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Boston Trust Walden

PRI reporting framework 2020

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (C) Implementation: Integration of ESG factors

(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the proportion of actively managed listed equity portfolios where E, S and G factors are systematically researched as part of your investment analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

See the response to LEI 01 and LEI 04. The same broad ESG research approach applies for ESG integration, though an assessment of financial materiality is the distinguishing factor in this case. In other words, not every issue we research for screening purposes is determined to be material to the long-term financial sustainability of the company in question.


LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on robust analysis.

09.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your integration strategy.

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information. [Optional]

Along with the following points, please see the additional information in the responses to LEI 01.2 and LEI 05.5:

  • An ESG financial materiality matrix is jointly completed by ESG analysts and securities analysts for every portfolio company. This analysis is included in securities research reports disseminated to all Investment Committee members.

  • ESG information is discussed at weekly Investment Committee meetings.

 


LEI 10. Aspects of analysis ESG information is integrated into

New selection options have been added to this indicator. Please review your prefilled responses carefully.

10.1. Indicate which aspects of investment analysis you integrate material ESG information into.

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

10.2. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis.

10.3. Describe how you integrate ESG information into portfolio weighting.

ESG factors influence portfolio construction decisions, such as industry and sector allocation. For example, climate risk influences overall energy sector allocation, the type of energy companies selected, as well as the relative weightings.

Our portfolio construction process results in a broadly diversified portfolio. When determining position weights, the portfolio management team considers the quality characteristics of a company, including ESG factors, as well as diversification and risk. ESG integration is both exclusionary (ruling out companies with significant risks) and inclusionary (identifying companies with superior performance). Hence, position weights reflect a company's ESG profile, among other factors.

Furthermore, specific ESG priorities of Boston Trust Walden clients will affect portfolio construction decisions. For example, fossil fuel free portfolios often require reweighting and company substitution in order to achieve financial objectives.

10.4. Describe the methods you have used to adjust the income forecast/valuation tool.

One input into Boston Trust Walden's revenue and income forecasts is the macroeconomic environment in which the company operates. Important macro ESG factors include climate change, government policies, population demographics, and income distribution, among others. All investments are evaluated in terms of their risks and potential mitigating factors. While ESG analysis does not lead to specific quantitative inputs in forecasts and valuation models, our assessment of the risks and associated company response affects the context within which we evaluate future cash flows of the company. Overall, we believe investors frequently fail to discount sufficiently for these and other risks, thereby providing an opportunity for Boston Trust Walden to identify high quality businesses with superior investment prospects and less risky business models at attractive valuations.

10.5. Describe how you apply sensitivity and /or scenario analysis to security valuations.

We consider investments in a scenario where appropriate, although we do not typically define precise scenario forecasts for individual security assessments. 

10.6. Additional information. [OPTIONAL]


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