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Baker Gilmore & Associates

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.
SSA
0 Screening alone
0 Thematic alone
95 Integration alone
5 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (financial)
0 Screening alone
0 Thematic alone
95 Integration alone
5 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
95 Integration alone
5 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Securitised
0 Screening alone
0 Thematic alone
95 Integration alone
5 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 firm has a fiduciary responsibility to monitor its clients’ portfolio investments and is committed to ensure that the selected issuers are well managed organizations.

ESG risks are embedded as part of Baker Gilmore investment process. For some mandates, negative screens are added to exclude certain companies.

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)
Securitised
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

04.2. Describe your approach to screening for internally managed active fixed income

Baker Gilmore currently manages several SRI mandates. Those funds are invested in accordance with ESG Standards set out in the mandates’ Investment Policy.  For specific clients, ESG screens are included in the internally developed guidelines database. Sustainalytics supplies Baker Gilmore with ESG screens for the Canadian bond market.

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

06.2. Additional information. [Optional]


(C) Implementation: Integration

FI 10. Integration overview

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

Baker Gilmore’s investment process combines fundamentally-driven, subjective forecasting of the key factors driving bond returns with a rigorous approach to portfolio construction and implementation to meet client risk and return objectives. ESG risks and constraints are integrated in the investment process, through both top-down and bottom-up analysis:

  1. Top-down: Baker Gilmore has identified a variety of economic and market data that are used to generate its forecasts and to evaluate market conditions. Interest rates and sector spreads are forecasted, as these are the factors that Baker Gilmore believes to be the dominant influences on portfolio performance. The investment team forecasts these factors through a subjective evaluation of macroeconomic data which contains ESG inputs such as demographics, geopolitics conflicts, regulations, technological innovation, resource scarcity, etc.
  2. Bottom-up: Once top-down portfolio exposures have been determined, individual securities are purchased or sold to achieve target positions. For corporate bond security selection, Baker Gilmore's bottom-up fundamental research process focuses on determining credit risk. Risk factors that are analyzed include: management quality, business model, cash flow, bond covenants, industry and red flags. ESG risks are integrated in these key risk factors.

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

SSA

For SSA issuers, ESG factors are integrated in Baker Gilmore top-down analysis such as demographics, geopolitics conflicts, regulations, technological innotivation, etc.

Corporate (financial)

Baker Gilmore’s bottom-up fundamental research process focuses on determining credit risk. Risk factors that are analyzed include: management quality, business model, cash flow, bond covenants, industry and red flags. ESG risks are embedded in these risk factors.

Corporate (non-financial)

Baker Gilmore’s bottom-up fundamental research process focuses on determining credit risk. Risk factors that are analyzed include: management quality, business model, cash flow, bond covenants, industry and red flags. ESG risks are embedded in these risk factors.

Securitised

Baker Gilmore’s bottom-up fundamental research process focuses on determining credit risk. Risk factors that are analyzed include: management quality, business model, cash flow, bond covenants, industry and red flags. ESG risks are embedded in these risk factors.

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)
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
SSA

Environmental

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.

SSA

For SSA analysis, ESG factors are integrated in Baker Gilmore top-down analysis. We include ESG inputs to generate our top-down views such as demographics, geopolitics conflicts, regulations, technological innovation, etc.

Baker Gilmore’s bottom-up fundamental research process focuses on determining credit risk. Any ESG risk factors that would affect credit capabilities of a government entity are included in our credit analysis.

Corporate (financial)

Baker Gilmore’s bottom-up fundamental research process focuses on determining credit risk. Risk factors that are analyzed include: management quality, business model, cash flow, bond covenants, industry and red flags. ESG risks are embedded in these risk factors.

Baker Gilmore’s bottom-up fundamental research process focuses on determining credit risk. Any ESG risk factors that would affect credit capabilities of a corporate security are included in our credit analysis.

Corporate (non-financial)

Baker Gilmore’s bottom-up fundamental research process focuses on determining credit risk. Risk factors that are analyzed include: management quality, business model, cash flow, bond covenants, industry and red flags. ESG risks are embedded in these risk factors.

Baker Gilmore’s bottom-up fundamental research process focuses on determining credit risk. Any ESG risk factors that would affect credit capabilities of a corporate security are included in our credit analysis.

.

Securitised

Baker Gilmore’s bottom-up fundamental research process focuses on determining credit risk. Risk factors that are analyzed include: management quality, business model, cash flow, bond covenants, industry and red flags. ESG risks are embedded in these risk factors.

Baker Gilmore’s bottom-up fundamental research process focuses on determining credit risk. Any ESG risk factors that would affect credit capabilities of a corporate security are included in our credit analysis.

12.3. Additional information.[OPTIONAL]


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