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ISGAM AG

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.
SSA
0 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
50 All three strategies combined
50 No incorporation strategies applied
100%
Corporate (financial)
0 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
50 All three strategies combined
50 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
50 All three strategies combined
50 No incorporation strategies applied
100%

01.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

We increasingly demand incorporation of ESG strategies from all actively managed Fixed Income managers; are in initial stage of clarifying objectives and monitoring managers.

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:

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
SSA
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

We exclude specific issuers as being "worst offenders".  We monitor serious ESG incidents and the issuer's follow up/rectification of these events.  We engage with clients regarding significant ESG breaches by issuers.

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process (Private)


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

          We depend on external managers to ensure their funds comply with ESG screening criteria.  We will check external managers' overall ESG score.
        
Positive/best-in-class screening

other description

          We depend on external managers to ensure their funds comply with ESG screening criteria.  We will check external managers' overall ESG score.
        

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.

We still need to formalize our process of ensuring issuer compliance with offering documents.

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.

          Our issuer reporting requirements until today have been ad hoc but we aim to formalize our process this year.
        

09.2. Additional information. [Optional]


(C) Implementation: Integration

FI 10. Integration overview

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

We increase the cost of capital and the required expected investment returns for companies that have low ESG scores and/or that earn most of their revenue from unsustainable businesses such as carbon extraction.  

We also shorten the expected productive life of their assets, and incorporate future high capital investment requirements to move to a more sustainable business model.

We only invest in short or medium duration fixed income instruments issued by these companies.

We exclude fixed income instruments issued by totalitarian regimes with bad human rights records.

 

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

SSA

We exclude fixed income instruments issued by totalitarian regimes with bad human rights records.

We also exclude fixed income instruments issued by companies that serve as important sources of revenue for totalitarian regimes with bad human rights records (example: Aramco).

Corporate (financial)

We increase the cost of capital and the required expected investment returns for financial companies that have low ESG scores.

We only invest in short or medium duration fixed income instruments issued by these companies, and avoid their Tier 1 or 2 instruments.

We exclude fixed income instruments issued by financial institutions that are an important source of revenue for totalitarian regimes with bad human rights records.

 

Corporate (non-financial)

We increase the cost of capital and the required expected investment returns for companies that have low ESG scores and/or that earn most of their revenue from unsustainable businesses such as carbon extraction.  

We also shorten the expected productive life of their assets, and incorporate future high capital investment requirements to move to a more sustainable business model.

We only invest in short or medium duration fixed income instruments issued by these companies.

We exclude fixed income instruments issued by companies that are an important source of revenue for totalitarian regimes with bad human rights records.

 

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
SSA
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
SSA

Environmental

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.

SSA

We exclude fixed income instruments issued by totalitarian regimes with bad human rights records.

We do not yet have, and need to adopt, a clear framework for assessing environmental risk of countries.

Corporate (financial)

We increase the cost of capital and the required expected investment returns for financial companies that have low ESG scores.

We only invest in short or medium duration fixed income instruments issued by these companies, and avoid their Tier 1 or 2 instruments.

We exclude fixed income instruments issued by financial institutions that are an important source of revenue for totalitarian regimes with bad human rights records.

We do not yet have, and need to adopt, a clear framework for assessing environmental risk of corporate financial companies.

Corporate (non-financial)

We increase the cost of capital and the required expected investment returns for companies that have low ESG scores and/or that earn most of their revenue from unsustainable businesses such as carbon extraction.  

We also shorten the expected productive life of their assets, and incorporate future high capital investment requirements to move to a more sustainable business model.

We only invest in short or medium duration fixed income instruments issued by these companies.

We exclude fixed income instruments issued by companies that are an important source of revenue for totalitarian regimes with bad human rights records.

12.3. Additional information.[OPTIONAL]


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