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Aktie-Ansvar AB

PRI reporting framework 2020

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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.

ESG information gathered is included in the analysis and investment decision making process. ESG factors play a role when investing, depending on how the risks and opportunities appear for every specific company and sector. 

Hence ESG factors are taken into account in corporate analysis in an integrated way along with other factors of importance for the decision making. Therefore ESG factors for which we do not have negative/exclusion criteria are part of the investrment process, but do not necessarily result in exclusions. An ESG factor could  also be one of the main reasons for inclusion.

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

Corporate (financial)

Before an investment decision is made, the portfolio manager performes individual research. Data or information are collected from annual reports or external credit analysis.

If available, data supplied through Bloomberg are used. Also research made by counterparties is used. The most important ESG factors of an issuer are captured in short internal notes/bullets. Risks and opportunities including the ESG related ones are considered. If there are high risks related to an ESG factor, for which the investor is not expected to be compensated through the risk premia, an investment is not likely to take place. Also, if there is an major ESG related credit strength identifed, it could be supportive for the investment.

Within the group Financials we look for different ESG factors depending on the type of company, but governance would be important in all cases.  For intstance, in the case of banks their lending practices and ethics are of interest, along with their compliance with regulations. For real estate companies energy efficiency and purchase practises are of particular interest as well as their sustainablity thinking when it comes to urban planning etc. In the case of investment companies their holdings are analyzed according to type of company. 

 

Corporate (non-financial)

Before an investment decision is made, the portfolio manager performes individual research. Data are collected from annual reports or external credit analysis.

If available, data supplied through Bloomberg are used. Also research made by counterparties is used. IThe most important ESG factors of an issuer are captured in internal notes/bullets. The risks and opportunities including the ESG related ones are considered. If there are high risks related to an ESG factor, for which the investor is not expected to be compensated through the risk premia, an investment is not likely to take place. Also, if there is a major ESG related credit strength identifed, it could be supportive for the investment.

The ESG factors of most interest varies with the type of company. For intstance, in the case of a sector such as mining, environmental factors could be the most important ESG factors whereas in another sectors it could be other factors. Governance would however be important in all cases.

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)

Our approach is based on a mix of quantitative data and qualitative judgement. Many ESG risks are associated with reputational risks and as such are important for the future of the companies/institutions.

Company reports and counterparty research notes are used. Where available data supplied by Bloomberg are used. Attendance at company presentations gives the opportunity to ask questions directly to management.

Governance is considered to generally be the most important factor as it defines the ability to do well on E and S as well. The board of directors/management and their track record are of importance.

ESG factors will receive different level of attention depending on the level of impact relative to other credit risks and strengths regarding the issuer. Furthermore, we differentiate the type of risks we focus on depending on the nature of the issuer's business activities, geografic presence etc. For instance, in the case of banks their governance and level of compliance will be given priority.

Corporate (non-financial)

Our approach is based on a mix of quantitative data and qualitative judgement. Many ESG risks are associated with reputational risks and as such are important for the future of the companies.

Company reports and counterparty research notes are used. Where available data supplied by Bloomberg are used. Attendance at company presentations gives the opportunity to ask questions directly to management. 

The ESG factors will receive different level of attention depending on the impact relative to other credit risks and strengths. The ESG factors of most interest will vary with the type of company. In the case of a company in a sector such as mining, environmental factors could be the most important ESG factors whereas in another sectors it could be other factors. For companies active in regions with a high degree of corruption more emphasis need to be placed on S-related factors such as work practices and code of conduct when doing business. In sectors with dangerous activities, we put more emphasis on work safety and look for data on that. Governance would be important in all cases as it defines the ability to do well on E and S as well. The board of directors/management and their track records are of importance.

 

 

12.3. Additional information.[OPTIONAL]


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