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PRI reporting framework 2020

Export Public Responses

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Outputs and outcomes

FI 17. Financial/ESG performance

17.1. Indicate whether your organisation measures how your incorporation of ESG analysis in fixed income has affected investment outcomes and/or performance.

Select all that apply
Corporate (financial)
Corporate (non-financial)
We measure whether incorporating ESG impacts portfolio risk.
We measure whether incorporating ESG impacts portfolio returns.
We measure the ESG performance/profile of portfolios (relative to the benchmark).
None of the above

17.2. Describe how your organisation measures how your incorporation of ESG analysis in fixed income has affected investment outcomes and/or ESG performance. [OPTIONAL]

We performed a study to determine the allocation effect of avoiding negatively scoring names in our SDG Global Credits fund.

The Performance contribution of the Beta policy equals the Beta position times “the excess return of the benchmark”. The remaining (beta-corrected) outperformance, we call issuer selection. We can allocate this issuer selection result in different dimensions. We can measure the allocation effect (being over/underweight the out/underperforming sectors) as well as the bottom-up issuer selection (selection of the right names within the sectors). We can also attributed the issuer results towards SDG scores. This means we get an allocation effect which measures the fact we are underweight the negative SDG part of the universe and overweight the positive scoring SDG names.

The fund outperformed the benchmark by 132 basis points since inception (1.5 yrs)

  • Approximately 25% of the performance is attributed to the allocation to the SDGs: 32 bps
  • Avoiding issuers with a negative SDG score had the strongest effect: 26 bps
  • Our beta policy in the fund added 24 bps to the overall outperformance
  • Issuer selection within the eligible universe made the largest contribution, which underlines the strength of the active management capabilities of the credit team

17.3. Additional information.[OPTIONAL]

Government bonds: S&P Dow Jones launched the S&P ESG Pan-Europe Developed Sovereign Bond Index. This first ESG-weighted bond index from S&P Dow Jones is based on the RobecoSAM Country Sustainability Ranking. While developing this index we have analyzed the impact of the ESG tilts on the return and risk of this index (for 2008-2014).

In an effort to quantify the longer term impact of ESG factors on investment returns and risks for government bonds we have investigated the relationship between changes in political risk, which is an important part of our ESG database, and changes in government bond returns over a period of 25 years. In January 2016 the results of this study have been published in the Journal of Empirical Finance (Political risk and expected government bond returns, J. Duyvesteyn, M. Martens and P. Verwijmeren, Journal of Empirical Finance, January 2016). To our knowledge this is one of the few academic articles on ESG and government bond returns. The link below gives access to the research article via the SSRN website. The conclusions from the article are clear. Bonds from countries with an improving political risk climate tend to generate higher returns than those of countries in which political risk is deteriorating. This underlines our conclusion that ESG information is a valuable input in the investment process of our fixed income funds.

FI 18. Examples - ESG incorporation or engagement

18.1. Provide examples of how your incorporation of ESG analysis and/or your engagement of issuers has affected your fixed income investment outcomes during the reporting year.

ESG issue and explanation

Specialty and generic pharmaceutical player, involved in Opioid litigation and price fixing allegations in US. This negatively impacts our fundamental view, and the F-score was lowered consequently. We had no exposure because of this, and saw spreads widen almost 3 fold.

Impact on investment decision or performance

The poor ESG performance negatively impacted our fundamental view, and the F-score was lowered consequently. We decided not to invest, because we felt the issue had not been priced in. We had no exposure because of this, and saw spreads widen almost 3 fold afterwards.

ESG issue and explanation

Niche seafood company harvesting shellfish, recognized as a leader in sustainable harvesting. 

Impact on investment decision or performance

Through it's product offering and procedures, the company and positively linked to SDG 2 (zero hunger) & 3 (good health and wellbeing) and is therfore invested in the sustainable strategies.

ESG issue and explanation

Pivately owned waste services/recycling company in France, specializing in the collection, sorting and recycling of non-hazardous waste. The trend towards a higher recycling rate of waste is beneficial to the company (and environment) and contributes positively to the SDGs 9 (industry, innovation and infrastructure), 11 (sustainable cities), 12 (responsible consumption and production), 14 (life below water) and 15 (life on land).

Impact on investment decision or performance

We see a premium versus the index, combined with fundamentals that are strong especially in the light of ESG.

ESG issue and explanation

Country subject to international sanctions

Impact on investment decision or performance

Excluded from the investable universe

ESG issue and explanation

Bank involved in one of the largest money laundering cases ever observed.

Impact on investment decision or performance

For the sustainable fund range, the company has been deemned negatively contributing to SDG 16 (peace, justice and strong institutions) and was therefore excluded from the investable universe.

18.2. Additional information.