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Fort Washington Investment Advisors, Inc

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

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

Fort Washington employs integration without limited our ability to invest for its High Yield and Investment Grade Fixed Income strategies, which represents the majority of the firm's third party fixed income assets. 

With respect to those two strategies, MSCI research is used to determine the security and strategy level ESG rating. Ratings and credit research are used throughout the selection and monitoring process. In the event of a CCC rating, the covering analyst is required to write a memo explaining why the firm believes that investment is appropriate. These memos are reviewed by Portfolio Managers, the Responsibility Committee and the committee co-chairs.

While Fort Washington has been managing client assets with SRI overlays for over 20 years, 2017 was the first annual period with specific ESG policies and procedures based on UNPRI guidelines. As our ESG capabilities continue to grow, we will evaluate additional screening, thematic and integration incorporation.

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:

specify description

          Investment team members, portfolio managers, and the RI Committee co-chairs review all processes at least on an annual basis.
        

03.2. Describe how your ESG information or analysis is shared among your investment team.

03.3. Additional information. [Optional]

MSCI periodically reviews company research. There is no set timeline, but it is typically twice per year.


(A) Implementation: Screening

FI 04. Types of screening applied (Not Applicable)


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

06.2. Additional information. [Optional]


(C) Implementation: Integration

FI 10. Integration overview

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

Fort Washington believes that credit analysis is a core competency. Our credit research process is driven by bottom-up, fundamental research, supplemented with quantitative tools, with ESG factors being an integral part of the process. Credit analysts are responsible for fundamental research, performance, and being apprised of ESG related factors impacting securities in their sectors. For example, if an analyst uncovers an ESG issue that could impact a company’s ability to service its debt, the analyst would most likely refrain from recommending the credit for purchase, or, if currently owned, would recommend selling the bond. We currently do not restrict purchases based solely on ESG factors. In the event a CCC issuer is held, the covering analyst is required to create a memo explaining why holding the investment is in the best interest of the client.

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

Corporate (financial)

Fort Washington believes that credit analysis is a core competency. Our credit research process is driven by bottom-up, fundamental research, supplemented with quantitative tools, with ESG factors being an integral part of the process. Credit analysts are responsible for fundamental research, performance, and being apprised of ESG related factors impacting securities in their sectors. For example, if an analyst uncovers an ESG issue that could impact a company’s ability to service its debt, the analyst would most likely refrain from recommending the credit for purchase, or, if currently owned, would recommend selling the bond. We currently do not restrict purchases based solely on ESG factors. In the event a CCC issuer is held, the covering analyst is required to create a memo explaining why holding the investment is in the best interest of the client.

Corporate (non-financial)

Fort Washington believes that credit analysis is a core competency. Our credit research process is driven by bottom-up, fundamental research, supplemented with quantitative tools, with ESG factors being an integral part of the process. Credit analysts are responsible for fundamental research, performance, and being apprised of ESG related factors impacting securities in their sectors. For example, if an analyst uncovers an ESG issue that could impact a company’s ability to service its debt, the analyst would most likely refrain from recommending the credit for purchase, or, if currently owned, would recommend selling the bond. We currently do not restrict purchases based solely on ESG factors. In the event a CCC issuer is held, the covering analyst is required to create a memo explaining why holding the investment is in the best interest of the client.

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]

ESG factors are integrated into regular investment analysis in the selection and monitoring processes. Analysts utilize multiple tools to research their investments. ESG factors are used as part of the core set of models and due diligence processes to determine portfolio eligibility. On a monthly basis, MSCI reporting is created for each strategy that outlines the portfolio, segment and security level ESG scores. If a security has a rating of CCC, the analyst is required to write an internal memo indicated why holding that investment is in the best interest of meeting the client's goals.


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 factors are integrated into regular investment analysis in the selection and monitoring processes. Analysts utilize multiple tools to research their investments. ESG factors are used as part of the core set of models and due diligence processes to determine portfolio eligibility.

On a monthly basis, MSCI reporting is created for each strategy that outlines the portfolio, segment, and security level ESG scores. If a security has a rating of CCC, the analyst is required to write an internal memo indicating why holding that investment is in the best interest of the client.

Corporate (non-financial)

ESG factors are integrated into regular investment analysis in the selection and monitoring processes. Analysts utilize multiple tools to research their investments. ESG factors are used as part of the core set of models and due diligence processes to determine portfolio eligibility.

On a monthly basis, MSCI reporting is created for each strategy that outlines the portfolio, segment, and security level ESG scores. If a security has a rating of CCC, the analyst is required to write an internal memo indicating why holding that investment is in the best interest of the client.

12.3. Additional information.[OPTIONAL]


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