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Permira Holdings Limited

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.

Direct Lending

Potentially material ESG matters are considered as part of the pre-investment due diligence process on each direct lending transaction. Responsibility for assessing ESG considerations of a potential transaction lies with the deal team. Where required, the PDM team can call on the expertise of Permira's Head of ESG, Adinah Shackleton, or Aga Siemiginowska (Adinah's maternity cover as of October 2019). During the pre-investment stage, deal teams may also have access to deal documentation, management teams and/or external advisors to understand and assess the ESG risks associated with the investment. Depending on the sponsor and the nature of the investment, PDM may also gain reliance on independent environmental, health, safety and/or social due diligence undertaken for the sponsor as part of the due diligence process. If no independent EHS or social due diligence has been undertaken, the PDM team may speak directly to the sponsor to better understand how ESG risks and opportunities are assessed at the sponsor level. 

PDM also use RepRisk, an ESG business intelligence provider, to inform the pre-acquisition process and screen companies for previous negative ESG and reputational issues (e.g. in the local, national, international media, issues raised by Non-Governmental Organisations and industry bodies in various languages). This tool is also used post investment to support in monitoring reputational risks during the lifetime of the investment.

Material risks identified throughout the pre-investment due diligence are raised with the Investment Committee through the iterative IC process. At Final Investment Recommendation overall ESG risks identified throughout the pre-investment process are distilled and presented in one summary slide to the Investment Committee, and discussed where relevant. As a result of the due diligence process, deal teams assign ESG risk ratings (red, yellow or green) according to a target's sector of activity and its internal ESG management capability. PDM deal teams have access to Permira's Head of ESG to discuss potential material issues and risk ratings to ensure that risk criteria are assessed consistently.

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)

Refer to FI 01 for further details on the approaches to ESG for the different types of fixed income strategies that are followed by the PDM funds.

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)

Potentially material ESG matters are considered as part of the pre-investment due diligence process on each direct lending investment. Responsibility for assessing ESG considerations on a potential transaction lies with the deal team. Where required, the PDM team can call on the expertise of Permira's Head of ESG. During the pre-investment stage, deal teams may also have access to deal documentation, management teams and/or external advisors to understand and assess the ESG risks associated with the investment. Depending on the sponsor and the nature of the investment, PDM may also gain reliance on independent environmental, health, safety and/or social due diligence undertaken for the sponsor as part of the due diligence process. In cases where no independent EHS or social due diligence is available, the PDM team may reach out to the sponsor directly to better understand how ESG risks and opportunities are assessed. 

PDM also uses RepRisk, an ESG business intelligence provider, to inform the pre-acquisition process and screen companies for previous negative ESG and reputational issues (e.g. in the local, national, international media, issues raised by Non-Governmental Organisations and industry bodies, in various languages). This tool is also used post-investment to support in monitoring reputational risks during the lifetime of the investment (see section on post-investment below for further details).

An initial screening of ESG risks begins during deal origination. The ESG Framework and templates guide this process but are not prescriptive, allowing deal teams to focus on the relevant aspects of ESG for a given sector or target company. As a result of the due diligence process, deal teams assign ESG risk ratings (red, yellow or green) according to a target's sector of activity and its internal ESG management capability. PDM deal teams have access to Permira's Head of ESG to discuss potential material issues and risk ratings to ensure that risk criteria are assessed consistently.

12.3. Additional information.[OPTIONAL]


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