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Loomis, Sayles & Company, L.P.

PRI reporting framework 2020

You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » Implementation processes

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
95 Integration alone
5 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
95 Integration alone
5 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
95 Integration alone
5 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Securitised
0 Screening alone
0 Thematic alone
100 Integration alone
0 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.

At Loomis Sayles, we believe that ESG issues play an important role in the global economy, both from a business and investment perspective. Loomis Sayles embraces its duty to act at all times in our clients' best interest, and we believe that ESG issues impact our goal of achieving superior, risk-adjusted returns. We understand that environmental, social, and corporate governance practices may present risks that need to be evaluated, and we analyze these risks as part of our fundamental research process.

We analyze risks by modeling long-term business opportunities and challenges, by identifying risks inherent in industries and sectors, and by using a variety of methods to evaluate ESG issues, including engagement with issuers and the use of third-party analytical tools. 

With respect to integration, we expect our investment professionals to consider any macro, fundamental and quantitative research insights that they deem to be material to their investment process, including those related to ESG.

Unless otherwise directed, with respect to screening, Loomis Sayles does not impose any ESG restrictions or exclusions on the investment process. Screening performed is mandated by our clients' guidelines, or by regulation.

01.3. Additional information [Optional].


FI 02. ESG issues and issuer research

02.1. Indicate which ESG factors you systematically research as part of your analysis on issuers.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
Environmental data
Social data
Governance data

02.2. Indicate what format your ESG information comes in and where you typically source it

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

02.3. Provide a brief description of the ESG information used, highlighting any differences in sources of information across your ESG incorporation strategies.

ESG issues are considered as part of the firm's investment decision-making process. We use ESG research and/or issuer scores from MSCI, Sustainalytics, TruValue Labs, and the credit rating agencies (Moody's S&P, & Fitch). We are also a SASB Alliance member and use their framework as the foundation of our fixed income materiality maps. Loomis Sayles utilizes information from financial news publications, specialist data services, and economic and political consulting groups, and has considerable access to Wall Street research publications and sell-side analysts. At all times, Loomis Sayles has as one of its goals to continually identify additional superior tools for the research analysts and the investment teams. We continually evaluate the existing resources and the need to supplement them, through (1) the acquisition of data, and (2) the development of technological tools.  The analysis focuses on whether our resources sufficiently capture data to assist in incorporating ESG into the investment process, and whether other resources may be necessary in the future.

 

02.4. Additional information. [Optional]

The securitized team has assessed the MSCI ESG Manager database and utilized report of frequent issuers and servicers in the securitization market. Overall, we hae not found the data in these areas to be particularly helpful to our securitized analysis for two main reasons:

  • Many of the finance companies that access the securitization markets are smaller finance companies, often privately held, and in general not tracked by these data providers, which tend to focus on larger public companies.
  • When large companies are covered by these data providers, the ratings and research applies to the parent company and not to the issuer of the securitization program.

Third party data in 2019 seems to be consistent with prior years' offerings.  Looking ahead, credit rating agencies have proposed frameworks that we are evaluating and we find that there is increasing willingess of issuers to discuss the topics and a move towards direct ESG disclosure in their offering documents.  Encouragingly, issuers are beginning to proactively disclose information and therefore issuer data is more available.  Sell side researchers are publishing more on ESG in the securitization space, which provides additional data points in our ESG analysis and integration.


FI 03. Processes to ensure analysis is robust

03.1. Indicate how you ensure that your ESG research process is robust:

specify description

          We are developing fixed income materiality maps as well as internal ESG scores, which are being shared with the investment teams.
        

03.2. Describe how your ESG information or analysis is shared among your investment team.

          Our periodic industry and issuer reviews include a written presentation of ESG factors and they are discussed if material.
        

03.3. Additional information. [Optional]

We have an internally-developed application, our ESG Center, for the collection of external and internal ESG data and research.  We originally brought MSCI ESG data in-house, and in 2018 integrated TrueValue Labs and the SASB Framework.  We are in the process of integrating Sustainalytics.  The portfolio managers are able to use the ESG Center to assess ESG metrics within their portfolios, and in the benchmarks relevant to their client accounts.  Additionally, we are working with our Quantitative Team to incorporate ESG metrics into our Unified Relative Value Tool (URV) and Emerging Market Relative Value Tool (ERV).  

Our Chief Investment Risk Officer conducts semi-annual investment risk reviews with each investment team.  In order to assess awareness of ESG issues in the portfolios, the review includes exposure by ESG rating for the portfolio, performance by ESG rating, and a review of the lower ESG-rated securities held in the portfolio.  The CIRO has recently incorporated climate-related data into the portfolio reviews.  Based on the review, the CIRO shares processes and practices across all investment teams.


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