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Federated Hermes, Inc. (formerly Federated Investors, Inc.)

PRI reporting framework 2020

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (A) Implementation: Screening

(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

Negative screening is used primarily in separate accounts.  Institutional separate account clients provide to Federated a list of prohibited sectors, products, securities or moral concerns which are then excluded from the potential universe of investments.  For Separately Managed Accounts (SMA), clients may provide a list of prohibited securities or choose class restrictions.  Federated uses GIC sector and industry classifications to determine the list of prohibited securities in SMA class restriction lists. 

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

 Institutional separate account clients direct all changes to the list of prohibited securities within their accounts so all changes to screening criteria are client-mandated and account specific. Within separately managed accounts, if a security is added to a class restriction list at the end of any given quarter and it is held in any client account that has that particular class restriction, the financial advisor on the account will be contacted to determine whether the security should be immediately sold from the client account or held and no further securities purchased.

 


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure ESG screening is based on robust analysis.

          Quarterly, SMA Portfolio Management provides to Managed Account Operations a current list of securities falling under the class restriction list using GIC industry definitions.
        

05.5. Additional information. [Optional]


LEI 06. Processes to ensure fund criteria are not breached

06.1. Indicate which processes your organisation uses to ensure fund criteria are not breached.

06.2. If breaches of fund screening criteria are identified, describe the process followed to correct those breaches.

Institutional Separate Accounts -  Through our trade order management system, we track sector and securities weightings and monitor a portfolio's structure and individual holdings.  Federated's Compliance Department monitors post-trade reports from various investment and trading systems to identify exceptions and facilitate any necessary corrective action in order to adhere to the stated SRI/ESG investment limitations articulated in the institutional separate account accounts guidelines.  In addition, Federated's Audit Department conducts periodic audits to ensure investment management controls, including those related to guidance adherence are operating properly.

Separately Managed Accounts - On a quarterly basis, Portfolio Management will provide to Managed Account Operations a current list of securities that fall under the class restriction list.  Managed Account Operations updates the Portfolio Accounting System as necessary.  If a security is added to a class restriction list at the end of any given quarter and it is held in any client account that has a particular class restriction, the financial advisor on the account will be contacted to determine whether the security should be immediately sold from the client account or held and no further securities purchased.  

06.3. Additional information. [Optional]


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