If the results of this process end up with a negative conclussion, the investment will be dismissed.

During the holding period, Oquendo’s strategy is based on the triple action of systematically assessing ESG performance, engaging with its investees and managing eventual controversies. Oquendo carries out a yearly

ESG Portfolio Review in order to collect up-to-date in- formation on ESG risks and its investees’ performance against these. In parallel, Oquendo seeks to engage with its investees to influence company’s board behaviour towards ESG best practices. Quarterly, the CFO reviews the Responsible Investment assessment and make changes if applicable.

12.3. Additional information.[OPTIONAL]