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AMF

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
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%
Securitised
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.

After the financial crisis, investment returns are more closely linked to the ability to protect value, and there is greater awareness of how ESG factors can manifest themselves into material risks that undermine creditworthiness. We want to steer our fixed income investments towards companies that tackle their ESG issues seriously. We therefore have integrated ESG considerations at issuer level för our bond portfolio.

In order to fulfill AMF policy comittments we also include our bonds in our biannual norms based screening and as of 2018, we also include a climate realted screen.

AMF invests in several themed bonds, such as green 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]

Where ESG research is not available from a service provider (or if a portfolio manager disagrees with the analysis), portfolio managers produce their own ESG assessment with the support of RI staff if needed. The assessment is then approved by the Responsible Investment Counsil. 


(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)
Securitised
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

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

In order to work into our overall best-in-class approach, our ESG integration strategy is based on an ESG rating threshold, directing investments to issuers who are performing well from an ESG perspective relative it's sector. We can occationally invest in bonds from issuers that fall below this threshold, but that is linked to commitments of company dialogue to promote improvements in their sustainability efforts.

We also perform a biannual norms-based screening that include our corporate bonds. Confirmed breaches of norms can lead to divestment and future exclusions if the company does not respond well to dialogue. Considering the duration of the bond we evaluate how a divestment plan best can be carried out with the best interest of our beneficiaries in mind.

As of 2018 we also apply a climate related screen considering high emission sectors and the exclusion of thermal coal (10 % threshold). 

AMF use a pre-trade compliance program in our trading system to reduce the risk of anyone investing in a red flagged issuer.

 

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.

We prefer to invest in themed bonds with clear frameworks. We regularly monitor and encourage the development of rules surrounding bond principles and are often consulted. 

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 starting point for all our investment decisions is what is best for our customers, focusing on expected returns given a desired risk level. Our view is that companies that have good management of their sustainability risks and opportunities, and work actively with sustainability issues, are more well-managed and have a better ability than other companies to generate high returns for our customers over time.

 

 

 

 

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

SSA

Positive screening and norms-based screening where applicable. Climate related considerations through both analysis and screening. 

Corporate (financial)

Positive screening and norms-based screening. Climate related considerations through both analysis and screening. 

Corporate (non-financial)

Positive screening and norms-based screening. Climate related considerations through both analysis and screening. 

Securitised

Positive screening and norms-based screening. Climate related considerations through both analysis and screening. 

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
SSA
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
SSA

Environmental

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.

SSA

ESG ratings and climate related analysis, primarily from service providers, are integrated in the investment process. 

Corporate (financial)

ESG ratings and climate related analysis, primarily from service providers, are integrated in the investment process. 

Corporate (non-financial)

ESG ratings and climate related analysis, primarily from service providers, are integrated in the investment process. 

Securitised

ESG ratings and climate related analysis, primarily from service providers, are integrated in the investment process. 

12.3. Additional information.[OPTIONAL]


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