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European Bank for Reconstruction and Development (EBRD)

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 (non-financial)
0 Screening alone
0 Thematic alone
0 Integration alone
60 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
40 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.

EBRD screens all potential investments for environmental and social impacts and governance risks. We carry out due diligence approriate to the identified risks and potential impacts, and we work with clients to develop approaches to manage and mitigate them in line with our Environmental and Social Policy and Performance Requirements and Governance related policies. Our main thematic strategy is our Green Economy Transition approach. EBRD actively screens in and promotes investments in projects that materialise climate mitigation, adaptation or environmental benefits and opportunities.

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.

          Environmental and social specialists are assigned to each project team and ESG issues are discussed in investment papers
        

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 (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

EBRD excludes investments in certain environmental or socially damaging activities and some specific sectors (e.g. tobacco). We actively promote investments in climate and environmental beneficial projects and have programmes to promote gender and economic inclusion in our investments. All projects are assessed against our environmental and social Performance Requirements and we work with client to ensure that projects are structured to meet relevant EU standards and international good practice for ESG

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process (Private)


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

other description

          All potential investments are screened by ESG specialists and investments on the exclusions lists do not go forward for investment.
        
Positive/best-in-class screening

other description

          Requirements are defined in financing agreements and monitored through client reporting, plus audits and site visits where needed
        
Norms-based screening

other description

          Requirements are defined in financing agreements and monitored through client reporting, plus audits and site visits where needed
        

06.2. Additional information. [Optional]


(B) Implementation: Thematic

FI 07. Thematic investing - overview (Private)


FI 08. Thematic investing - themed bond processes

08.1. Indicate whether you encourage transparency and disclosure relating to the issuance of themed bonds as per the Green Bonds Principles, Social Bond Principles, or Sustainability Bond Guidelines..

          We also require Second party opinions and corporate sustainability commitment/strategy
        

08.2. Describe the actions you take when issuers do not disburse bond proceeds as described in the offering documents.

EBRD will engage with the issuer to ask questions and clarifications, and may seek to divest/sell the bonds on a secondary market

08.3. Additional information. [Optional]


FI 09. Thematic investing - assessing impact

09.1. Indicate how you assess the environmental or social impact of your thematic investments.

          Where possible project impact are assessed prior to investment through site visits, audits or other information provided by the issuers, and monitored through issuer.
        

09.2. Additional information. [Optional]


(C) Implementation: Integration

FI 10. Integration overview

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

EBRD’s environmental, social team has around 45 staff and is responsible for assessing and monitoring all investments against the requirements of the Bank's Environmental and Social Policy. The nature of the assessment depends on the risk and impacts associated with the proposed investment. This can range from questionnaire to site visits to detailed Environmental and Social Impact Assessments. Environmental and social requirements are included in financing agreements. The results of the environmental and social appraisals are summarised for the decision making body and are disclosed on EBRD's website. EBRD's Chief Compliance Officer coordinates the implementation of anti-bribery and corruption measures and governance-related aspects. It has 14 people working on project integrity issues.Significant ESG risks and management costs are integrated into financial analysis of investments. The EBRD carries out economic assessment with shadow carbon pricing of projects with high GHG emissions.

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

Corporate (non-financial)

EBRD’s environmental, social team has around 45 staff and is responsible for assessing and monitoring all investments against the requirements of the Bank's Environmental and Social Policy. The nature of the assessment depends on the risk and impacts associated with the proposed investment. This can range from questionnaire to site visits to detailed Environmental and Social Impact Assessments. Environmental and social requirements are included in financing agreements. The results of the environmental and social appraisals are summarised for the decision making body and are disclosed on EBRD's website. EBRD's Chief Compliance Officer coordinates the implementation of anti-bribery and corruption measures and governance-related aspects. It has 14 people working on project integrity issues. Significant ESG risks and management costs are integrated into financial analysis of investments. The EBRD carries out economic assessment with shadow carbon pricing of projects with high GHG emissions.

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 (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 (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 (non-financial)

EBRD’s environmental, social team has around 45 staff and is responsible for assessing and monitoring all investments against the requirements of the Bank's Environmental and Social Policy. The nature of the assessment depends on the risk and impacts associated with the proposed investment. This can range from questionnaire to site visits to detailed Environmental and Social Impact Assessments. Environmental and social requirements are included in financing agreements. The results of the environmental and social appraisals are summarised for the decision making body and are disclosed on EBRD's website. EBRD's Chief Compliance Officer coordinates the implementation of anti-bribery and corruption measures and governance-related aspects. It has 14 people working on project integrity issues.

12.3. Additional information.[OPTIONAL]


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