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Vinci Partners Investimentos Ltda.

PRI reporting framework 2020

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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 (non-financial)
0 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
100 Thematic + integration strategies
0 Screening + thematic strategies
0 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.

Around 25% of the Credit AUM comes from a thematic fund focused on clean energy. The Vinci Energia Sustenável (VES) invests in projects of wind energy, solar energy, hydro power, etc... The rest of the of the investments goes through an integration strategy, where we incorporate ESG factors into our decision process

01.3. Additional information [Optional].

Our ESG policy and management system (ESG MS) has been developed with the suport of a specialized ESG consulting fimr (Sitawi) along 2019


FI 02. ESG issues and issuer research

02.1. Indicate which ESG factors you systematically research as part of your analysis on issuers.

Select all that apply
Corporate (non-financial)
Environmental data
Social data
Governance data

02.2. Indicate what format your ESG information comes in and where you typically source it

Indicate who provides this information  

specify description

          Bloomberg ESG data
        

Indicate who provides this information  

specify description

          Water Risk Atlas (https://www.wri.org/); ThinkHarzard (http://thinkhazard.org/en/report/37-brazil/)
        

Indicate who provides this information  

02.3. Provide a brief description of the ESG information used, highlighting any differences in sources of information across your ESG incorporation strategies.

We use data from multiple sources - for example:

1) Environmental

  • Annual reports
  • Sustainability Reports
  • CDP (https://www.cdp.net/pt)
  • Bloomberg
  • WRI Aqueduct: https://www.wri.org/

2) Social

  • Company´s Reference Forms
  • Bloomberg
  • Annual reports
  • Sustainability Reports

3) Governance

  • Annual reports
  • Sustainability Reports
  • Bloomberg

02.4. Additional information. [Optional]

Today we have three strategies for private credit. They are: (i) corporate credit, focused on large corporate debt; (ii) structured credit, which focuses on investment in credit rights of small and medium-sized companies (iii) long-term credit, which includes investments in fixed-income real estate (Certificates of Real Estate Receivables or debentures backed by real estate guarantees) and renewable energy ( debentures of renewable energy generation, energy efficiency transmission, among others). In view of the particularities of each type of fund, we divided the analysis into those three segments.

Long Term Credit

To assess the ESG performance of the fixed income real estate fund, we developed a framework aimed at evaluating the assets that serve as ballast or guarantee for the issuance of CRI or debentures. This is done based on a specific questionnaire for the main types of real estate assets in the portfolio: Residential, Commercial Real Estate, Malls, Health and Electric. For this, we use some of the main sustainability standards in the real estate sector, such as Global Real Estate Sustainability Benchmark (GRESB), Leadership in Energy and Environmental Design (LEED), Sustainability Accounting Standard Board (SASB) and Climate Bonds Initiative (CBI).

This evaluation generates a rating from one to one hundred as an output, in addition to the identification of critical ESG topics that may be further discussed in the investment committee.

Structured Credit

For our structured loan funds, in view of the large number of evaluated companies, we use a more simplified process. In this process, we look at the history of fines and penalties of an environmental and social nature (labor, civil), based on consolidated databases, such as SERASA. 


FI 03. Processes to ensure analysis is robust

03.1. Indicate how you ensure that your ESG research process is robust:

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

03.3. Additional information. [Optional]

For our corporate credit funds, the analysis process will follow a similar path to equity, using sector questionnaires based on public information and assigning a rating of one to one hundred based on primarily public information.

To assess the ESG performance of the fixed income real estate fund, we developed a framework aimed at evaluating the assets that serve as ballast or guarantee for the issuance of CRI or debentures. This is done based on a specific questionnaire for the main types of real estate assets in the portfolio: Residential, Commercial Real Estate, Malls, Health and Electric. For this, we use some of the main sustainability standards in the real estate sector, such as Global Real Estate Sustainability Benchmark (GRESB), Leadership in Energy and Environmental Design (LEED), Sustainability Accounting Standard Board (SASB) and Climate Bonds Initiative (CBI).

To assess the ESG performance of the sustainable energy fund, we have developed a specific framework for assessing the sustainability performance of the asset and the issuer

This evaluation generates a rating from one to one hundred as an output, in addition to the identification of critical ESG topics that may be further discussed in the investment committee


(B) Implementation: Thematic

FI 07. Thematic investing - overview

07.1. Indicate what proportion of your thematic investments are (totalling up to 100%):

Specify

          we have developed a specific framework for assessing the sustainability performance of the asset and the issuer
        
100 %

07.2. Describe your organisation’s approach to thematic fixed income investing

To assess the ESG performance of the sustainable energy fund, we have developed a specific framework for assessing the sustainability performance of the asset and the issuer. The analysis of the asset will be carried out based on a questionnaire sent to the company, whereas the analysis of the issuer will occur primarily based on public information, in addition to the second opinion reports on the green credentials of the issue, when available.

This evaluation generates a rating from one to one hundred as an output, in addition to the identification of critical ESG topics that may be further discussed in the investment committee.

Once the analysis on the asset and / or the debt issuer has been carried out, the results are presented to the investment committee, where the following actions can be taken:

• Veto investment on debt of assets / issuers with insufficient ESG performance;

• Limitation on the portfolio's exposure to assets / issuers with ESG performance below the established limit;

• In-depth analysis and quantification of the critical ESG themes identified;

07.3. Additional information [OPTIONAL]

Around 25% of the Credit AUM comes from a thematic fund focused on clean energy. The Vinci Energia Sustenável (VES) invests in projects of wind energy, solar energy, hydro power, etc...


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..

          We assess the ESG performance of the issuer based on our proprietary framework that uses a mix of public and private information
        

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

To assess the ESG performance of the sustainable energy fund, we have developed a specific framework for assessing the sustainability performance of the asset and the issuer. The analysis of the asset will be carried out based on a questionnaire sent to the company, whereas the analysis of the issuer will occur primarily based on public information, in addition to the second opinion reports on the green credentials of the issue, when available

Once the analysis on the asset and / or the debt issuer has been carried out, the results are presented to the investment committee, where the following actions can be taken:

• Veto investment on debt of assets / issuers with insufficient ESG performance;

• Limitation on the portfolio's exposure to assets / issuers with ESG performance below the established limit;

• In-depth analysis and quantification of the critical ESG themes identified;

08.3. Additional information. [Optional]

N/D


FI 09. Thematic investing - assessing impact

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

09.2. Additional information. [Optional]

To assess the ESG performance of the sustainable energy fund, we have developed a specific framework for assessing the sustainability performance of the asset and the issuer. The analysis of the asset will be carried out based on a questionnaire sent to the company, whereas the analysis of the issuer will occur primarily based on public information, in addition to the second opinion reports on the green credentials of the issue, when available

Once the analysis on the asset and / or the debt issuer has been carried out, the results are presented to the investment committee, where the following actions can be taken:

• Veto investment on debt of assets / issuers with insufficient ESG performance;

• Limitation on the portfolio's exposure to assets / issuers with ESG performance below the established limit;

• In-depth analysis and quantification of the critical ESG themes identified;


(C) Implementation: Integration

FI 10. Integration overview

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

Today we have three strategies for private credit. They are: (i) corporate credit, focused on large corporate debt; (ii) structured credit, which focuses on investment in credit rights of small and medium-sized companies (iii) long-term credit, which includes investments in fixed-income real estate (Certificates of Real Estate Receivables or debentures backed by real estate guarantees) and renewable energy ( debentures of renewable energy generation, energy efficiency transmission, among others). In view of the particularities of each type of fund, we divided the analysis into three segments.

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)

For our corporate credit funds, the analysis process will follow a similar path to equity, using sector questionnaires based on public information and assigning a rating of one to one hundred based on primarily public information and comprises the following steps:

1. The first step consists of a materiality assessment, where we filter the environmental, social and corporate governance issues relevant to the companies we are analyzing. Themes considered non-relevant or non-material are downgraded.

2. Then, using sectoral ESG assessment questionnaires, we evaluate the main indicators and metrics of the companies, based on public information. The questionnaires were developed using some of the main sustainability standards for company analysis. From these questionnaires, we were also able to identify critical gaps and recurrent ESG controversies, which can be further explored later.

The information to carry out these analyzes comes especially from annual and sustainability reports of companies, providers of financial and sustainability information, direct questions from our analysts to the companies analyzed, as part of our traditional research process, as well as news.

3. In the subsequent stage, we assign an overall score and theme for the companies analyzed, ranging from one to one hundred. This score is a summary of the companies' ESG performance, which allows us to create sectoral and general rankings.

4. Finally, the ESG analysis is integrated into our investment analysis based on the following actions:

  • Veto investment on debt of assets / issuers with insufficient ESG performance;
  • Limitation on the portfolio's exposure to assets / issuers with ESG performance below the established limit;
  • In-depth analysis and quantification of the critical ESG themes identified;

10.3. Additional information [OPTIONAL]

N/D


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]

In addition, in our credit products we seek to promote positive practices in the market through investments in securities that have a positive socio-environmental impact, such as green, social and sustainability bonds. In addition, we were selected as managers of the first renewable energy fund in Brazil


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)

Our approach to integrating ESG into credit funds comprises the following steps:

1. The first step consists of a materiality assessment, where we filter the environmental, social and corporate governance issues relevant to the companies we are analyzing. Themes considered non-relevant or non-material are downgraded.

2. Then, using sectoral ESG assessment questionnaires, we evaluate the main indicators and metrics of the companies, based on public information. The questionnaires were developed using some of the main sustainability standards for company analysis. From these questionnaires, we were also able to identify critical gaps and recurrent ESG controversies, which can be further explored later.

The information to carry out these analyzes comes especially from annual and sustainability reports of companies, providers of financial and sustainability information, direct questions from our analysts to the companies analyzed, as part of our traditional research process, as well as news.

12.3. Additional information.[OPTIONAL]

N/D


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