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Stichting Shell Pensioenfonds

PRI reporting framework 2020

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

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

The SSPF investment policy is focused on long-term value creation, where SSPF acts as a responsible investor; an active owner of assets that takes into account both financial and ESG considerations (incl. climate change) in its investment decisions.

ESG incorporation in investment decision making: All internal Fixed Income Corporate (non-financial) portfolio managers have access to MSCI ESG data. This includes ESG Ratings & Research, Controversial Conduct scores and Climate Change metrics. The data is used as an input for portfolio monitoring and is considered as part of the risk/return analysis when making investment decisions.

Green bonds: The market for green bonds is increasing for Corporate Credit offerings and is considered in the security-selection phase. SSPF has a positive attitude towards this asset category and green bonds will be added to the portfolio where deemed appropriate.

Engagement: SSPF has recruited Hermes EOS for engagement activities on its corporate credit holdings (incl. non-financial).

Exclusions: PMs refrain from owning financial instruments of companies on the SSPF exclusion list. This could be because of involvement in the manufacture, sale or distribution of cluster munitions and anti-personnel landmines, or because of controversial conduct/UNGC non-compliance combined with unsuccessful engagement.

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.

          Exclusions: ESG information on exclusions is communicated to the investment teams/portfolio managers, as required. The compliance department also blocks trades in the systems.
        

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
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

ESG incorporation in investment decision making: All internal Fixed Income Corporate portfolio managers have access to MSCI ESG data. This includes ESG Ratings & Research, Controversial Conduct scores and Climate Change metrics. The data is used as an input for portfolio monitoring and is considered as part of the risk/return analysis when making investment decisions.

Green bonds: The market for green bonds is increasing for Corporate Credit offerings and is considered in the security-selection phase. SSPF has a positive attitude towards this asset category and green bonds will be added to the portfolio where deemed appropriate.

Engagement: SSPF has recruited Hermes EOS for engagement activities on its corporate credit holdings.

Exclusions: PMs refrain from owning financial instruments of companies on the SSPF exclusion list. This could be because of involvement in the manufacture, sale or distribution of cluster munitions and anti-personnel landmines, or because of controversial conduct/UNGC non-compliance combined with unsuccessful engagement.

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process (Not Completed)


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
Positive/best-in-class screening

other description

          See below (under FI 06.2).
        
Norms-based screening

other description

          See below (under FI 06.2).
        

06.2. Additional information. [Optional]

Positive/best-in-class screening : There is a preference for certain ESG characteristics, so if an instrument exhibits these characteristics, it should be chosen over its peers - assuming all other characteristics are equal. There is no formal (case-by-case) check that this is done, but regular reports show the positioning of the portfolios on these ESG characteristics versus their benchmark.  

Negative/exclusionary screening / norms-based screening: PMs refrain from owning financial instruments of companies on the SSPF exclusion list. This could be because of involvement in the manufacture, sale or distribution of cluster munitions and anti-personnel landmines or because of controversial conduct/UNGC non-compliance combined with unsuccessful engagement (ultimum remedium).


(C) Implementation: Integration

FI 10. Integration overview

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

ESG incorporation in investment decision making: All internal Fixed Income Corporate portfolio managers have access to MSCI ESG data. This includes ESG Ratings & Research, Controversial Conduct scores and Climate Change metrics. The data is used as an input for portfolio monitoring and is considered as part of the risk/return analysis when making investment decisions.

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

Corporate (non-financial)

The approach of taking ESG data (as mentioned above) into account is broadly similar between fixed income types, although there are differences in terms of data availability between ratings classes and regions.

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 (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 (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 (non-financial)

SSPF has a preference for companies that have a relatively strong governance structure in place relative to their peers. Governance scores are an important element of the assessment, potentially followed up by additional research. Carbon intensity relative to peers is another metric that is taken into account systematically.

12.3. Additional information.[OPTIONAL]


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