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Addenda Capital Inc.

PRI reporting framework 2020

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (C) Implementation: Integration

(C) Implementation: Integration

FI 10. Integration overview

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

We strongly believe monitoring ESG factors for our fixed income mandates provide better risk management, hence leading to superior returns. We also undertake ESG screening and thematic investing when our clients demand it.

A key aspect of our approach is the explicit integration of ESG issues into our investment decisions. We do not reduce our investment universe by screening out industries or business practices for ethical reasons – we rather enhance our investment decisions by considering ESG factors that could have a material impact on financial or investment performance. The team is supported by the Sustainable Investing team working together to proactively identify and assess ESG risks and opportunities in our existing investment process.

When considering the purchase of a new security, the investment team incorporates ESG considerations into their investment analysis. The investment team receives ESG analysis from Addenda's sustainable investing team that draws upon a variety of ESG sources of information.

The investment team incorporates the ESG information and analysis into their decision, along with a variety of other considerations including corporate structure, management quality, relative value and liquidity.

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

SSA

With the help of the sustainable investing team, portfolio managers consider ESG information when it comes to the fundamental analysis of new issuers. The sustainable investing team also provides information on specific ESG issues on an ad hoc when they judge it material.

Corporate (financial)

With the help of the sustainable investing team, portfolio managers consider ESG information when it comes to the fundamental analysis of new and existing issuers. The sustainable investing team also provides information on specific ESG issues on an ad hoc when they judge it material. We place particular emphasis on governance issues.

Corporate (non-financial)

With the help of the sustainable investing team, portfolio managers consider ESG information when it comes to the fundamental analysis of new and existing issuers. The sustainable investing team also provides information on specific ESG issues on an ad hoc when they judge it material. We place particular emphasis on governance issues.

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 their analysis of sovereign issuers, portfolio managers include variables such as demographics as part of the research process.

Corporate (financial)

Investment teams are responsible for incorporating material ESG information. For corporate fixed income analysis, this could mean using data from ESG research providers such as MSCI, Sustainalytics, or Bloomberg, and identifying the best or worst performers in the portfolio on various E, S, and G, metrics. When looking at issuers, fixed income teams may work with the equity teams to see if any ESG analysis has been previously done by the equity teams. A member of the Sustainable Investing team attends the weekly Corporate Bonds team meetings. At these meetings issuer ESG issues are discussed. We also focus on specific topics such as cyber security and review how issuers are managing the risks. ESG issues are also reviewed in strategy meetings.

Corporate (non-financial)

Investment teams are responsible for incorporating material ESG information. For corporate fixed income analysis, this could mean using data from ESG research providers such as MSCI, Sustainalytics, or Bloomberg, and identifying the best or worst performers in the portfolio on various E, S, and G, metrics. When looking at issuers, fixed income teams may work with the equity teams to see if any ESG analysis has been previously done by the equity teams. A member of the Sustainable Investing team attends the weekly Corporate Bonds team meetings. At these meetings issuer ESG issues are discussed. We also focus on specific topics such as cyber security and review how issuers are managing the risks. ESG issues are also reviewed in strategy meetings.

12.3. Additional information.[OPTIONAL]


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