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BT Funds Management (NZ) Limited

PRI reporting framework 2020

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.

  • BTNZ primarily manages funds on behalf of individuals for their retirement and in this sense the investment horizon is long term. We believe integrating ESG analysis into entity/security analysis will enhance portfolio performance over time. Focus has traditionally been dominated by issuer governance factors, however the urgency to address climate change and sustainability factors has heightened the importance integrating a fuller ESG approach into our analyses.
  • We use information from Bloomberg provided ESG scores, sell-side research, company reports, knowledge and meetings, and company specific research from our ESG provider Sustainalytics, to assess ESG factors applicable to issuers.
  • An overview of these factors is incorporated in the issuer research note prepared by the team.
  • We then assign an internal broad rating for companies researched.  

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

SSA

Our investment in SSAs are typically in large entities that issue into New Zealand in NZ dollars. ESG integration tends to be lighter touch given the global public and invest oversight of these entities have. However, brief one-on-one meeting opportunities with senior funding/relationship personnel is taken to discuss the entity including ESG factors (predominantly governance).

Corporate (financial)

ESG analysis is integral to the credit research process with a deep dive tending to be into those issuers that are smaller and/or unrated in the NZ market or where a particular factor has become topical/highlighted. Sustainalytics score is part of the analysis. Currently the ESG analysis results in a basic three code allocation to an issuer (acceptable to buy, do not increase, do not hold).

Corporate (non-financial)

ESG analysis is integral to the credit research process with a deeper dive tending to be into those issuers that are smaller and/or unrated in the NZ market or where a particular factor has become highlighted. Sustainalytics score is part of the analysis. Currently the ESG analysis results in a basic three code allocation to an issuer (acceptable to buy, do not increase, do not hold).

Securitised

ESG analysis for securitised issues focusses on issuer and servicer governance.

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)
Securitised
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

Securitised

Environmental

Social

Governance

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

SSA

Opportunities are taken for one-on-one discussions with funding/relationship personnel for most SSA issuers in the NZ market annually, primarily covering entity strategy, performance and governance.

Corporate (financial)

ESG factors considered with a greater focus on BBB(+/-) or internally rated issuers. This includes the available information (via Bloomberg, Sustainalytics, sell-side research, company reports and presentations and engagement) incorporated into an internal assessment and peer review of the credit resulting in a commentary and internal assigned ESG rating of: acceptable to buy, do not increase, do not hold. 

Corporate (non-financial)

ESG factors considered with a greater focus on BBB(+/-) or internally rated issuers. This includes the available information (via Bloomberg, Sustainalytics, sell-side research, company reports and presentations and engagement) incorporated into an internal assessment and peer review of the credit resulting in a commentary and internal assigned ESG rating of: acceptable to buy, do not increase, do not hold. 

Securitised

ESG factors considered using available information (via Bloomberg, sell-side research, company reports and presentations and engagement) incorporated into an internal assessment and peer review of the credit resulting in a commentary and internal assigned ESG rating of: acceptable to buy, do not increase, do not hold. Focus is predominantly on the governance factor as it pertains to the issuer and servicer of a security and its underlying pool.

12.3. Additional information.[OPTIONAL]


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