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Loomis, Sayles & Company, L.P.

PRI reporting framework 2020

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (C) Implementation: Integration of ESG factors

(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the proportion of actively managed listed equity portfolios where E, S and G factors are systematically researched as part of your investment analysis.

ESG issues

Proportion impacted by analysis




Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

Our objective is to equip analysts on our equity investment teams with ESG resources, tools and trainings, etc. Climate change has been recognized as an ESG issue and has been prioritised as a topic for 2020. 

Although the analysts on our equity investment teams incorporate E, S, and G factors as part of their fundamental analysis, the process is not standardized across the teams. This may result in different percentages of E, S and G focus for different investments. In addition, each industry has different exposures to E, S, and G issues. The material E, S, and G factors are researched by each equity team for each investment, but the concept of 'materiality' and the definition of 'systematically' may be interpreted differently by each investment team.


LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on robust analysis.

          An ESG review is incorporated into the structured, periodic meetings attended by members of investment product teams and the firm's Chief Investment Risk Officer.

09.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your integration strategy.

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.5. Describe how ESG information is held and used by your portfolio managers.

          We have an internally-developed application, our ESG Center, for the collection of data from external and internal vendors. See below.

09.6. Additional information. [Optional]

We have an internally-developed application, our ESG Center, for the collection of external and internal ESG data.  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.

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



LEI 10. Aspects of analysis ESG information is integrated into

New selection options have been added to this indicator. Please review your prefilled responses carefully.

10.1. Indicate which aspects of investment analysis you integrate material ESG information into.

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

10.2. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis.

          Each team integrates ESG metrics within its own process.  ESG integration can be a part of fundamental analysis, valuation, engagement, portfolio construction, and risk management.

10.3. Describe how you integrate ESG information into portfolio weighting.

Each investment team assesses the ESG risks and opportunities within its own investment process.  

The portfolio management teams have incorporated ESG information as part of their portfolio management processes using a range of approaches.  Our senior management believes it is critical to give the investment professionals the best ESG tools and data we can, and to allow each investment team the autonomy to integrate it as part of its unique investment process. Each portfolio manager has determined how and where ESG concepts are implemented within their investment process, and can (despite not not being mandated to) include macroeconomic analysis, fundamental analysis, valuation analysis, technical analysis, engagement with management teams, portfolio management, and risk management.  

For portfolio weighting in particular:

- Our portfolio managers have the ability to review their investment portfolio ESG metrics within our ESG Center. They have the ability to see ESG metrics from external vendors for both their portfolios and their respective benchmarks.  

- We also have ESG vendor data in Factset, which is a common platform used by our equity portfolio managers.   

- Our Chief Inestment Risk Officer reviews portfolio construction vs the appropriate benchmarks.


10.4. Describe the methods you have used to adjust the income forecast/valuation tool.

Each investment team assesses the ESG metrics that they believe are material and that could constitute a specific risk or present an opportunity)as part of the investment thesis.  It is up to each investment team to determine what they use to supplement their valuation analysis and whether they use it.  Our teams have developed their own fundamental forecasting models, and may consider ESG metrics as a subset of the fundamental metrics.  ESG metrics may be in a variety of places within the forecasts, but are not necessarily systematically 'labeled' as such within the models.  Some ways that investment teams may incorporate ESG within their fundamental models and valuation analysis include:

- Incorporate within the revenue model, if there are sustainability-related products or services that can drive revenues

- Incorporate within expenses

- Incorporate within intangibles 

- Incorporate within the cost of capital assessment as part of the discounted cash flow analysis

- Incorporate within assessment of management strategy and corporate governance

Increasingly, our equity analysts are learning more about incorporating ESG data as part of scenario analysis, particularly related to climate transition risks.  We expect to review and integrate one or more scenario analysis tools in 2020.


10.5. Describe how you apply sensitivity and /or scenario analysis to security valuations.

We are in the process of reviewing and assessing a number of climate transition related scenario analysis tools, and we expect to offer one or more of these tools to our investment teams in 2020. For example, PACTA is currenty under consideration.  We are also in the process of becoming a supporter of the TPI (Transition Pathways Initiative). We expect that these developments will allow our analysts to better incorporate climate related metrics into their valuation models, both from a DCF forecast perspective and from a valuation perspective (e.g. potentially higher discount rates or lower earnings multiples for higher risk companies).

10.6. Additional information. [OPTIONAL]

We conducted training on the SASB framework for our investment teams because we believe the SASB materiality map is a robust and practical way to assess the material factors wihtin each sector and industry.