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Nordic Credit Partners

PRI reporting framework 2020

You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » Implementation processes

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)
100 Screening alone
0 Thematic alone
0 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 (non-financial)
100 Screening alone
0 Thematic alone
0 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%

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

Nordic Credit Partners's ESG strategy is developed to align with our internal as well as clients' values. We adhere to the UN Global Compact principles in our investment process as we do not want to invest in companies breaching internal norms. This has become an industry standard in the Nordics.

To ensure compliance with UN Global Compact and other international conventions we use an external research provider. The same provider also provides screens for a range of sectors on our portfolio companies, based on coverage. For sectors with limited sector coverage we also do manual research.

In combination with screenings, we also proactively invest in companies where we see ESG opportunities, for example Green and Social Bonds.

 

01.3. Additional information [Optional].

Further information on Nordic Credit Partners's ESG work:

In accordance with FI 01.1-2.

  • The choice of strategy builds on Nordic Credit Partners' values as set forth in the ESG Investment Policy.
  • The ESG Investment policy is owned by the CEO and board, thus the accountability also falls on the named.
  • There are two PMs, out of which one is responisble for the implementation of the policy.

Implementation of ESG policy:

  • During the reporting period an internal and external screening have applied.
  • As stated in the additional information to the investment process below, monitoring of current investments is conducted on a quarterly basis where potential key issues would be reviewed and discussed in the investment committee
  • Screening of holding companies for norms violations as well as particular sectors, done on biannual basis.
  • In the event of sector involvement or business conduct issues, found either pre- or post investment, Nordic Credit Partners would evaluate available information to build an understanding of severeness and thereafter potentially contact the company for their view. Depending on understanding of issue, Nordic Credit Partners would choose to either refrain from investment, engage with the company to reach desireable results, or divest.


Further background to investment due diligence process:
All potential investments are evaluated in a tailored and thorough due diligence process for typically lasting for 2-4 weeks and including:

  • Business and market review focused on business model, quality of  operations, customers, management, ownership, competitive landscape as well as industry and market structure.
  • Financial review focused on historic and forecasted financial performance, current trading, quality of  earnings, cash flows, debt service capacity, downside risk and sensitivity analysis. 
  • ESG - NCP use both negative exclusion and positive impact criteria in their ESG due diligence. If a new investment opportunity does not meet the ESG minimum thresholds, an investment will not be made, regardless of its financial attractiveness.
  • Valuation and investment returns.
  • Structure and documentation.

Due diligence is conducted using a wide range of  data sources including company materials and financial reports, third-party industry and market reports, public filings, credit and equity research industry experts.

Further background to investment process:

First-time Issuers:
- Phase 1: Pre-sounding/information collection, incl. teaser information from underwriter(s), corporate financial reporting, 1to1 meetings with management, etc.
- Phase 2: If PMs are still interested, in-depth DD process of above mentoned materials, and internally conducted screening, analyst views, contact with network of industrial advisors (one per sector -  knowledge of sector and company often including management.
- Phase 3: Memo to the board incl. recommendation / conclusions, discussion between PMs and board, sign off from all individuals are needed.
- Phase 4: Investment recorded and reported back to the board.

• Secondary market:
- PMs find potential suitable investments.
- Phase 1-4 above apply with some differences in research sources.

 1. Origination

- Maintaining shadow portfolio of  high quality potential issuers/issuers with currently unsatisfactory risk-return balance.
- Investment committee network referrals.
- Industrial partner network referrals.
- Referrals from shareholders, financial sponsors, market intelligence, consultants and banks.
- Preliminary investment committee discussion.

2. Execution
- Thorough due diligence conducted by the CEO and PM, the investment committee, advisers and industrial partners.
- Strict price discipline and timing flexibility provides for entry at best available market price.
- Final investment committee discussion.
- Investment committee approval.

3. Monitoring
- Quarterly investment reviews.
- Ad-hoc investment committee meetings possible at short notice.
- Key issues reviewed and discussed in investment committee.

4. Exit
- Investments will normally be exited when bonds are repaid/refinanced without involvement from the investment committee.
- Refinancing opportunities treated as a ‘new deal’ (back to step 1 “Origination”).
- Investment committee always involved in potential restructurings.


FI 02. ESG issues and issuer research

02.1. Indicate which ESG factors you systematically research as part of your analysis on issuers.

Select all that apply
Corporate (financial)
Corporate (non-financial)
Environmental data
Social data
Governance data

02.2. Indicate what format your ESG information comes in and where you typically source it

Indicate who provides this information  

Indicate who provides this information  

02.3. Provide a brief description of the ESG information used, highlighting any differences in sources of information across your ESG incorporation strategies.

Sustainalytics provide norms-based and certain sector specific screens for the portfolio and potential investments two times a year. The norms-based screening includes violations of international norms and conventions, capturing business conduct issues.

Research on companies governance structures is a vital part of Nordic Credit Partners' investment analysis. We believe good governance is a prerequisite for sound businesses, corporate practices and work on ESG-related issues. 

Sources used to collect relevant data include sell-side research and analyst views covering the relevant companies and sectors, company materials, financial reports, meetings with management, ESG providers providers, third-party industry and market reports, public filings, credit and equity research industry experts.
-  Nordic Credit Partners’ network of industrial advisers is frequently consulted to confirm the due diligence findings.
-  In parallel, the Board of directors draws on its extensive network of insightful expertise, decision makers and top-tier managers to add additional assurance.

 

 

 

02.4. Additional information. [Optional]


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]


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