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Carnegie Fonder AB

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

Carnegie Fonder's funds are actively managed, which we consider to be a prerequisite for responsible investments. In all our funds, we demand and supervise that our holdings meet the UN Global Compact's standards. We also exclude investments in controversial weapons, tobacco and pornography. All funds integrate ESG factors via our proprietary analysis tool, CF THOR.

01.3. Additional information [Optional].


FI 02. ESG issues and issuer research

02.1. Indicate which ESG factors you systematically research as part of your analysis on issuers.

Select all that apply
Corporate (financial)
Corporate (non-financial)
Environmental data
Social data
Governance data

02.2. Indicate what format your ESG information comes in and where you typically source it

Indicate who provides this information  

Indicate who provides this information  

02.3. Provide a brief description of the ESG information used, highlighting any differences in sources of information across your ESG incorporation strategies.

Carnegie Fonder is an independent fund management company founded in 1988. All our funds are actively managed with the purpose to create financial security for children, pension savers, foundations and institutions. We achieve this through our philosophy of focused value investing.

  • Focused means that the funds are concentrated to a limited number of securities. We do not invest in a company simply because it is included in an index.
  • Value investing means that we invest in well-managed companies that are undervalued. There are lots of good companies, but not all of them are good value. Behind each investment, we conduct a thorough analysis of the business model, finances, sustainability issues and management.

The world is rapidly changing, with megatrends like migration, climate change, scarce resources, shifts in technology and new regulations. By working with sustainability in a structured way, we can identify the companies that are well equipped for the challenges of the future. To that end we have developed a framework for responsible investments consisting of six key resources:

1. Commitments and collaborations

2. Responsible Investment Board

3. Training and incentives

4. Screening and sector exclusion

5. Internal analysis – CF THOR

6. Shareholder engagement

02.4. Additional information. [Optional]

By working with sustainability in a structured way, we can identify the companies that are well equipped for the challenges of the future. To that end we have developed a framework for responsible investments consisting of six key resources:

1. Commitments and collaborations - for instance membership in PRI, UN Global Compact and Swesif but most of all informal collaborations with other investors.

2. Responsible Investment Board - Sets the broad framework and ensures proper implementation of ESG-factors in the management of the funds as well as working as a governing body for company engagements.

3. Training and incentives - All portfolio managers, analyst and sales staff are educated on ESG-related issues. Incorporating ESG-factors are stated in portfolio managers work descriptions with annual goals formulated related to ESG that are subject to incentives in the form of variable salary.

4. Screening and sector exclusions - We require all holdings to comply with international norms, such as the UN Global Compact and our funds also exclude certain sectors such as weapons and tobacco production. Holdings are screened prior to investment with ongoing monitoring and bi-annual screenings from an external provider.

5. Internal analysis, CF THOR - Fundamental ESG-analysis incorporating both qualitative and quantitative measures using our proprietary tool, CF THOR. This analysis is performed on all holdings, both bonds and equities and its outputs are integrated in the financial analysis, for instance influencing views on future revenues and costs for investee companies.

6. Shareholder engagement - We are responsible owners which include voting on annual general meetings, serving on board nomination committees and engaging with the investee companies. We distinguish between reactive dialogues which typically happen after we are notified of potential non-compliance with internation norms and proactive dialogues to express our opinions and expectations and encourage our holdings to be more structured in their sustanaiblity work and integrate sustainability into all aspects of their business.


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
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

We exclude companies involved in controversial weapons, e.g. cluster bombs and landmines, adult entertainment, alcohol and tobacco in all funds. Potential exposure to excluded sectors is checked in an external database managed by our service provider Sustainalytics before investment (pre-screening) and reconfirmed by the same provider bi-annually in the form of full screening of all fund portfolios (reconfirmation).

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process

05.1. Provide examples of how ESG factors are included in your screening criteria.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

All funds exclude companies breaching international norms as well as companies in certain sectors (controversial and conventional weapons, tobacco, alcohol, adult entertainment

05.2. Additional information.


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
Norms-based 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.

Carnegie Fonder is an independent fund management company that was founded in 1988. All our funds are actively managed with the purpose to create financial security for children, pension savers, foundations and institutions. We achieve this through our philosophy of focused value investing.

Focused means that the funds are concentrated to a limited number of securities. We do not invest in a stock simply because it is included in an index, but only if we really like the company.
Value investing means that we invest in well-managed companies that are undervalued. There are lots of good companies, but not all of them are good value. Behind each investment, we conduct a thorough analysis of the business model, finances, sustainability issues and management.

The world is rapidly changing, with megatrends like migration, climate change, scarce resources, shifts in technology and new regulations. By working with sustainability in a structured way, we can identify the companies that are well equipped for the challenges of the future. To that end we have developed a framework for responsible investments consisting of six key resources:

1. Commitments and collaborations - for instance membership in PRI, UN Global Compact and Swesif but most of all informal collaborations with other investors.

2. Responsible Investment Board - Sets the broad framework and ensures proper implementation of ESG-factors in the management of the funds as well as working as a governing body for company engagements.

3. Training and incentives - All portfolio managers, analyst and sales staff are educated on ESG-related issues. Incorporating ESG-factors are stated in portfolio managers work descriptions with annual goals formulated related to ESG that are subject to incentives in the form of variable salary.

4. Screening and sector exclusions - We require all holdings to comply with international norms, such as the UN Global Compact and our funds also exclude certain sectors such as weapons and tobacco production. Holdings are screened prior to investment with ongoing monitoring and bi-annual screenings from an external provider.

5. Internal analysis, CF THOR - Fundamental ESG-analysis incorporating both qualitative and quantitative measures using our proprietary tool, CF THOR. This analysis is performed on all holdings, both bonds and equities and its outputs are integrated in the financial analysis, for instance influencing views on future revenues and costs for investee companies.

6. Shareholder engagement - We are responsible owners which include voting on annual general meetings, serving on board nomination committees and engaging with the investee companies. We distinguish between reactive dialogues which typically happen after we are notified of potential non-compliance with internation norms and proactive dialogues to express our opinions and expectations and encourage our holdings to be more structured in their sustainability work and integrate sustainability into all aspects of their business.

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

Corporate (financial)

The same overarching ESG approach, tools and resources are applied to all our fund products. We have the same investment philosophy for all assets and all our funds, without exceptions.

Corporate (non-financial)

The same overarching ESG approach, tools and resources are applied to all our fund products. We have the same investment philosophy for all assets and all our funds, without exceptions.

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
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
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.

Corporate (financial)

We use our own ESG analysis tool, CF THOR to review ESG factors and integrate them with the financial analysis. The tool includes modules on e.g. climate, resource efficiency and supply chain. The tool identifies key company risks and opportunities on their business, strategy and products which can then feed into a financial analysis model to influence for example revenue growth or costs.

Corporate (non-financial)

We use our own ESG analysis tool, CF THOR to review ESG factors and integrate them with the financial analysis. The tool includes modules on e.g. climate, resource efficiency and supply chain. The tool identifies key company risks and opportunities on their business, strategy and products which can then feed into a financial analysis model to influence for example revenue growth or costs.

12.3. Additional information.[OPTIONAL]


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