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Elo Mutual Pension Insurance Company

PRI reporting framework 2020

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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
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
100 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
100 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.

Within the corporate investments ESG issues are integrated into the investment process on a portfolio manager level within the overall company analysis. We also use external screening services. Screening strategy is done to understand the risks in the specific investment and on a portfolio level. We screen for certain elements like CO2 emissions, controversial weapons, tobacco companies, global compact and positive impact. The thematic approach involves for e.g CO2 intensity and positive impact within the credit portfolio. We also exclude companies deriving 25% or more revenue from the mining of thermal coal or from the thermal coal based power generation. 

01.3. Additional information [Optional].


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]


(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

In corporates we use the MSCI data for screening the portfolio and markets in general. Screening is done to understand the risks in the specific investment and on a portfolio level. We screen for certain elements like CO2 emissions, controversial weapons, tobacco companies, global compact and positive impact. The thematic approach involves for e.g CO2 intensity and positive impact within the credit portfolio.

In SSA we pursue to avoid making investments in the lowest quartile countries based on the Corruption Perception Index.

04.3. Additional information. [Optional]


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
Positive/best-in-class screening
Norms-based screening

06.2. Additional information. [Optional]


(B) Implementation: Thematic

FI 07. Thematic investing - overview (Private)


FI 08. Thematic investing - themed bond processes

08.1. Indicate whether you encourage transparency and disclosure relating to the issuance of themed bonds as per the Green Bonds Principles, Social Bond Principles, or Sustainability Bond Guidelines..

08.2. Describe the actions you take when issuers do not disburse bond proceeds as described in the offering documents.

We would request further information why this has happened and if not satisfied we would sell the bonds. This would not only be due to uneligibility by definition but also a question of trust and governance.

08.3. Additional information. [Optional]


FI 09. Thematic investing - assessing impact

09.1. Indicate how you assess the environmental or social impact of your thematic investments.

09.2. Additional information. [Optional]


(C) Implementation: Integration

FI 10. Integration overview

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

Within the corporate investments ESG issues are integrated into the investment process on a portfolio manager level. In addition we also use external screening services. An ongoing dialogue and meetings with companies' management teams and in-depth knowledge of the investment targets all reduce the chance of negative surprises and provide an understanding of the kinds of factors that make a good, responsibly operating company, and thus a good investment. Our approach is a mix of quantitative and qualitative. A good scoring improves the overall investment score and a weak ESG rating reduces the attractiveness on the investment.

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

SSA

Corruption Perception Index by Transparency International used for ranking investable universe.

Global Adaptation Index by Dotre Dame University is used to gauge environmental issues within our investable universe.

World Bank's ESG Database

Corporate (financial)

ESG issues are integrated into the investment process on a portfolio manager level. In addition we also use external screening services. An ongoing dialogue and meetings with companies' management teams and in-depth knowledge of the investment targets all reduce the chance of negative surprises and provide an understanding of the kinds of factors that make a good, responsibly operating company, and thus a good investment. Our approach is a mix of quantitative and qualitative. A good scoring improves the overall investment score and a weak ESG rating reduces the attractiveness on the investment. The process is the same for financials and non-financials but governance issues are more in focus.

Corporate (non-financial)

ESG issues are integrated into the investment process on a portfolio manager level. In addition we also use external screening services. An ongoing dialogue and meetings with companies' management teams and in-depth knowledge of the investment targets all reduce the chance of negative surprises and provide an understanding of the kinds of factors that make a good, responsibly operating company, and thus a good investment. Our approach is a mix of quantitative and qualitative. A good scoring improves the overall investment score and a weak ESG rating reduces the attractiveness on the investment.

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
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

Environmental issues are still under development in SSA investments. ND-GAIN Index is being further investigated as a data source. Social and Governance issues fully integrated into SSA investment process.

Corporate (financial)

Within financials it is similar to the description on corporates below but there is more focus put on the governance issues.

Corporate (non-financial)

A starting point is whether there are or have there been serious controversies. If yes we raise the question whether they have been resolved. The ESG factors can vary between sectors.Typical elements within environment would be toxic emissions and waste, water stress, carbon emissions, product carbon footprint and opportunities in clean tech. Social aspect includes labour management, health and safety or product safety. Within Governance the general corporate governance, anti-competitive practicies and Business ethics & fraud. The focus on these issues varies between sectors.

12.3. Additional information.[OPTIONAL]


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