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Community Capital Management, INC.

PRI reporting framework 2020

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.

We seek to invest in high quality, well-researched bonds that have positive societal impacts, requiring transparency into the specific use of the proceeds, and measurement of their anticipated corresponding impact; actively manage the portfolio to take advantage of opportunities and reduce unnecessary risks; build a portfolio that keeps risks lower, income higher, and diversification benefits better than the broad investment grade bond market.  Each of the bonds must meet our stringent impact and financial criteria.  We need to be able to measure, monitor, and track the positive impact outcomes of every bond.

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

Corporate (financial)

We do not have a large allocation to corporate bonds since we will only invest in those corporate bonds where we see an identifiable and impactful use of proceeds. If there is a clear use of proceeds that can be aligned to one or more of our 18 impact themes, the team focuses on the ability for the borrower to meet its debt obligations.  This is done by analyzing the offering statements and corresponding financial information, and then discussions with the banker/issuer to get further insight or clarifications.  Emphasis is placed on redemption features and/or covenants, any credit enhancements, and the sources that will be used for the payment of interest and repayment of principal. The process also serves as a verification of the purpose of the project to ensure that the impact criteria are indeed met. We need to have transparency into the use of the bond's proceeds to ensure the funds raised will provide provide environmental and social outcomes that can be measured, monitored, and tracked. 

The team will also ensure there is no excessive ESG-related risk in regards to the issuer.  We will not invest in corporate bonds issued by companies involved in fossil fuel exploration and production or any activity related to coal, tobacco, chemical manufacturing, weapons, and prison management, among others.

 

Corporate (non-financial)

We do not have a large allocation to corporate bonds since we will only invest in those corporate bonds where we see an identifiable and impactful use of proceeds. If there is a clear use of proceeds that can be aligned to one or more of our 18 impact themes, the team focuses on the ability for the borrower to meet its debt obligations.  This is done by analyzing the offering statements and corresponding financial information, and then discussions with the banker/issuer to get further insight or clarifications.  Emphasis is placed on redemption features and/or covenants, any credit enhancements, and the sources that will be used for the payment of interest and repayment of principal. The process also serves as a verification of the purpose of the project to ensure that the impact criteria are indeed met. We need to have transparency into the use of the bond's proceeds to ensure the funds raised will provide provide environmental and social outcomes that can be measured, monitored, and tracked.  

The team will also ensure there is no excessive ESG-related risk in regards to the issuer.  We will not invest in corporate bonds issued by companies involved in fossil fuel exploration and production or any activity related to coal, tobacco, chemical manufacturing, weapons, and prison management, among others.

Securitised

The team focuses on the voluntary and non-voluntary principal prepayments and any potential delinquencies. For agency MBS, our focus on low-to-moderate income borrowers has historically provided more consistent prepayment protection than what external pricing models would suggest, alleviating some of the issues around accelerated cashflows when rates fall and generating better total returns.We need to have transparency into the use of the bond's proceeds to ensure the funds raised will provide provide environmental and social outcomes that can be measured, monitored, and tracked.  Each bond goes through our rigorous research process which includes impact and financial analysis and is tageed by geography and with one or more of our eighteen impact themes. 

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)
Securitised
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

Securitised

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)

Impact/ESG is integral to all aspects of investment activity at CCM. Our goal is for each portfolio to have maximum alignment with CCM’s Impact Themes. We perform a use-of-proceeds analysis of each debt security under consideration. Our tools for alignment achievement vary by asset class. For corporate securities issued by financial institutions, we focus on the issuer’s overall ESG risk intensity using proprietary and third-party research data. For U.S. banks, we also look at the firm’s Community Reinvestment Act (CRA) test score from government regulators.

Corporate (non-financial)

Impact/ESG is integral to all aspects of investment activity at CCM. Our goal is for each portfolio to have maximum alignment with CCM’s Impact Themes. We perform a use-of-proceeds analysis of each debt security under consideration. Our tools for alignment achievement vary by asset class. For corporate securities, we focus on the issuer’s overall ESG risk intensity using proprietary and third-party research data. In some instances, we look at a corporate debt offering with attractive impact purpose that is issued by a company that we may not rate highly on overall ESG characteristics. Our policy is to look at these on a case-by-case basis and make decisions after robust internal discussions.

Securitised

Impact/ESG is integral to all aspects of investment activity at CCM. Our goal is for each portfolio to have maximum alignment with CCM’s Impact Themes. We perform a use-of-proceeds analysis of each debt security under consideration. Our tools for alignment achievement vary by asset class. Securitized debt securities allow for the most detailed use-of-proceeds analysis as issuers typically share substantial granular detail about the collateral being securitized. Our proprietary impact database captures information at the whole loan level so that each dollar invested can be matched up against its specific purpose, geography and impact theme.

12.3. Additional information.[OPTIONAL]


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