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Stanhope Capital

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
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%
Corporate (financial)
0 Screening alone
0 Thematic alone
99.5 Integration alone
0.5 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
00 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
99.5 Integration alone
0.5 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.

SSA - We use the Worldwide Governance Indicators to inform our views on the Government bond space. The project constructs aggregate indicators of six broad dimensions of governance: voice and accountability; political stability and absence of violence/terrorism; government effectiveness; regulatory quality; rule of law; and control of corruption, all of which we feel are material and measurable. We consider dimension scores in isolation and countries' aggregate scores. 

Corporate bonds - we use Sustainalytics information to give us a view of companies' ESG risk areas, performance and management. This information, alongside our fixed income investment analysis (which includes a review of credit ratings, spread levels, subordination, etc.) informs our decision to hold/not hold.

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]


(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

We manage a fixed income portfolio which employs all the above; we use Sustainalytics to provide us with ESG information, ESG ratings and carbon emission scores and are targetting portfolio outcomes in relation to the MSCI World (e.g. above average ESG, at least a 35% better carbon rating). 

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

For one client we do carbon emissions screening and have a minimum standard threshold at portfolio level. 

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]


(C) Implementation: Integration

FI 10. Integration overview

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

SSA - We use the Worldwide Governance Indicators to inform our views on the Government bond space. The project constructs aggregate indicators of six broad dimensions of governance: voice and accountability; political stability and absence of violence/terrorism; government effectiveness; regulatory quality; rule of law; and control of corruption, all of which we feel are material and measurable. We consider dimension scores in isolation and countries' aggregate scores alongside our traditional analysis of credit ratings, yield, duration and spread levels. 

Corporate bonds - we use Sustainalytics information to give us a view of companies' ESG risk areas, performance and management. This information, alongside our fixed income investment analysis (which includes a review of credit ratings, spread levels, subordination, etc.) informs our decision to hold/not hold.

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

SSA

SSA - We use the Worldwide Governance Indicators to inform our views on the Government bond space. The project constructs aggregate indicators of six broad dimensions of governance: voice and accountability; political stability and absence of violence/terrorism; government effectiveness; regulatory quality; rule of law; and control of corruption, all of which we feel are material and measurable. We consider dimension scores in isolation and countries' aggregate scores alongside our traditional analysis of credit ratings, yield, duration and spread levels. 

Corporate (financial)

Corporate bonds - we use Sustainalytics information to give us a view of companies' ESG risk areas, performance and management. This information, alongside our fixed income investment analysis (which includes a review of credit ratings, spread levels, subordination, etc.) informs our decision to hold/not hold. In some cases, we are applying further ESG criteria (e.g. exclusions, carbon scores) as detailed earlier in this report. 

Corporate (non-financial)

Corporate bonds - we use Sustainalytics information to give us a view of companies' ESG risk areas, performance and management. This information, alongside our fixed income investment analysis (which includes a review of credit ratings, spread levels, subordination, etc.) informs our decision to hold/not hold. In some cases, we are applying further ESG criteria (e.g. exclusions, carbon scores) as detailed earlier in this report. 

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)
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

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

SSA

SSA - We use the Worldwide Governance Indicators to inform our views on the Government bond space. The project constructs aggregate indicators of six broad dimensions of governance: voice and accountability; political stability and absence of violence/terrorism; government effectiveness; regulatory quality; rule of law; and control of corruption, all of which we feel are material and measurable. We consider dimension scores in isolation and countries' aggregate scores. 

 

Corporate (financial)

Corporate bonds - we use Sustainalytics information to give us a view of companies' ESG risk areas, performance and management. This information, alongside our fixed income investment analysis (which includes a review of credit ratings, spread levels, subordination, etc.) informs our decision to hold/not hold.

Corporate (non-financial)

Corporate bonds - we use Sustainalytics information to give us a view of companies' ESG risk areas, performance and management. This information, alongside our fixed income investment analysis (which includes a review of credit ratings, spread levels, subordination, etc.) informs our decision to hold/not hold.

12.3. Additional information.[OPTIONAL]


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