CIBC AM has implemented a rigorous procedure for integrating ESG factors into our fundamental analysis and investment process. Our proprietary approach is based on an analyst-led, quantitative strategy in line with the Responsible Business Conduct guidelines from OECD.
Each equity and fixed income analyst crafted a custom questionnaire to measure E, S and G performance for the companies within their coverage. Development of the ESG questionnaires was guided by the following 18 factors identified as most relevant for our investment universe:
-Environmental factors: climate change, water and energy use, waste management, regulatory threshold and compliance, assessment and disclosure
-Social license factors: health & safety, privacy & data security, labour relations & employment quality, human rights, community relations & social media, product responsibility
-Governance factors: board, ownership, business ethics, legal & regulatory compliance, executive compensation, disclosure, gender diversity
Initial data collection included publicly disclosed information, such as annual reports, ESG reports, 10Ks, and Annual Information Forms. Direct communication with companies and supplemental information from third party providers Sustainalytics and the Canadian Coalition of Good Governance were further incorporated to complete the datasets. Analysts then calculated company scores for each ESG factor, applying sector weightings developed using materiality matrices, and ranked companies from "best-in-class" to "below average" based on overall ESG score.
Better investment decisions result as credit analysts incorporate their ESG research into their own assessments of bond values. If the ESG risks are high then the spread will need to be sufficient to compensate for these risks. This approach applies to companies on all of our Approved Lists (money market / investment grade bonds / high yield / SRI) which constitute our active holdings.
ESG scores and ratings are presented in investment committee meetings for discussion and stored centrally for inclusion in investment research reports.