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Nexxus

PRI reporting framework 2020

You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (C) Implementation: Integration

(C) Implementation: Integration

FI 10. Integration overview

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

We act as responsible investors in our day to day, integrating ESG factors in each of the phases of our financing process:

  • Pre - Financing: we have decided to exclude from our financing universe a number of activities that are contrary to our principles and involve high reputational risk.
  • Evaluation: those companies that meet our financing criteria are subject to a preliminary analysis process by the financing team that includes major ESG risks and opportunities.
  • First Credit Committee and Approval of the Due Diligence Budget by the Borrower.
  • Due Diligence: includes a specific ESG due diligence performed internally in order to identify short and long-term ESG risks and opportunities. The results of the analysis are included in a report of conclusions and recommendations containing details of the most relevant issues from an ESG perspective.
  • Credit Committee Approval: once the transaction team is satisfied with the results of the due diligence analysis, the relevant team will prepare the Credit Paper and submit it to the Credit Committee for final approval of the transaction. The Credit Paper includes at least a specific section devoted to the main ESG risks and opportunities identified in the Due Diligence phase.
  • In the debt financing processes, the compliance with Nexxus Responsible Investment Policy is included as a Borrower obligation, within the Loan Agreement and other transaction documents. Likewise, the Loan Agreement includes specific provisions in the Information Undertakings clauses.
  • Full amortisation / maturity: Nexxus’ objective is to be able to prove at amortisation or maturity that we have contributed to the creation of a more sustainable company, from a social and environmental point of view.

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)

We follow the same integration approach in every private debt transaction. Due to our investment strategy (private debt), we do not use comparables within the fixed income market.

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]


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 (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 (non-financial)

The ESG due diligence analysis is performed internally and covers at least the following items:

(i) Analysis of the adequacy of the borrower to the exclusions and restrictions defined in this policy;

(ii) High level analysis of the geographies and sectors in which the company operates, allowing the identification of the main ESG risks and opportunities determined by the location and general characteristics of the activity it carries out; and

(iii) Specific analysis of the company to assess its ESG risks and opportunities.

The ESG Due Diligence process ensures that the following aspects are covered when analysing new financing opportunities:

Social:

Respect of workers’ human rights
Maintain safe and healthy work conditions for employees and contractors

Environmental:

Prudent and responsible environmental management of operations, ensuring an efficient use of natural resources as well as mitigation of environmental risks and issues

Governance:

Maintain high standards of business integrity, avoid corruption in any of its forms and complying with laws and regulation applicable against bribery, fraud and money laundering
Apply a good business management establishing clear responsibilities, procedures and controls and applying best corporate governance practices
Follow as a standard an inclusion and diversity policy

The results of the analysis are included in a report of conclusions and recommendations that contains details of the most relevant issues from an ESG perspective for making a financing decision. These conclusions inform the credit report that is analysed in the Credit Committee prior to take any financing decision.

12.3. Additional information.[OPTIONAL]


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