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Kagiso Asset Management

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.
SSA
0 Screening alone
0 Thematic alone
100 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
100 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 (non-financial)
0 Screening alone
0 Thematic alone
100 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%

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

We are predominantly a listed equity asset  manager and have used our listed equity ESG process and investment process to evaluate and analyse the fixed income investment opportunities.

We utilise our sector specific ESG scorecards where applicable in the fixed income universe particurlarly with listed companies that we also hold fixed income investments.

When evaluating government investments we use engagement as there is not readily available ESG data from government at this stage.

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]


(C) Implementation: Integration

FI 10. Integration overview

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

We do not hold fixed income instruments of companies without listed equity as our fixed income holdings normally flow from our research processes of our listed equity investment process and hence we follow a similar process to our listed equity process.

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

SSA

Our clear distinction is SSA as that has a different analysis process.

We use engagement with public policymakers to ascertain ESG risks of SSA and would argue any investment in any governmnet or public institution has inherent ESG risks that one must account for.

We continously engage with public policymakers and where ESG risks or general investment risk does not get the adequate return we would not invest.

Corporate (financial)

We do not hold fixed income instruments of companies without listed equity as our fixed income holdings normally flow from our research processes of our listed equity investment process and hence we follow a similar process to our listed equity process.

On financial companies we look upweight social and governance risks and look at whether they are signatories of the UNPRI and adopt the equator principles.

Corporate (non-financial)

 

We do not hold fixed income instruments of companies without listed equity as our fixed income holdings normally flow from our research processes of our listed equity investment process and hence we follow a similar process to our listed equity process.

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)
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]


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

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.

SSA

We review E factors as follows:

  • We engage with government or public policymakers on environmental legislation

We review S factors:

  • We engage with government on social initiatives and government policy
  • Whether the policy would result in social benefits or costs
  • Applicability of that policy and conflict of interest between policy and politics

We review G factors as follows:

  • We engage with public policymakers on Corporate governance standards of public institutions

Corporate (financial)

We use our sector specific ESG scorecards as an engagement tool, we engage on matters ranging from diversity in the workplace, transformation in South Africa, corporate governance of the banking institutions, executive remuneration.

We benchmark the scores to sector peers and continously engage where we are concerned.

Corporate (non-financial)

We use our sector specific ESG scorecards as an engagement tool, we engage on matters ranging from diversity in the workplace, transformation in South Africa, corporate governance of the banking institutions, executive remuneration, environmental emissions and carbon disclosure project scores.

We benchmark the scores to sector peers and continously engage where we are concerned.

12.3. Additional information.[OPTIONAL]


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