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Eurazeo

PRI reporting framework 2020

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.

Idinvest Partners has determined several processes aiming at integrating ESG considerations into traditional financial analysis and throughout the investment life cycle.

Pre-Investment:

Private debt analysts systematically conduct a first assessment of the ESG and impact stakes of investment targets. The results are consolidated into an ESG and impact profile, which includes an initial score that is to be monitored throughout the investment lifecycle. This Profile is further discussed at the Investment Committee and integrated in investment documents such as the Investment Memorandum. This step is a requirement for the validation of the investment.

The initial review allows to identify potential ESG risks and improvement areas. When high ESG or reputational risks are identified, the investment may be dropped. Specific ESG due diligence may be conducted to assess whether the identified ESG risks may result in impacting the relevance of the business model, and hence the financial performance of the company (e.g. reputation risk, market risk - change in consumer demand, regulation/ taxation) and if these risks are mitigated.

Post-investment:

Idinvest Partners has put in place a comprehensive process to monitor ESG risks and opportunities during the holding period:

Direct lending legal documentation includes an information on Idinvest's ESG commitments and ESG reporting requested to portfolio companies annually.
Idinvest Partners monitors the ESG performance of portfolio companies through this annual ESG reporting. In its role as a responsible investor, Idinvest provides KPI dashboards with improvement recommendations to portfolio companies. The objective is to further empower them on the management of ESG issues.
When appropriate, specific ESG audit/ reviews may be conducted on some portfolio companies.
ESG matters are expected to be discussed at least once a year within portfolio companies at Board level.
Every year, ESG best practices identified at portfolio companies are highlighted within the Idinvest Partners' annual ESG report.

In addition, together with a strategy advisory firm, Idinvest Partners has developed in 2018 a proprietary Sustainability & Impact matrix aiming at identifying its portfolio's impact on the achievement of the Sustainable Development Goals. The matrix is reviewed on an annual basis and allows for the identification of companies contributing most/ having a negative impact on these SDGs. This mapping also serves as an educational tool for companies that are not fully aware of all the potential impacts their activity may have on society.

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

Corporate (non-financial)

Idinvest Partners only manages private debt within its fixed income activity. For more information please see question FI 10.1.

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 (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
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 (non-financial)

Idinvest Partners' responsible investment integration approach to its Fixed Income investments is broad as it includes both environmental, social and governance-related and SDG impact considerations. For example:

  • Environment: Environmental criteria are systematically considered as a part of Idinvest's overall ESG assessment. Idinvest Partners conducts climate-risk assessments of its largest fixed income portfolios. This assessment allowed for the identification of companies highly exposed to climate risks and to raise their awareness (and that of the investment directors) on these issues.
  • Social: Idinvest Partners closely monitors social indicators at portfolio level. This is specifically the case of the job creation indicator which is studied at portfolio companies and aggregated at portfolio level on an annual basis. In addition, Idinvest Partners encourages its portfolio companies to deploy social initiatives related to staff training or profit-sharing scheme for example.
  • Governance: Idinvest Partners can participate in governing bodies of portfolio companies (observer seat). Idinvest Partners encourages the nomination of independent Board members of portfolio companies and the formalisation of structuring policies and procedures.

Idinvest has issued an Engagement policy for Private debt investments which encompasses all three pillars.

12.3. Additional information.[OPTIONAL]


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