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Momentum Metropolitan Life Ltd

PRI reporting framework 2020

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

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

Responsible investment practices is inherent to the Investment team's outcome based investment philosophy.

 

 

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]


(C) Implementation: Integration

FI 10. Integration overview

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

Environmental, social and governance (ESG) risk factors are relevant to the overall performance of investments.  Responsible investment practices is part of the investment philosophy that gets implemented when doing traditional financial analysis.  As part of the investment risk management process, the impact on portfolios of any material ESG concerns needs to be identified and assessed on a case by case basis and action taken accordingly.  Even though ESG issues might not be able to be quantified initially, the potential impact of ESG issues could manifest into significant financial implications for an entity. As part of the continuous ESG monitoring it is important to also assess and obtain comfort with the issuers’ management.  Where the ESG issues are considered to pose a potential threat to investments, the specific entity should be noted on a watch list and monitored accordingly. Any concerns should be communicated to credit committee and escalated if necessary.  The potential impact of ESG issues could result in an asset manager deciding not to invest in the entity anymore, and/or reduce/sell off exposure and/or not roll upcoming maturities in order to protect the investor against any potential adverse changes as a result of ESG issues. However, an asset manager could also decide that they are comfortable with their existing position, but decide not to increase exposure any further, and/or would like to obtain additional security in order to mitigate and compensate for the heightened ESG risk. The responsible investment team, credit risk team and various broker research feeds into the qualitative ESG considerations that is applied to the financial analysis executed.  The credit analysts integrate ESG considerations in their investment considerations that directly feeds to the fixed income team.  There are responsible investment committee members and the ESG analyst of the investment team that also serve on the credit and fixed income investment committees where investment analysis is considered or where decisions need to be made.  All capabilities within the investment team adopted the responsible investment policy.  

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

SSA

In our country lending to State Owned Entities (SOEs) is a challenge involving a fine balance between its strategic importance, adequate compensation and risk mitigation on the one side and its ESG risk factors on the other side that needs to be assessed on a case by case basis. Further, from a responsible investor viewpoint, lending to SOEs also represent a challenge as a fine ESG balancing act between the different ESG concerns noted and the social responsibility (“the S”) as a South African investor.

Accordingly, governance issues with regards to SOEs are becoming increasingly important in the risk management process and as a result it is also influencing investment decisions. These issues would include, but will not be limited to: management concerns, poor operational performance, corruption and fraud, mismanagement of funds, misuse of assets, supply chain irregularities.  Some issuers are unable to access the debt capital markets for funding as a result of governance concerns which in turn puts even more pressure on their liquidity position. There is also a certain amount of social responsibility involved in funding key strategic assets for the benefit of the country.  Therefore we have put in place an SOE lending framework that assist in dividing the entities into different categories depending on to which extent we are willing to lend to them.

Corporate governance issues, dependency on government and funding constraints have become increasingly important considerations to rating agencies, thus the impact of ESG issues on an entity’s credit rating is also an important factor to consider in investment decisions.

Corporate (financial)

The ESG integration process for Corporate (financial) issuers don't have a significant different approach to our fixed income investment process which includes ESG integration.  The fixed income and the responsible investment team must engage with company issuers if there are any material ESG concerns.  We record such engagements in a register.

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)
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

12.2. Please provide more detail on how you review E, S and/or G factors in your integration process.

SSA

Environmental, social and governance (ESG) risk factors are relevant to the overall performance of investments.  Responsible investment practices is part of the investment philosophy that gets implemented when doing traditional financial analysis.  As part of the investment risk management process, the impact on portfolios of any material ESG concerns needs to be identified and assessed on a case by case basis and action taken accordingly.  Even though ESG issues might not be able to be quantified initially, the potential impact of ESG issues could manifest into significant financial implications for an entity. As part of the continuous ESG monitoring it is important to also assess and obtain comfort with the issuers’ management.  Where the ESG issues are considered to pose a potential threat to investments, the specific entity should be noted on a watch list and monitored accordingly. Any concerns should be communicated to credit committee and escalated if necessary.  The potential impact of ESG issues could result in an asset manager deciding not to invest in the entity anymore, and/or reduce/sell off exposure and/or not roll upcoming maturities in order to protect the investor against any potential adverse changes as a result of ESG issues. However, an asset manager could also decide that they are comfortable with their existing position, but decide not to increase exposure any further, and/or would like to obtain additional security in order to mitigate and compensate for the heightened ESG risk. The responsible investment team, credit risk team and various broker research feeds into the qualitative ESG considerations that is applied to the financial analysis executed.  The credit analysts integrate ESG considerations in their investment considerations that directly feeds to the fixed income team.  There are responsible investment committee members and the ESG analyst of the investment team that also serve on the credit and fixed income investment committees where investment analysis is considered or where decisions need to be made.  All capabilities within the investment team adopted the responsible investment policy.  The ESG information utilised within the credit and fixed income team would mostly be sourced in-house from company statements, integrated reports and websites.  Financial market data services such as Bloomberg and rating agencies also complements the information the team use to inform ESG considerations.  Media articles and other news material will also serve as an information source.  Other information inputs may come from bank research and our broker research that includes ESG specific research such as Avior and Legae that provide issuer specific research. 

Corporate (financial)

Environmental, social and governance (ESG) risk factors are relevant to the overall performance of investments.  Responsible investment practices is part of the investment philosophy that gets implemented when doing traditional financial analysis.  As part of the investment risk management process, the impact on portfolios of any material ESG concerns needs to be identified and assessed on a case by case basis and action taken accordingly.  Even though ESG issues might not be able to be quantified initially, the potential impact of ESG issues could manifest into significant financial implications for an entity. As part of the continuous ESG monitoring it is important to also assess and obtain comfort with the issuers’ management.  Where the ESG issues are considered to pose a potential threat to investments, the specific entity should be noted on a watch list and monitored accordingly. Any concerns should be communicated to credit committee and escalated if necessary.  The potential impact of ESG issues could result in an asset manager deciding not to invest in the entity anymore, and/or reduce/sell off exposure and/or not roll upcoming maturities in order to protect the investor against any potential adverse changes as a result of ESG issues. However, an asset manager could also decide that they are comfortable with their existing position, but decide not to increase exposure any further, and/or would like to obtain additional security in order to mitigate and compensate for the heightened ESG risk. The responsible investment team, credit risk team and various broker research feeds into the qualitative ESG considerations that is applied to the financial analysis executed.  The credit analysts integrate ESG considerations in their investment considerations that directly feeds to the fixed income team.  There are responsible investment committee members and the ESG analyst of the investment team that also serve on the credit and fixed income investment committees where investment analysis is considered or where decisions need to be made.  All capabilities within the investment team adopted the responsible investment policy.  The ESG information utilised within the credit and fixed income team would mostly be sourced in-house from company statements, integrated reports and websites.  Financial market data services such as Bloomberg and rating agencies also complements the information the team use to inform ESG considerations.  Media articles and other news material will also serve as an information source.  Other information inputs may come from bank research and our broker research that includes ESG specific research such as Avior and Legae that provide issuer specific research. 

12.3. Additional information.[OPTIONAL]


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