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Central Finance Board of the Methodist Church / Epworth Investment Management

PRI reporting framework 2020

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (C) Implementation: Integration

(C) Implementation: Integration

FI 10. Integration overview

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

There is a dedicated ESG section in our investment reports, with a section each for environment, social and governance factors. There are common criteria that are addressed, in addition to high impact issues specific to the sector e.g carbon emissions for electricity generation companies; water management for beverage companies etc.
 

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

SSA

When we invest in SSAs we look at the business focus of the institution in the same manner as for a company.  Many SSAs are lending institutions (eg EIB, IBRD) and in these situations we look at the lending policies and the types of projects to which funds are disbursed - these can be both positive (e.g. lending for development) and negative (e.g. lending for coal-fired power stations).  Where SSAs are the responsibility of only one government, we also consider country-specific factors such as human rights and corruption.

Corporate (financial)

We consider the lending policies and practices of the financial institutions to which we lend.  In recent years this has focussed on concerns around money laundering, and bank lending to projects that would involve high carbon emissions, though in the past it also involved concerns around bank lending to projects in specific jurisdictions (e.g. Apartheid-era South Africa).

Corporate (non-financial)

With non-financial companies, the ESG integration into financial analysis, is very similar to that in equities, with an incorporation of ESG metrics into our financial analysis.  This focusses on particular metrics where relevant to the sector concerned.  

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

When we research an SSA issuer, we look into ESG factors as part of the investment process.  We focus on those factors and metrics which are most relevant to the issuer in question.  We focus on both the practices of the instituion in question and also the projects to which the institution lends (where relevant).

Corporate (financial)

When we research a financial issuer, we look into ESG factors as part of the investment process.  We focus on those factors and metrics which are most relevant to the issuer in question.  We focus on both the practices of the instituion in question and also the projects to which the institution lends (where relevant).  We have a particular concern around high interest lending, and will not lend to issuers who engage in this usurious practice.

Corporate (non-financial)

When we research a non-financial issuer, we look into ESG factors as part of the investment process.  We focus on those factors and metrics which are most relevant to the issuer in question.  

12.3. Additional information.[OPTIONAL]


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