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Dimensional Fund Advisors

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
0 Screening alone
0 Thematic alone
0 Integration alone
5 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
95 No incorporation strategies applied
100%
Corporate (financial)
5 Screening alone
0 Thematic alone
0 Integration alone
5 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
90 No incorporation strategies applied
100%
Corporate (non-financial)
5 Screening alone
0 Thematic alone
0 Integration alone
5 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
90 No incorporation strategies applied
100%

01.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

We believe screening to be most appropriate for clients with specific social and environmental concerns (such as factory farming and child labor) as such concerns seek to avoid investment in certain lines of business. Additionally, for clients with environmental concerns, we take an integration approach with sustainability strategies to account for the varying degrees of impact an issuer’s business practices have on the environment.

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]


(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

A combination of internal and external data is used to evaluate issuers on a focused set of sustainability and social concerns. Negative screens include cluster munitions and tobacco, as well as social sustainability issues such as factory farming. The list of screened issuers is updated regularly based on internal data and data received from ESG research providers. For more information on the screens applied, see our response to FI 05.1.

04.3. Additional information. [Optional]

With respect to environmental screening for SSAs, this was implemented in March 2020.


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]


(C) Implementation: Integration

FI 10. Integration overview

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

For Dimensional’s fixed income sustainability portfolios, a combination of internal and external data is used to evaluate issuers on a focused set of sustainability concerns. Issuers are evaluated relative to their peers, and issuers with more environmentally sustainable business practices are emphasized while those with less sustainable business practices are deemphasized or excluded.

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

SSA

In sustainability strategies, supranational and agency issuers are evaluated relative to other supranational and agency issuers on greenhouse gas emissions intensity. Those with higher greenhouse gas emissions intensity are excluded, while those with lower greenhouse gas emissions intensity are emphasized.

Corporate (financial)

In sustainability strategies, financial companies are evaluated relative to other financial companies on certain environmental metrics (such as greenhouse gas emissions intensity), and companies with more environmentally sustainable business practices are emphasized while those with less sustainable business practices are deemphasized.

Corporate (non-financial)

In sustainability strategies, non-financial companies are evaluated relative to other non-financial companies on certain environmental metrics (such as greenhouse gas emissions intensity), and companies with more environmentally sustainable business practices are emphasized while those with less sustainable business practices are deemphasized.

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]


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

In sustainability strategies, supranational and agency issuers are evaluated relative to other supranational and agency issuers on greenhouse gas emissions intensity. Those with higher greenhouse gas emissions intensity are excluded, while those with lower greenhouse gas emissions intensity are emphasized.

Corporate (financial)

In sustainability strategies, financial companies are evaluated relative to other financial companies on certain environmental metrics (such as greenhouse gas emissions intensity), and companies with more environmentally sustainable business practices are emphasized while those with less sustainable business practices are deemphasized.

Corporate (non-financial)

In sustainability strategies, non-financial companies are evaluated relative to other non-financial companies on certain environmental metrics (such as greenhouse gas emissions intensity), and companies with more environmentally sustainable business practices are emphasized while those with less sustainable business practices are deemphasized.

12.3. Additional information.[OPTIONAL]


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