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Boston Trust Walden

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
55 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
45 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.

The approximate 14% of assets under management that constitute SSA bonds are primarily U.S. Agency notes and municipal bonds. Because we purchase investment grade securities, thematic and screening approaches are the focus of fixed income incorporation strategies.

Thematic: At the national level, Boston Trust Walden focuses on notes of U.S. government sponsored enterprises, most commonly Federal National Mortgage Association and Federal Home Loan Bank securities that support the financing of housing and community lending. We also hold Federal Farm Credit Bank securities, a leading financer of agriculture and rural communities. Municipal securities support infrastructure development, housing, education, healthcare, as well as projects with environmental benefits. For example, MA Commonwealth Green bonds held in many client portfolios fund stormwater projects, energy efficiency and conservation in Massachusetts buildings, open space protection and environmental remediation, and river revitalization and habitat restoration projects. In a few instances, green bonds have also been purchased from supranational organizations (e.g. World Bank) and other sovereign states.

SSA screening: As appropriate, we apply screens to achieve any unique environmental and social objectives of our clients. For example, some clients rule out investment in general obligations of the U.S. Treasury or securities that fund specific projects such as prisons.

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
SSA
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  

Indicate who provides this information  

specify description

          NGOs with knowledge of country-specific risks.
        

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

Given our investment focus on U.S. government sponsored enterprises, our main source of ESG information is issuer documentation, supplemented by primary research from the Boston Trust Walden in-house ESG and traditional analysts, as needed. The same information sources apply on occasions when we invest in non-U.S. fixed income securities, but we may also call upon NGOs with significant expertise and knowledge about unique country level risks and opportunities.  

02.4. Additional information. [Optional]

The sources of ESG factors selected above also apply to purchases of Fixed Income Corporates, which comprise less than 2% of assets under management (as previously described). Boxes checked that refer to company research processes were completed with these fixed income corporate bonds in mind, as company research does not apply to SSA bonds. 


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]

Boston Trust Walden monitors issuer information relevant to investment in SSA fixed income securities. However, given our focus on high quality U.S. government issuers of securities that have direct, positive impacts such as Federal Home Loan Bank notes or infrastructure funding muni bonds, we rarely experience concerns related to monitoring or updating ESG analysis of these investments.


(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
SSA
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

04.2. Describe your approach to screening for internally managed active fixed income

As appropriate, we apply positive and negative screens to achieve the specific environmental and social objectives of our clients. For example, we seek opportunities to invest in securities with social or environmental benefits, such as investments in education, healthcare, or environmental infrastructure. On the flip side, some clients rule out investment in general obligations of the U.S. Treasury or securities that fund specific projects such as prisons. Similarly, these clients avoid any issuer deemed to violate international norms of conduct (for example, a general obligation bond issued by a country known for widespread violations of human rights).

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

As appropriate, we apply positive and negative screens to achieve the specific environmental and social objectives of our clients. For example, we seek opportunities to invest in securities with social or environmental benefits, such as investments in education, healthcare, or environmental infrastructure. On the flip side, some clients rule out investment in general obligations of the U.S. Treasury or securities that fund specific projects such as prisons. Similarly, these clients avoid any issuer deemed to violate international norms of conduct (for example, a general obligation bond issued by a country known for widespread violations of human rights).

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

Examples of investment in municipal bonds funding projects with environmental and societal benefits include:

  • Climate Bonds Initiative certified Metropolitan Transportation Authority bond, a public benefit corporation of New York State, funding transit and commuter projects;
  • Rhode Island Infrastructure Bank Safe Drinking Water Revolving Fund Revenue green bonds; and
  • A California Kaiser Permanente Green Bond funding green buildings.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

As part of our commitment to seek opportunities to invest in securities with social benefits, we invest in various municipal bonds funding state-level health and educational projects.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

We are responsive to clients seeking to rule out investment in general obligations of the U.S. Treasury or securities that fund specific projects such as prison construction or operations.

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

06.2. Additional information. [Optional]

These systems to ensure compliance with ESG criteria also apply to purchases of Fixed Income Corporates, which comprise less than 2% of assets under management (as previously described). Boxes checked above that refer to company research processes were completed with these fixed income corporate bonds in mind, as company research does not apply to SSA bonds. 


(B) Implementation: Thematic

FI 07. Thematic investing - overview

07.1. Indicate what proportion of your thematic investments are (totalling up to 100%):

100 %

07.2. Describe your organisation’s approach to thematic fixed income investing

Boston Trust Walden seeks to invest in fixed income securities that have a positive societal benefit. These include green bonds (e.g., NY Metropolitan Transportation Authority Green Bonds that are Climate Bond Certified; Export-Import Bank of Korea Green Bond; North American Development Bank; Mid-American Green Energy Bonds) or municipal securities supporting environmental projects (e.g., Massachusetts and California tax-exempt Green Bonds), health and education (e.g. Massachusetts Health and Educational Facilities), housing, sustainability (e.g. State of Oregon Sustainability Bonds that comport with Green Bonds Principles), water (e.g., Massachusetts Water Authority Green Bonds; Massachusetts Clean Water Trust green bond that finances or refinances costs of wastewater and drinking water projects), and other infrastructure development projects. Recent corporate green bond purchases include issuances from Apple, Bank of America, NSTAR (Eversource), and Verizon.

We conduct our own due diligence on the ESG characteristics of the issuers. Certified green bonds (e.g. Climate Bonds Initiative) are viewed favorably. We have also encouraged robust reporting on impacts, sometimes through investor collaborations. In addition, we believe investments in general obligations of municipalities helps support those local economies.

*While we do invest in specific green bonds and social bonds, in addition to broader sustainability bonds, our system does not allow us to track percentages. Therefore, we have categorized everything under the broader sustainability bonds category.

07.3. Additional information [OPTIONAL]


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.

To our knowledge, this problem has not occurred given the nature of our fixed income investments (primarily U.S. federal and state level government bonds). Green bonds are a relatively small, albeit growing, portion of our fixed income assets, which in turn are a small portion of overall assets under management. As the markets for such bonds expand, we will continue to increase exposure in our clients' portfolios.

In addition, while we do not require issuers to report at least annually, we encourage them to demonstrate impact over time through public reporting.

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.

          In-house analysts assess the consistency of thematic investments with client-specific objectives.
        

09.2. Additional information. [Optional]

While we do not require issuers in our portfolios to report at least annually given the nature of our fixed income investments, as appropriate, we encourage issuers to demonstrate impact over time through public reporting. As described throughout our PRI response, we have comprehensive in-house ESG research, integration, and engagement processes, as well as a proprietary method for tracking and measuring impact. 


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