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Avanda Investment 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
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
100%
Corporate (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
100%
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
100%

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

We screen based on our IMAs with our clients. We then apply ESG criteria on remaining securities.

01.3. Additional information [Optional].

There are some sectors that have more comprehensive ESG rankings, and we rank the companies in these sectors more based on ESG. The GRESB score, for example, appears to be more frequently used in certain sectors. All else equal, companies with higher ESG ratings in sectors where we can make an “apples to apples” comparison will have a larger weight in our portfolio.


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]

We usually share ESG information that we obtain from meetings with management in our weekly meeting. The respective analyst or fund manager will share the information with the team to further add colour to whatever ESG score the company may already have in our database.


(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
SSA
Corporate (financial)
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

We apply screens based on our IMAs with our clients. We also use ESG ratings from specialist ESG research providers to evaluate issuers. We supplement this with internal research. 

04.3. Additional information. [Optional]

Our internal research adds colour to our understanding of the ESG process of the company. Companies with impressive ESG processes usually stand out and may be given a higher weight in our portfolio. ESG ratings are generally used to make sure the company is doing a reasonable job.


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
Checks
Negative/exclusionary screening

other description

          We use third-party data to check if an issuer has a low ESG score
        
Norms-based screening

06.2. Additional information. [Optional]

We have been trying to arrange more meetings with management to better understand individual companies’ ESG practices and not just relying on our database. We will build this up more over time.


(C) Implementation: Integration

FI 10. Integration overview

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

In traditional analysis we already include evaluation of issuers' corporate governance. Now we incorporate ESG ratings from service providers as an additional screening criteria. 

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

SSA

We apply our screening criteria first.

No external ESG ratings are used but we evaluate the governance of the countries' governments. 

Corporate (financial)

We apply our screening criteria first.

Then external ESG ratings are used, complemented by internal research. 

Corporate (non-financial)

We apply our screening criteria first. 

Then external ESG ratings are used, complemented by internal research. 

10.3. Additional information [OPTIONAL]

ESG scores from various databases are generally integrated into our financial analysis. 


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 incorporate all ESG factors in our integration process for SSAs.

Corporate (financial)

We incorporate all ESG factors in our integration process for Corporates.

Through our research we have noticed that some companies we cover may receive lower a ESG rating in a particular year even when they have put in greater efforts on the ESG front than in the previous year. We have been informed that some of these ratings are relative to other companies in the respective sector or country, and we do take that into consideration when looking at their ESG efforts.

Corporate (non-financial)

We incorporate all ESG factors in our integration process for Corporates.

Through our research we have noticed that some companies we cover may receive lower a ESG rating in a particular year even when they have put in greater efforts on the ESG front than in the previous year. We have been informed that some of these ratings are relative to other companies in the respective sector or country, and we do take that into consideration when looking at their ESG efforts.

12.3. Additional information.[OPTIONAL]


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