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The international business of Federated Hermes (formerly Hermes Investment Management)

PRI reporting framework 2020

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

A) 実施:スクリーニング

FI 04. Types of screening applied

04.1. 実施するスクリーニングの種類を記載してください。

当てはまる項目を全てを選択してください
SSA
社債(金融)
社債(非金融)
証券化商品
ネガティブ/ 排他的スクリーニング
ポジティブ/業界最高のスクリーニング
基準に基づくスクリーニング

04.2. 組織内でアクティブ運用している債券に適用するスクリーニングのアプローチを記載してください。

​We adopt a firm-wide exclusion policy of companies that produce cluster munitions and/or anti-personnel landmines.

If a name appears on the Credit team's exclusion list, it is eliminated from the investment universe. These covers companies involved in the manufacturing or distribution of Controversial Weapons (predicated on the principles of the UNGC) or any names that receive an ESG score of five. For the newly-launched SDG Engagement High Yield Fund, additional exclusions include manufacturers of tobacco. (Although tobacco does not appear on a firm-wide exclusion list, the credit team has no exposure to tobacco.) For other scores, the team looks at whether or not the company's ESG behaviours are improving and if the company demonstrates an earnest desire to improve. In this way, companies that optically score poorly could be investment opportunities. If a company makes it through the exclusion list (e.g. no controversial weapons involvement, Credit ESG score of better than five), the Credit team can include it in its investment universe.

The Direct Lending strategies do not invest in any transaction exposed to certain industries and practices, including gambling, tobacco, distilled alcohol, pornography, weapons & munitions, GMO, fur trade, ship breaking, shark finning and cosmetics tested on animals.

04.3. 補足情報 [任意]

 

Moreover, as with all other scores, the credit team not only analyses the ESG risks, but also attempts to price them on an outright and nominal basis. If the analyst can provide a choice between two names at similar spread levels but of varying ESG quality, the portfolio manager will choose the one with the better ESG scores; the portfolio manager is less likely to select or build significant positions in names with a troubled ESG record.

The Public credit team do not have any norms-based exclusions for the mainstream credit funds. However, they do upload the quarterly controversial company reports produced by EOS to the coverage database in order to ensure that the analysts are aware of any changes to the list and capture materiality in financial risk from non-fundamental factors. 

The Private Debt team considers ESG items as part of the credit analysis undertaken for each potential investment. ESG considerations are tabled at the Private Debt Investment Committee as part of the research presented for all new transactions.

For our Direct Lending team, the key is to identify meaningful ESG risks, both current and potential, before investing. Due to the difficulty of divesting and the capped upside, it is important to manage the downside ex ante. The Direct Lending team operates a three-pillar approach to ESG analysis:

  1. Excluded Industries: The Direct Lending strategies are prevented from investing in any transaction exposed to certain industries and practices, including gambling, tobacco, alcohol, weapons, GMO, animal testing and businesses with a negative ecological footprint on natural habitats. This is because the Direct Lending team does not think that investors are remunerated for the ESG risks associated with these industries.
  2. Enhanced Due Diligence: Any potential investment exposed to certain industries is subjected to enhanced due diligence, including engaging with the Federated Hermes Responsibility team and  EOS, as appropriate. These industries include energy, chemicals, forestry and agricultural commodities, manufacturing and mining and metals.
  3. Transaction-specific ESG Analysis: Each potential investment is analysed at a granular level across the three ESG components, with the analyst identifying potential company and sector-specific ESG risks and mitigants. The analyst assigns a low, medium or high rating to each component. The Direct Lending team do not invest in companies with a ‘high’ risk assigned to any of the E, S or G factors pre-investment.

Information on flood risk is provided by the borrower along with professional independent valuation, EPC rating and financial information as a condition precedent to lending and then annually throughout the term of the loan. Flood risk for UK is measured in line with the UK Environment Agency flood maps and can be verified by Federated Hermes through this source. If any risk of flood is identified, a mitigation or action plan is required from the borrower and reviewed at least annually throughout the term of the loan.


FI 05. Examples of ESG factors in screening process

05.1. スクリーニング条件に含まれているESG要因の例を挙げてください。

種類

ESG要因

スクリーニング

スクリーニングの説明

Federated Hermes Credit do not hold any aerospace names because of controversial weapons.

種類

ESG要因

スクリーニング

スクリーニングの説明

The Direct Lending strategies are prevented from investing in any transaction exposed to certain industries and practices, including gambling, tobacco, distilled alcohol, pornography, weapons & munitions, GMO, fur trade, ship breaking, shark finning and cosmetics tested on animal. 

種類

ESG要因

スクリーニング

スクリーニングの説明

The Direct Lending strategy is prohibited from in investing in any transaction where any of the E, S or G components have been assigned a “5/Very High”  rating by the analyst (ratified by Private Debt Investment Committee).

種類

ESG要因

スクリーニング

スクリーニングの説明

We exclude companies which receive a rating of 5 (the worst rating) on our internal Credit ESG rating.
Hermes SDG Engagement High Yield Credit strategy excludes manufacturers of tobacco and controversial weapons.
 

05.2. 補足情報 [任意]


FI 06. Screening - ensuring criteria are met

06.1. 債券投資においてファンドスクリーニングの基準に違反がないことを確認するために組織が使用しているシステムを記載してください。

スクリーニングの種類
ネガティブ/排他的スクリーニング​

06.2. 補足情報 [任意]


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