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Finance in Motion GmbH

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

Finance in Motion is an impact asset manager exclusively focused on sustainable development in low and middle-income countries. Our funds have the primary goal of achieving significant positive economic, social and environmental impact. Applying a combination of ESG incorporation strategies for our fixed income investments is thus part of our core business.

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

          a team exclusively dedicated to E&S and E&S training provided to staff involved in the investment cycle
        

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

03.3. Additional information. [Optional]


(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
Corporate (financial)
Corporate (non-financial)
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

04.2. Describe your approach to screening for internally managed active fixed income

Our fixed income investments are based on several screening activities. Firstly, we require our investees to adhere to exclusion lists. Amongst others, funding may not be used to finance activities involving forced labour, radioactive materials, unbound asbestos fibres, hazardous chemicals, or wood or other forestry products from unsustainably managed forests ("negative screening"). Secondly, since we seek to achieve positive impact, our investments are based on investment guidelines and in certain cases "green lists", which stipulate what investments are eligible. For instance, certain investments need to achieve a 20% reduction in energy consumption and/or a 20% reduction in CO2 emissions, or contribute to sustainable land use ("positive screening"). Thirdly, we apply environmental and social (E&S) requirements in alignment with good industry practice when analysing investments during due diligence processes ("norms-based screening"). This involves an assessment of the Environmental and Social Management Systems of financial institutions we invest in, and a full E&S due diligence based on IFC performance standards for our direct investments. Similarly, analysing governance aspects is part of our standard due diligence process.

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process (Not Completed)


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

other description

          External audits are performed on a biennial basis.
        
Positive/best-in-class screening
Norms-based screening

other description

          External audits are performed on a biennial basis
        

06.2. Additional information. [Optional]


(B) Implementation: Thematic

FI 07. Thematic investing - overview (Private)


FI 08. Thematic investing - themed bond processes

08.1. Indicate whether you encourage transparency and disclosure relating to the issuance of themed bonds as per the Green Bonds Principles, Social Bond Principles, or Sustainability Bond Guidelines..

08.2. Describe the actions you take when issuers do not disburse bond proceeds as described in the offering documents.

At present, we do not invest in themed bonds. Thus, FI 08.1 is not applicable.

08.3. Additional information. [Optional]


FI 09. Thematic investing - assessing impact

09.1. Indicate how you assess the environmental or social impact of your thematic investments.

          We measure the impact of our themed investments on specific ESG factors such as CO2 emission reduction and sequestration, energy savings and water savings.
        

09.2. Additional information. [Optional]


(C) Implementation: Integration

FI 10. Integration overview

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

As an impact asset manager exclusively focused on sustainable development in low and middle-income countries, integrating ESG into financial analysis is part of our core business. Our approach to fixed income investing is based on integrating the consideration of ESG aspects in all stages of the investment cycle in order to achieve a positive impact.

 

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

Corporate (financial)

When investing into financial institutions (FI), our ESG integration approach involves an E&S due diligence to assess the FI's Environmental and Social Management System and - after the loan agreement is signed - at minimum yearly reporting on E&S compliance and performance. For financial institutions investing into renewable energy projects, it involves additional E&S requirements to be met. The consideration of corporate governance is integrated in our standard risk assessment and monitoring procedures in the investment cycle.

Corporate (non-financial)

When investing directly into non-financial institutions (thusfar mostly renewable energy projects), our ESG integration approach involves a full E&S due diligence, based on IFC Performance Standards, and a detailed E&S action plan derived from the E&S due diligence findings. The implementation of the E&S action plan by the client is monitored with support from E&S consultants as required. The consideration of corporate governance is integrated in our standard risk assessment and monitoring procedures in the investment cycle.

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]


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)

When investing into financial institutions (FI), our ESG integration approach involves an E&S due diligence questionnaire to assess the FI's Environmental and Social Management System and yearly reporting on E&S compliance and performance. For financial institutions investing into renewable energy, it involves additional E&S requirements to be met. The consideration of corporate governance is integrated in our standard risk assessment and monitoring procedures in the investment cycle.

Corporate (non-financial)

When investing into non-financial institutions (mostly renewable energy projects), our ESG integration approach involves a full E&S due diligence, based on IFC Performance Standards, and a detailed E&S action plan derived from the E&S due diligence findings. The implementation of the E&S action plan by the client is monitored with support from E&S consultants as required. The consideration of corporate governance is integrated in our standard risk assessment and monitoring procedures in the investment cycle.

12.3. Additional information.[OPTIONAL]


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