It is our firm belief that ESG considerations is essential in order to be able to assess the risks and opportunities which could impact an issuers creditworthiness, both in the short- and long-term. For this reason, we have decided to take a systematic approach to ESG incorporation. During the last 1 ½ year we have been working on a more close collaboration between the fixed income team and ESG team. We have held dedicated workshops focusing on materiality at sector level, as well as discussed ESG in relation to the different characteristics which could influence our credit view (such as pricing, bond maturity and term structure). In particular, we have discussed how different time horizons for certain ESG risks could yield different investment decisions. This work has improved the overall knowledge in the fixed income team and the ESG team. Below follows a more elaborate description of our investment process.

ESG is a standard element in the credit evaluation and investment process. If we do not consider that the ESG risks would fundamentally impact the issuers credit quality or default risk, or if we believe that the bond issuer has the financial strength to mitigate the risks, these risks are not considered in the investment decision. The main goal is to identify potential downside risks, for example to avoid costly scandals that could affect an issuer's ability to repay debt.

• PM’s inform the ESG team of potentially interesting companies and new issuances. An ESG Due Diligence is conducted to ensure that it meets our minimum requirements, if it is a new issuer which have not been assessed before. The ESG team makes a qualitative assessment of the company's ESG profile and makes a recommendation (positive / neutral / negative outlook). The ESG score from the external service provider, which is a more of a quantitative score, is thus complemented by our own qualitative assessment.
• We regularly monitor the ESG risks of our bond holdings. The credit analysis is partly built on a four-dimensional assessment of business risk; industry analysis, competitive position, management and country risk. The ESG factors can influence all of these dimensions of the business risk. The PM can decide to notch the business risk up or down, depending on how ESG factors weigh on and impact the credit credentials. These adjustments to the business risk are documented in our internal systems. 
• We have developed sector specific ESG scorecards including the most material aspects that could affect specific industries. These scorecards have been developed by the ESG-team in collaboration with the portfolio managers, outlining the ESG factors based on their potential risk and importance for the credit valuation. It is the PM’s ultimate responsibility to assess how these factors impacts the pricing of the bond, such as how these risks and / or opportunities may affect the company's cash flow and creditworthiness.
• If an issuer has high ESG risk rating, and if the ESG team has a negative outlook for the specific issuer, this is discussed at regular meetings with the portfolio team and the ESG team (monthly). If we continue to have a negative view of the company's ESG profile, and do not see the necessary improvements, we can choose to divest. These regular meetings can also be dedicated to a specific sector to discuss which ESG factors we currently deem relevant to the credit assessment. We discuss individual corporates and sectors on a regular basis also to identify any material changes to their ESG profile.
• We could decide to invest in a company with a high ESG risk, if we consider that the company has the potential to improve or if we believe that we are compensated for the risk. ESG factors are thus evaluated alongside the financial credit metrics.

The strength of our integration process is that we have a close and ongoing dialogue between the ESG team, credit analysts and portfolio managers. Together we form a view and determine the impact of ESG related issues in our bond selection process.