We employ negative screening for companies that add articulable, serious, and sustained investment risk to the portfolio. This includes issuers that are involved in firearms manufacturers and private prisons. For thermal coal mining companies, we are conducting further research to evaluate individual companies’ readiness for a low carbon transition, and are engaging with the companies before considering divestment.
We also consider an issuer’s ESG performance relative to its peers in our fundamental credit analysis. We typically analyze a green or sustainable bond issuer’s ESG performance as part of our fundamental analysis on themed bonds. For example, we factored Xcel Energy’s subsidiary’s performance in climate change and the low carbon transition into our investment decision as part of the investment analysis when we considered purchasing their green bonds.
Our external managers incorporate positive screening to invest in best-in-class performers in ESG consistent with fiduciary duty.