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TD Asset Management (TDAM)

PRI reporting framework 2020

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Outputs and outcomes

FI 17. Financial/ESG performance (Private)


FI 18. Examples - ESG incorporation or engagement

18.1. Provide examples of how your incorporation of ESG analysis and/or your engagement of issuers has affected your fixed income investment outcomes during the reporting year.

ESG issue and explanation

We have examined our utility holdings and recommendations based on their level of coal fired generation. 

Impact on investment decision or performance

We mainly have recommended investing in utilities with little to no exposure to coal fired generation.

ESG issue and explanation

A convenience store operator has among the highest ESG risks within the companies we invest in within the consumer/retail sector. The key ESG concern stems from their unfavourable product exposure (fuel and tobacco) which impacts both E & S.

Impact on investment decision or performance

TDAM's credit research team uses a proprietary ESG scoring model to better assess ESG issues facing every credit we invest in. All of our sector analysts develop an ESG score on each of the companies/sovereigns they cover. Applying an ESG score to every credit we invest in helps portfolio managers mitigate any potential ESG risks facing any given credit.

ESG issue and explanation

ESG analysis has factored substantially into our analysis of both an internet media company and an e-commerce company, as social perception has deteriorated over time due to numerous data privacy and security issues, labour rights concerns, and antitrust allegations. These long standing issues have led to considerable public criticism, sparking legal cases against both issuers.

Impact on investment decision or performance

We forecasted that popular sentiment against 'Big Tech' would drive litigation contagion risk, and proactively adjusted our ratings to recognize the growing impact of headline risk over core fundamentals. We also adjusted our forecasts to reflect the impact of antitrust remedies that would cause drag on liquidity and potential upward pressure on leverage.

ESG issue and explanation

ESG indicators are key inputs into our proprietary sovereign rating methodology. We reflect environmental risks by evaluating dependency on certain commodity sectors. Social factors such as higher levels of development and investment in education and R&D are viewed favourably. Governance indicators, such as control of corruption and government effectiveness are also considered.

Impact on investment decision or performance

Due to such deep integration, investment outcomes (i.e., our credit ratings) are driven by key ESG considerations. There are cases where our sovereign ratings were negatively impacted by a sovereign issuer's high commodity exposure, weak governance and institutional strength, and lower levels of development.

ESG issue and explanation

There are heightened environmental risks for oil & gas producers. As large greenhouse gas emitters, they are under increased environmental scrutiny which may eventually result in higher costs of capital. Additionally, a high reserve life has historically been an advantage, however stranded asset risk is becoming more of a concern due to the green revolution.

Impact on investment decision or performance

 Considerations are made to ensure stranded asset risk doesn't affect our holdings.

18.2. Additional information.


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