We believe that ESG analysis provides a holistic view of fixed income issuers and helps enhance our fundamental credit analysis. We employ a combination of integration, thematic, and screening strategies to incorporate ESG into our fixed income investments as below:
Integration is an effective way to systematically address ESG risks and capture ESG opportunities, which we apply to our credit analyses on corporate and securitized fixed income issuers.
Thematic strategy provides opportunities to invest in sustainability solutions consistent with our fiduciary duty. We look to invest in nine environmental and social themes defined under our Sustainable Investment-Climate Solutions (SICS) program such as climate change, affordable housing, among others.
We employ negative screening for companies that add articulable, serious, and sustained investment risk to the portfolio. Our specific criteria includes firearms manufacturers and private prisons. We are also evaluating thermal coal mining companies’ readiness for a low carbon transition, and engaging with the individual companies before considering divestment.
For SSA, we largely invest in US Treasuries and Federal Agency housing bonds to preserve our capital while receiving a dependable income stream, and our exposure to municipal and other sovereign debts is minimal.