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United Nations Joint Staff Pension Fund

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
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
100 Screening + thematic strategies
0 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%
Securitised
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.

Reasons for choosing above mentioned ESG incorporation strategies:

- IPS Statement - (Restricted Securities): We have IPS based restrictions for investing in securities such as tobacco and armament securities.

- Special Considerations in Investments - (SSA Fixed Income Portfolio - Social): Pursuant to General Assembly Resolutions 31/197 in 1976 and 32/73 B in 1977, the General Assembly requested the Secretary-General to redouble his efforts in consultation with the Investments Committee, to ensure that, subject to careful observance of the requirements of safety, profitability, liquidity and convertibility, and in strict conformity with the Regulations of the UNJSPF, a larger proportion of the investment of the resources of the Fund was made in developing countries.

- Dedicated Green Bonds, Social Bonds, and Sustainable Bonds Portfolio: We have a sizeable portfolio allocated to Green Bonds, Social Bonds, and Sustainable Bonds.

 

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]

Created seperated ESG bespoke function to mark daily green bond pricing and ratings.


(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

We follow several types of screenings:

Investments in the tobacco industry: 
 Investments in companies that derive any revenue from the production of tobacco and that primarily deal with manufacturing and distribution of tobacco and tobacco related products are prohibited. 
 
Investments in armaments or other military equipments: 

The Fund shall not invest in securities of companies that derive any revenue from the production of military weapons, weapons systems or weapons of mass destruction, including nuclear, chemical or biological weapons, or derive more than 10 per cent of their revenue from the production of customized components for purposes of the production of military weapons, weapons systems or weapons of mass destruction.

The fund will not be investing in companies deriving more than 10% of their revenues from the mining of thermal coal.

https://oim.unjspf.org/report/unjspf-press-release-united-nations-joint-staff-pension-fund-announces-divestment-from-coal-energy-sector/

-Credit Ratings Screening: Securitized products are screened first on the basis of their credit ratings. We focus mostly on AAA rated securities with minor allocations to A and BBB rated securities if they are well-diversified.

Country Screening: Governance issues in countries are used for screening especially in SSA.

ESG Analysis: We engage with issuers on several key points:  valuation, sector and issuer analysis (ESG), duration, and SSA risk mitigation. 

 

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
Positive/best-in-class screening
Norms-based 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.

Internal Fixed Income Investment Risk and Compliance:

  1. OIM Fixed Income Investment Committee Reviews Issuer Green Bond document
  2. ​Issuer review is logged with Risk and Compliance for due diligence review and validation
  3. Appropriate decision is made to sell down position and locate alternative/substitute issuer

 

 

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.

ESG integration across the fixed income portfolio is a hybrid approach that sources multiple ESG sources and issuer information to better validate credit quality:

Internal Analysis 

  • Deal Size
  • Bond Currency
  • Bond Tenor / Time Horizon
  • Instrument Type
  • Guarantor
  • **Use of Proceeds: ESG KPI indicators for average sector credit profiles)***
  • CRA's  vs. ESG rating differential analysis relative historical fixed income performance 
  • Utilize MSCI ESG ratings across corporate (financials & non-financials) 
  • Country and sector risk (World Bank Governance Indicators)
  • Industry ESG materiality risk (MSCI ESG)
  • Corporate goverance rating (Corporate)
  • Project and operations risk (**SSA's)

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

Corporate (financial)

​ESG integration across the fixed income corporate bonds portfolio is a hybrid approach that sources multiple ESG sources and issuer information to better validate credit quality:

Internal Analysis 

  • Deal Size
  • Bond Currency
  • Bond Tenor / Time Horizon
  • Instrument Type
  • Guarantor
  • **Use of Proceeds: ESG KPI indicators for average sector credit profiles)***
  • CRA's  vs. ESG rating differential analysis relative historical fixed income performance 
  • Utilize MSCI ESG ratings across corporate (financials & non-financials) 
  • Country and sector risk (World Bank Governance Indicators)
  • Industry ESG materiality risk (MSCI ESG)
  • Corporate goverance rating (Corporate)
  • Project and operations risk (**SSA's)

Corporate (non-financial)

​ESG integration across the fixed income corporate bonds portfolio is a hybrid approach that sources multiple ESG sources and issuer information to better validate credit quality:

Internal Analysis 

Deal Size
Bond Currency
Bond Tenor / Time Horizon
Instrument Type
Guarantor
**Use of Proceeds: ESG KPI indicators for average sector credit profiles)***
CRA's  vs. ESG rating differential analysis relative historical fixed income performance 
Utilize MSCI ESG ratings across corporate (financials & non-financials) 
Country and sector risk (World Bank Governance Indicators)
Industry ESG materiality risk (MSCI ESG)
Corporate goverance rating (Corporate)
Project and operations risk (**SSA's)

Securitised

UNJSPF's securitised portfolio comprises a sizeable allocation to loans disbursed by GNMA. A significant proportion of the loans comprises mortgages of first-time home buyers and starter homes that facilitate homeownership.

When researching, we focus mostly on the top rated 'AAA' securities and keep in mind that the underlying mortgages should be issued in a responsible lending manner. The issuers of underlying mortgages should not “churn” borrowers or practice predatory lending practices.

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)
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
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.

Corporate (financial)

Several factors are analyzed while analyzing investment opportunities:

Enviromental (Green Bonds):

  • Inclusive and Sustainable Development Plan 
  • Climate Change
  • Conservation of Natural Resources
  • ​Renewable Energy
  • Low Carbon Buildings & Energy Efficiency 
  • Clean Transport
  • Sustainable Land Use & Forestry
  • Sustainable Water Management 
  • Sustainable Waste Management

Social (IFC, IBRD, ADB & Soverigns):

  • SSA Social Bonds 
  • Gender Equality 
  • Assessment and management of environmental and social risks and impacts
  • Community, health, safety and security
  • Labor and working conditions 
  • Cultural heritage 
  • Land acquisition and involuntary resettlement 
  • Indigenous peoples
  • Resource efficiency and pollution prevention 

Governance:

  • World Bank Governance Indicators (WBGI)
  • Corporate goverance ratings
  • Project and operations risk
  • Country Systems

 

Corporate (non-financial)

Several factors are analyzed while analyzing investment opportunities:

Enviromental (Green Bonds):

Inclusive and Sustainable Development Plan 
Climate Change
Conservation of Natural Resources
​Renewable Energy
Low Carbon Buildings & Energy Efficiency 
Clean Transport
Sustainable Land Use & Forestry
Sustainable Water Management 
Sustainable Waste Management

Social (IFC, IBRD, ADB & Soverigns):

SSA Social Bonds 
Gender Equality 
Assessment and management of environmental and social risks and impacts
Community, health, safety and security
Labor and working conditions 
Cultural heritage 
Land acquisition and involuntary resettlement 
Indigenous peoples
Resource efficiency and pollution prevention 

Governance:

World Bank Governance Indicators (WBGI)
Corporate goverance ratings
Project and operations risk
Country Systems

Securitised

UNJSPF has a sizeable portfolio allocation in securitized products. Via these products, we have exposure to the loans that make a direct impact at the E, S, and G levels.

- Social: A high proportion of the underlying loans of these securitized products comprise loans to First time homebuyers and mortgages that finance underserved communities. Hence, these loans facilitate homeownership. 

- Environmental: Many of the underlying real-estate loans are for LEEDS (Leadership in Energy and Environmental Design) certified buildings. Hence, they promote sustainable environmental pratices.

- Governance: We deeply analyze the governance of issuers of our portfolio securities such as GNMA, Fannie Mae, etc. We make sure that our issuers follow strong governance practices.

12.3. Additional information.[OPTIONAL]


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