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PriorNilsson Fonder

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

Our ESG research supplier is performing bi-annually norm-based screenings of our portfolio companies. Our criteria for exclusion (based on international principles and frameworks) and black lists are also narrowing our investment universe ex-ante. Our fundamental analysis of investment opportunities then integrates and weigh in ESG factors into the normal investment decision-making process.

In the governance aspect of the ESG criteria we're looking at the firm from a complete stakeholder perspective. This means that we're taking both the interest of the equity holders but also the firm's creditors. When firms are taking on excessive leverage they might be acting in the interest of equity shareholders but not of their creditors and employees that might not be compensated for the risk of financial distress. This point is of course crucial in the financial analysis prior to making fixed income investments.

These screenings and integration on ESG factors lead us to make better risk-adjusted investment decisions both by mitigating the risk in our investment universe and in our holdings.

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.

          Our investment team is fairly small and works intimately with eachother. All ESG information and/or analysis is shared openly in the operating environment.
        

03.3. Additional information. [Optional]

Occasionally, we are provided with data on ESG factors from our research providers. This is, however, not a standard item in all equity research. Mostly because our universes cover companies where ESG factors are not deemed to be material.


(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
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

Our ESG research supplier is performing bi-annual norm-based screenings of our portfolio companies. Our criteria for exclusion (based on international principles and frameworks) and black lists are also narrowing our investment universe ex-ante. 

This is the same approach as for every other asset class in our investment management, including our fixed income investments.

04.3. Additional information. [Optional]

We do not conduct any own ESG factor screenings, but we follow recommendations from others. E.g. the bi-annual AP7 screening, based on ESG factors such as negative environmental impact, breaches of international standards for human rights, labor rights, civil rights and corruption. These AP7 screenings result in a black list which is then used as a criteria of exclusion.

Our external ESG research provider performs norms-based screenings of our holdings (fixed income as well as listed equities). The norms used in this screening are the principles and commitments we're adhering to via our SWESIF's sustainability declaration for funds (Hållbarhetsprofilen).


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
Norms-based screening

06.2. Additional information. [Optional]

In fixed income, there are often data issues when we screen or analyze non-listed corporations. We are analyzing the best we can the available information, but out third-party ESG research provider may not be able to screen accurately our fixed income assets.


(C) Implementation: Integration

FI 10. Integration overview

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

A responsible approach to investments constitute an integral part of the investment decision-making process at PriorNilsson. The portfolio managers are treating company, sector and country ESG data in the financial analysis in the same way as and alongside other publically available data on the firm. This ESG data is sourced from the media, external reports, annual reports, CSR reports, equity research reports or any publically accessible information source.

Practically, ESG factors are integrated into the investment decision-making process by e.g., evaluating the risks and opportunities of the investment based on trends. This could be business risk associated with the shift from fossil fuels. Such trends might lead to new legislation that affects a company’s future earnings, need for new investments and re-structuring costs.

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

Corporate (financial)

A responsible approach to investments constitute an integral part of the investment decision-making process at PriorNilsson. The portfolio managers are treating company, sector and country ESG data in the financial analysis in the same way as and alongside other publically available data on the firm. This ESG data is sourced from the media, external reports, annual reports, CSR reports, equity research reports or any publically accessible information source.

Practically, ESG factors are integrated into the investment decision-making process by e.g., evaluating the risks and opportunities of the investment based on trends. This could be business risk associated with the shift from fossil fuels. Such trends might lead to new legislation that affects a company’s future earnings, need for new investments and re-structuring costs.

Corporate (non-financial)

A responsible approach to investments constitute an integral part of the investment decision-making process at PriorNilsson. The portfolio managers are treating company, sector and country ESG data in the financial analysis in the same way as and alongside other publically available data on the firm. This ESG data is sourced from the media, external reports, annual reports, CSR reports, equity research reports or any publically accessible information source.

Practically, ESG factors are integrated into the investment decision-making process by e.g., evaluating the risks and opportunities of the investment based on trends. This could be business risk associated with the shift from fossil fuels. Such trends might lead to new legislation that affects a company’s future earnings, need for new investments and re-structuring costs.

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)
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

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

Corporate (financial)

ESG risk and opportunities are a natural element in PriorNilsson's investment decision-making process. This process integrates business risk and opportunities as well as mega trends towards sustainability in our world and society at large.

A firm’s exposure to ESG factors can provide both a risk and an opportunity that is assessed the same way as other business-related information. The firm’s exposure will affect its valuation and the portfolio manager’s belief on its future earnings potential.

These factors are reviewed occassionally, but at least annually, as the investment environment is changing. Because the ESG factors are naturally integrated into the portfolio manager’s daily tracking of the holdings and investment universe, the factors are occassionally being reviewed alongside other factors in the space.

Corporate (non-financial)

ESG risk and opportunities are a natural element in PriorNilsson's investment decision-making process. This process integrates business risk and opportunities as well as mega trends towards sustainability in our world and society at large.

A firm’s exposure to ESG factors can provide both a risk and an opportunity that is assessed the same way as other business-related information. The firm’s exposure will affect its valuation and the portfolio manager’s belief on its future earnings potential.

These factors are reviewed occassionally, but at least annually, as the investment environment is changing. Because the ESG factors are naturally integrated into the portfolio manager’s daily tracking of the holdings and investment universe, the factors are occassionally being reviewed alongside other factors in the space.

12.3. Additional information.[OPTIONAL]


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