DDJ believes that its clients have selected DDJ to manage their assets primarily to seek to maximize total return while minimizing risk, in each case in accordance with the desired investment strategy and any customized individual guidelines. In pursuing this objective, DDJ believes that it has a responsibility to take into account non-financial factors when allocating client assets to various investment opportunities. Accordingly, this Responsible Investment Policy outlines DDJ's integration approach with respect to assessing environmental, social and governance ("ESG") factors as an integral feature of DDJ's underlying investment philosophy and process.
To further enhance the quality of its ESG-related research, DDJ licenses ESG data from a leading third-party provider of such data for many of the companies within DDJ client portfolios as well as its investable universe more broadly. Such information includes both industry-wide and company specific research reports. In addition, the vendor provides ESG ratings for a broad list of corporate credit issuers, including many portfolio holdings of DDJ's clients. DDJ's research team can access such ESG ratings within DDJ's trade order and portfolio management system. Although DDJ does not use these ratings to strictly include or exclude an investment from client accounts, DDJ does instruct its analysts to incorporate such information in their fundamental research process in an effort to better understand the topical ESG-related risks as well as the relative value among existing and prospective investment opportunities.
DDJ, which pursues fixed income investment strategies on behalf of its clients, believes that issuer engagement as a debt holder tends to be more indirect when compared to that of an equity owner. In the high yield market, DDJ would like to see more robust ESG disclosures and increased transparency by issuers; to further this objective, DDJ seeks to influence terms in new issue bond indentures when possible (e.g., increased reporting obligations by issuers). DDJ also identifies inconsistencies between its third party ESG vendor research on certain companies and DDJ's evaluation of those companies. In such cases, DDJ initiated discussions with both the respective issuer and with its third party ESG vendor in an effort to improve the quality of the ESG research produced.
DDJ's active approach to fixed income investing oftentimes includes frequent interaction with company management, as DDJ seeks to keep an open line of communication with respect to actions that could negatively impact the investment made by DDJ on behalf of its clients. In the event that DDJ does not believe that it can advocate for practical change to mitigate a material ESG risk factor, divestment from a client portfolio may be warranted. In addition, DDJ implements exclusionary screens at the request of certain of DDJ's clients and works with new clients to tailor products that meet their internal requirements (e.g., investment restrictions on issuers associated with the production of Cluster Munitions, Tobacco, etc).