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Orcadia Asset Management

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
0 Thematic alone
0 Integration alone
90 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
10 No incorporation strategies applied
100%

01.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

We strongly believe that through his investments an investor can nudge companies and countries to make efforts. This explains the choice for the “best in class” approach since it is a positive approach. This pushes countries and companies to improve in order to become (or stay) investable. In our view exclusion of complete sectors would take away the carrot for improvement. Nevertheless, some subsectors which are widely considered to be controversial, are automatically excluded.

Additionally, to the subsector exclusion factors we have a negative screening on companies which are considered to be involved in (very) severe controversies. While for equities and corporate bonds we can – at least for part of the universe – rely on external sources in order to assess the extra-financial ESG-criteria this is not the case in sovereign bonds. As such we have developed an in-house ESG-methodology for this kind of investments.

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
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

We strongly believe that through his investments an investor can nudge companies and countries to make efforts. This explains the choice for the “best in class” approach since it is a positive approach. This pushes countries and companies to improve in order to become (or stay) investable. In our view exclusion of complete sectors would take away the carrot for improvement. Nevertheless, some subsectors which are widely considered to be controversial, are automatically excluded.

Additionally, to the subsector exclusion factors we have a negative screening on companies which are considered to be involved in (very) severe controversies. While for equities and corporate bonds we can – at least for part of the universe – rely on external sources in order to assess the extra-financial ESG-criteria this is not the case in sovereign bonds. As such we have developed an in-house ESG-methodology for this kind of investments.

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process (Not Completed)


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.

We use a best in class screening combined with an exclusion screening (sectors / subsectors & (very) severe controversies). This constitutes the investment universe. Within this universe investments are choosen based on "traditional" financial screening

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

SSA

The approach used is similar but the underlying data is different. 

In corporate bonds we see if the company would be among the 50% best within its sector. For sovereign bonds this is of course not possible. There we can pick within the 50% best of the investible universe (excluding those contries with (very) severe controversies)

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
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

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

SSA

For countries : based on public available material (oa UN / Worldbank etc) we rank a country within the "gross" investible universe. Each of E/S/G get a similar 33% score. We can only invest in those countries that meet the 50% threshold. If a country no longer meets the requirement its bonds must be sold with a reasonable time frame

12.3. Additional information.[OPTIONAL]


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