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Baker Gilmore & Associates

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.

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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