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City of Chicago (City Treasurer's Office)

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

Screening is required by multiple City of Chicago ordinances.

The Office of the City Treasurer implements thematic ESG strategies in our portfolio to invest in organizations behaving in accordance with the public interest on issues such as climate change, income inequality, air quality, water pollution, and human rights. 

ESG integration is utilized to supplement financial credit reviews and overall portfolio risk management in order to enhance our fiduciary duty to preserve capital.  

 

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]


(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
SSA
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

The Office of the City Treasurer is guided by ordinance to limit investments into oil and gun manufacturers. 

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process (Not Completed)


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

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..

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

The Office of the City Treasurer does not have an established policy. 

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.

09.2. Additional information. [Optional]


(C) Implementation: Integration

FI 10. Integration overview

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

The Office of the City Treasurer uses the MSCI ESG research platform for individual issuer credit review and utilizes all available ESG ratings for overall portfolio risk management.  

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

SSA

MSCI ESG Ratings identify 6 to 10 key ESG issues out of 37 key ESG issues for all rated entities that currently generate large environmental or social externalities; these are issues that may force some entities to absorb unanticipated costs associated with those externalities in the future. Corporate Governance is assessed for all entities. Key issues are identified for various industries and governments that are grouped by relevant exposure. Exposures are identified at an issuer level rather than at the security level, and issuers are benchmarked to their peers with similar exposure.

Corporate (financial)

MSCI ESG Ratings identify 6 to 10 key ESG issues out of 37 key ESG issues for all rated entities that currently generate large environmental or social externalities; these are issues that may force some entities to absorb unanticipated costs associated with those externalities in the future. Corporate Governance is assessed for all entities. Key issues are identified for various industries and governments that are grouped by relevant exposure. Exposures are identified at an issuer level rather than at the security level, and issuers are benchmarked to their peers with similar exposure.

Corporate (non-financial)

MSCI ESG Ratings identify 6 to 10 key ESG issues out of 37 key ESG issues for all rated entities that currently generate large environmental or social externalities; these are issues that may force some entities to absorb unanticipated costs associated with those externalities in the future. Corporate Governance is assessed for all entities. Key issues are identified for various industries and governments that are grouped by relevant exposure. Exposures are identified at an issuer level rather than at the security level, and issuers are benchmarked to their peers with similar exposure.

10.3. Additional information [OPTIONAL]

MSCI ESG Ratings identify 6 to 10 key ESG issues out of 37 key ESG issues for all rated entities that currently generate large environmental or social externalities; these are issues that may force some entities to absorb unanticipated costs associated with those externalities in the future. Corporate Governance is assessed for all entities. Key issues are identified for various industries and governments that are grouped by relevant exposure. Exposures are identified at an issuer level rather than at the security level, and issuers are benchmarked to their peers with similar exposure.


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)
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

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

SSA

MSCI ESG manager selects Key Issues for any given GICS Sub-Industry and sets the weights that determine each Key Issue’s contribution to the overall rating. Each Key Issue typically comprises 5-30% of the total ESG Rating. The weightings reflect both the contribution of the industry relative to all other industries related to the negative or positive impact on the environment or society and the timeline within which MSCI expect that risk or opportunity for companies in the industry to materialize. See below for the MSCI ESG Key Issue Hierarchy which includes 3 Pillars, 10 Themes, and 37 ESG Key Issues. 

Pillar: Environment

Theme: Climate Change 

Key Issues: Carbon Emissions Product Carbon Footprint Financing Environmental Impact Climate Change Vulnerability

Theme: Natural Resources

Key Issues: Water Stress Biodiversity & Land Use Raw Material Sourcing

Theme: Pollution & Waste

Key Issues: Toxic Emissions & Waste Packaging Material & Waste Electronic Waste

Theme: Environmental Opportunities

Key Issues: Opportunities in Clean Tech Opportunities in Green Building Opp’s in Renewable Energy

Pillar: Social

Theme: Human Capital

Key Issues: Labor Management Health & Safety Human Capital Development Supply Chain Labor Standards

Theme: Product Liability

Key Issues: Product Safety & Quality Chemical Safety Financial Product Safety Privacy & Data Security Responsible Investment Health & Demographic Risk

Theme: Stakeholder Opposition

Key Issue: Controversial Sourcing

Theme: Social Opportunities

Key Issues: Access to Communications Access to Finance Access to Health Care Opp’s in Nutrition & Health

Pillar: Governance

Theme: Corporate Governance*

Key Issues: Board* Pay* Ownership* Accounting*

Theme: Corporate Behavior

Key Issues: Business Ethics Anti-Competitive Practices Tax Transparency Corruption & Instability Financial System Instability 

Corporate (financial)

MSCI ESG manager selects Key Issues for any given GICS Sub-Industry and sets the weights that determine each Key Issue’s contribution to the overall rating. Each Key Issue typically comprises 5-30% of the total ESG Rating. The weightings reflect both the contribution of the industry relative to all other industries related to the negative or positive impact on the environment or society and the timeline within which MSCI expect that risk or opportunity for companies in the industry to materialize. See below for the MSCI ESG Key Issue Hierarchy which includes 3 Pillars, 10 Themes, and 37 ESG Key Issues. 

Pillar: Environment 

Theme: Climate Change 

Key Issues: Carbon Emissions Product Carbon Footprint Financing Environmental Impact Climate Change Vulnerability 

Theme: Natural Resources 

Key Issues: Water Stress Biodiversity & Land Use Raw Material Sourcing 

Theme: Pollution & Waste 

Key Issues: Toxic Emissions & Waste Packaging Material & Waste Electronic Waste 

Theme: Environmental Opportunities 

Key Issues: Opportunities in Clean Tech Opportunities in Green Building Opp’s in Renewable Energy 

Pillar: Social 

Theme: Human Capital 

Key Issues: Labor Management Health & Safety Human Capital Development Supply Chain Labor Standards 

Theme: Product Liability 

Key Issues: Product Safety & Quality Chemical Safety Financial Product Safety Privacy & Data Security Responsible Investment Health & Demographic Risk 

Theme: Stakeholder Opposition 

Key Issue: Controversial Sourcing 

Theme: Social Opportunities 

Key Issues: Access to Communications Access to Finance Access to Health Care Opp’s in Nutrition & Health 

Pillar: Governance 

Theme: Corporate Governance* 

Key Issues: Board* Pay* Ownership* Accounting* 

Theme: Corporate Behavior 

Key Issues: Business Ethics Anti-Competitive Practices Tax Transparency Corruption & Instability Financial System Instability 

Corporate (non-financial)

MSCI ESG manager selects Key Issues for any given GICS Sub-Industry and sets the weights that determine each Key Issue’s contribution to the overall rating. Each Key Issue typically comprises 5-30% of the total ESG Rating. The weightings reflect both the contribution of the industry relative to all other industries related to the negative or positive impact on the environment or society and the timeline within which MSCI expect that risk or opportunity for companies in the industry to materialize. See below for the MSCI ESG Key Issue Hierarchy which includes 3 Pillars, 10 Themes, and 37 ESG Key Issues. 

Pillar: Environment 

Theme: Climate Change 

Key Issues: Carbon Emissions Product Carbon Footprint Financing Environmental Impact Climate Change Vulnerability 

Theme: Natural Resources 

Key Issues: Water Stress Biodiversity & Land Use Raw Material Sourcing 

Theme: Pollution & Waste 

Key Issues: Toxic Emissions & Waste Packaging Material & Waste Electronic Waste 

Theme: Environmental Opportunities 

Key Issues: Opportunities in Clean Tech Opportunities in Green Building Opp’s in Renewable Energy 

Pillar: Social 

Theme: Human Capital 

Key Issues: Labor Management Health & Safety Human Capital Development Supply Chain Labor Standards 

Theme: Product Liability 

Key Issues: Product Safety & Quality Chemical Safety Financial Product Safety Privacy & Data Security Responsible Investment Health & Demographic Risk 

Theme: Stakeholder Opposition 

Key Issue: Controversial Sourcing 

Theme: Social Opportunities 

Key Issues: Access to Communications Access to Finance Access to Health Care Opp’s in Nutrition & Health 

Pillar: Governance 

Theme: Corporate Governance* 

Key Issues: Board* Pay* Ownership* Accounting* 

Theme: Corporate Behavior 

Key Issues: Business Ethics Anti-Competitive Practices Tax Transparency Corruption & Instability Financial System Instability 

12.3. Additional information.[OPTIONAL]


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