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Pareto Asset Management AS

PRI reporting framework 2020

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes

Implementation processes

LEI 01. Percentage of each incorporation strategy

01.1. Indicate which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities; and the breakdown of your actively managed listed equities by strategy or combination of strategies.

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
100 %
Total actively managed listed equities 100%

01.2. Describe your organisation’s approach to ESG incorporation and the reasons for choosing the particular strategy/strategies.

Being a Norwegian company, the exclusion list published by the Norwegian Government Pension Fund was a natural starting point for us in incorporating our SRI/ESG strategy, which we have applied for more than 10 years.

The last few years we have had a more active approach to SRI/ESG incorporation, where we also look at other sources of information as well as emerging trends and issues. This has led to more exclusions, without reference to the Government Pension Fund, as well as more direct contact with management at the companies involved.

It is fair to say that the degree of incorporation differs among our various portfolios/mandates. This is a work in progress, not least in making sure that ESG incorporation is on our portfolio managers' agenda at all times, in a systematic way. It is, nevertheless, a constant topic in investment meetings and communication.

01.3. If assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]

PAM uses a combination of negative screening (being a starting point) as well as ESG incorporation when investments are made and ongoing monitoring.

 

 


LEI 02. Type of ESG information used in investment decision (Private)


LEI 03. Information from engagement and/or voting used in investment decision-making (Private)


(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

Product/activity/sector

  • Companies that produce weapons that through normal use violate fundamental humanitarian principles.
  • Companies that produce tobacco.
  • Companies that sell weapons or military material to states as specifed by the scheme for government bond exceptions mentioned in the mandate for the Norwegian Government Pension Fund.
  • Mining companies and power producers that themselves or through consolidated entities they control will have 30 per cent or more of their revenues from thermal coal, or basing 30 per cent or more of their business on thermal coal.
  • Companies engaged in producing pornography.

Environmental and social practices

  • Serious or systematic violations of human rights such as murder, torture, deprivation of liberty, forced labour, the worst forms of child labour.
  • Serious violations of individual rights in war or conflict situations.
  • Severe environmental damage.
  • Acts or omissions on an aggregated company level, to an unacceptable degree, leadsing to emission of greenhouse gases.
  • Gross corruption.
  • Other especially severe breaches of common norms and rules.

Countries/geographic regions

In the (exceptional) event we consider investing in companies listed outside the OECD, a more thorough analysis needs to be made.

Corporate Governance

Companies with sub-standard corporate governance.

Other

We also have a product-based precautionary principle towards certain sectors.

Screened by

Description

Negative transition risk (opportunities arising from the transition to a less carbon-dependent world) is factored into stock selection, e.g. when investing in a solar parks company.

Screened by

Description

Our internal guidelines are based on these principles and guidelines and more. 

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

The screening criteria are based on the Norwegian Government Pension Fund and recognised international standards and principles, as well as emerging environmental and soscial trends etc. The criteria are reviewed biannually, and communicated to clients in our biannual SRI report. 


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure ESG screening is based on robust analysis.

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

Our equity funds have low turnover, meaning that we tend to know these companies very well - and spend more time analyzing new candidates for investment. As for new candidates, thus, the share is very high. For the portfolio in total, maintaining ESG knowledge and insights takes less time - though we do examine their products and practises on an ongoing basis (cf. also next page).


LEI 06. Processes to ensure fund criteria are not breached (Private)


(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the proportion of actively managed listed equity portfolios where E, S and G factors are systematically researched as part of your investment analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

According to both external research and our own experience, G factors are more likely to influence financial performance than both E and S. While we would not allow this observation to influence our prioritisation of these tasks, researching governance was part of the investment process long before anyone thought of stamping it part of our ESG policies. As for E, we see that its commercial relevance is growing, e.g. in relation to transition risk.

 


LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on robust analysis.

09.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your integration strategy.

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information. [Optional]

For some mandates, like the Nordic Ecolabel-approved Pareto Global Corporate Bond or the recently launched Pareto Nordic Cross Credit, we go more into detail. For these mandates we could have checked the "Systematic records ..." box.


LEI 10. Aspects of analysis ESG information is integrated into (Private)


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