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Bank of America Global Wealth and 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
65 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
35 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (financial)
75 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
25 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
91 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
9 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.

IP/MAA:  MAA offers negative screening capability for corporate fixed income strategies at the direction/request of the client.  Screening alone accounts for 100% of IP/MAA’s approach.

 

CIO:  the following description applies only to the CIO Socially Innovative Fixed Income Portfolio. CIOCIO utilizes a proprietary social innovation screening process, by which fixed income investment universes  are screened across data points related to ESG issues. CIOCIO segments these data points into three categories: environmental stewardship, human capital engagement, and corporate governance. The social innovation screening process serves to narrow down the investment universe to only those issuers that exemplify top stewards of the aforementioned categories. The screening process is proprietary and dynamic which allows the portfolio managers to customize for our clients based on specific ESG concerns. 

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]

IP/MAA: For the discretionary investment management in Merrill Lynch, Merrill Private Wealth Management, and the Private Bank, MAA uses screens provided by a third party provider to negatively screen accounts. These research screens encompass religious, industry, country, sector, and individual company screens. At present time, clients and/or beneficiaries are not notified when changes to the underlying screened components are adjusted. 

CIO:  The Social Innovation screen seeks to find companies that are best-in-class across the three focus areas within the screening process: Environmental Stewardship, Human Capital Engagement, and Corporate Governance. We also employ a Performance Review which is designed to measure how effectively corporations implement the policies and procedures described and evaluated in the previous step, and whether the company capitalizes on external incentives for good corporate behavior. We believe the data points used in the screening process identify companies that are having positive social impact while simulataneously creating economic advantages for their businesses. The scoring process takes place after each quarter-end and the portfolios are adjusted accordingly. Given CIO’s discretionary approach, changes are implemented and clients may speak with their portfolio managers to be made aware of any changes in a client's portfolio. 


(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

IP/MAA:  For the discretionary investment management in Merrill Lynch, Merrill Private Wealth Management, and the Private Bank, MAA uses screens provided by a third party provider to negatively screen accounts. These research screens encompass religious, industry, country, sector, and individual company screens.

CIO:  For positive best-in-class screening, we test the companies broadly against the key characteristics that are designed to identify corporations that achieve positive social impact through progressive policies believed to be creators of value. This description applies only to the CIO Socially Innovative Fixed Income portfolio.

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

06.2. Additional information. [Optional]

IP/MAA:  Box 1 in Negative/exclusionary screening is checked for IP/MAA. For the discretionary investment management in Merrill Lynch, Merrill Private Wealth Management, and the Private Bank MAA uses screens provided by a third party provider to negatively screen accounts. These research screens encompass religious, industry, country, sector, and individual company screens.

CIO :  All other boxes are checked with respect to CIO activity.  Exclusions are maintained on an account by account basis and we have a systematic way to ensure that each exclusion is adhered to. Breaches are brought directly to the portfolio managers of the strategy and an attempt to clarify when client-initiated exceptions are made. It is common for clients to direct exclusions that must be documented in the clients' investment contract with CIO (Investment Policy Statement. Applies only to CIO Socially Innovative Fixed Income portfolio.)


(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.

Not applicable

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]

CIO: The above response applies to CIO Socially Innovative Investing Fixed Income customization only.


(C) Implementation: Integration

FI 10. Integration overview

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

IP/MAA:  MAA does not calculate the impact of ESG issues on performance.

 

CIO:  The S2I team screens our fixed income team’s prefered issuer corporate list to identify leading ESG performers. The Social Innovation screen seeks to find companies that are leaders across the three focus areas within the screening process: Environmental Stewardship, Human Capital Engagement, and Corporate Governance. We also employ a Performance Review which is designed to measure how effectively corporations implement the policies and procedures described and evaluated in the previous step, and whether the company capitalizes on external incentives for good corporate behavior.

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

SSA

See response to FI 10.1

Corporate (financial)

See response to FI 10.1

Corporate (non-financial)

See response to FI 10.1

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]

CIO – The selections above only apply to the CIO Socially Innovative Fixed Income customization.


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

CIO: The portfolio management team leverages approximately ESG data points, provided by third party data providers, that are incorporated into the social innovation positive screening process. This process only applies to the CIO Socially Innovative Fixed Income strategies.

Corporate (financial)

CIO: The portfolio management team leverages approximately ESG data points, provided by third party data providers, that are incorporated into the social innovation positive screening process. This process only applies to the CIO Socially Innovative Fixed Income strategies.

Corporate (non-financial)

CIO: The portfolio management team leverages approximately ESG data points, provided by third party data providers, that are incorporated into the social innovation positive screening process. This process only applies to the CIO Socially Innovative Fixed Income strategies.

12.3. Additional information.[OPTIONAL]


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