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Brummer & Partners AB

PRI reporting framework 2020

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Investment process

HF 06. ESG data, research and other resources used

Please describe the ESG resources and tools used in your investment decision-making process.
Category of ESG
Reason for use
          To analyse all material factors that may affect the value of an investment, whether labelled ESG or not, is common sense and part of the role description of a PM.
        
          See above.
        
          ISS-ESG is used for screening and exclusion purposes as well as to get additional information about ESG issues in flagged companies.
        
          
        
Select and explain how these resources are incorporated into the investment and risk management process?
Category of ESG
Investment/risk management process
Additional text (optional)
ESG data (proprietary, 3rd party, etc.)
          ESG integration, investment restrictions and engagement with portfolio holdings.
        
ESG research (broker, etc.)
          ESG integration, investment restrictions and engagement with portfolio holdings.
        
Consultants
          Screening, ESG integration, investment restrictions and engagement with portfolio holdings.
        

HF 07. ESG incorporation into quantitative and fundamental analysis

07.1. Does your organisation uses quantitative analysis?

Please indicate at which level ESG is incorporated into the analysis.
Quantitative modelling
ESG incorporation
Outcomes and assessment/review

Please specify

          Certain markets excluded from trading
        

Please specify

          Investment restrictions
        
          Alpha generating ESG parameters are identified as a result of ongoing processes to identify financially material parameters in general.
        

07.2. Does your organisation uses fundamental analysis?

Please indicate at which level ESG is incorporated into the analysis.
Fundamental approach
ESG incorporation
Outcomes and assessment/review

Please specify

          ESG treated as any factor
        
          Well informed investment decisions
        

07.3. Additional information [OPTIONAL]

ESG is not treated separately but as any other material factor (risk/opportunity) and hence included in analysis and investment decisions where relevant. Also, it is rarely labelled ESG but instead political risk, regulatory risk, demographical trends, changes in consumption patterns, technological disruption, sustainability etcetera. We are however continuously educating our investment teams on what constitutes ESG to better communicate with clients on our responsible investment practices.  


HF 08. Changes to the RI incorporation process over the past 12 months

08.1. Could you please indicate whether there have been any changes to your RI incorporation process over the past 12 months (e.g. additional resources, information sources)?

08.2. If yes, please describe them.

          Sustainability and responsible investment is an area of continuous learning and we are constantly working on improving and enhancing our investment analyses.   
During 2019, ESG integration was a core focus point for some of the investment teams within the group. On a group level we decided initiate a process to acquire additional ESG data tied to climate risk and opportunities, which will feed into a project that is carried out during 2020.
        

HF 09. Integration of Active Ownership

09.1. Please select and explain how active ownership practices are integrated into investment decisions.

          The funds may vote and typically do so when they believe it is relevant and in their clients' best interest.
        
          The investment teams engage with portfolio companies on ESG issues when they believe it is relevant and they can make a difference. Brummer & Partners Sustainability team supports this process when required.
        
          The funds may vote on shareholder resolutions, and are not prohibited from acting in collaboration with other investors through for example filing and voting shareholder resolutions as long as it is in the clients’ best interest.
        

HF 10. Examples of ESG risks/opportunities in investment decisions

10.1. Please provide examples of where ESG risks and opportunities were incorporated into the investment decisions over the past 12 months.

Hedge Funds Strategy
Equity Hedge|Relative value
ESG factors
Governance
ESG risks/opportunities
          Executive remuneration
        
Financial risks
          When CEO's or senior management's compensation packages are misaligned with the goals of the company, or with shareholders' values, there is a risk that it will affect the share price of a company (equity risk).
        
Scope and process
          Qualitative assessment
        
Outcomes
          Engagement, voting and sometimes a decision to sell/short or not invest at all.
        
Hedge Funds Strategy
Equity Hedge|Relative value
ESG factors
Social
ESG risks/opportunities
          Technological disruption
        
Financial risks
          Companies that are unable to adapt to changing consumer patterns, new business models etc risk going out of business.
        
Scope and process
          Fundamental analysis
        
Outcomes
          Go long in companies that adapt and take advantage of technological change, short or stay away from those that do not. Capitalize on credit valuation developments and possibly pair with acting on insight of long term yield requirements for certain issuers.
        
Hedge Funds Strategy
Equity Hedge
ESG factors
Governance
ESG risks/opportunities
          Aggressive accounting/forensic accounting
        
Financial risks
          Changing accounting methods may signal problems which may affect the share price of a company at a later stage
        
Scope and process
          Forensic accounting/fundamental analysis
        
Outcomes
          Short the company
        
Hedge Funds Strategy
Global macro
ESG factors
Social|Governance
ESG risks/opportunities
          Systematic trend following strategies are dependent upon the health and well functioning of financial markets. Only markets with sufficient liquidity and daily traded volumes should be traded and positions sized to minimise the risk of driving prices.
        
Financial risks
          If the models start to affect the price they will distort investment signals and risk affecting the return of a fund.
        
Scope and process
          Quantitative modelling/analyses
        
Outcomes
          Exclude certain markets from trading
        

10.2. Based on your example(s) provided above, please specify whether the incorporation of ESG factors affected the risk-adjusted returns of your hedge funds.


HF 11. Derivatives products and ESG impact

11.1. Do you use derivatives instruments as part of your hedge funds strategies and/or Funds of Hedge Funds?

Please select all the applicable categories of derivatives used.
Listed/OTC
Category of derivatives

11.3. Please explain whether and how these derivatives impacted the risk-adjusted returns of your hedge funds investments?

Impact

Outcomes

          Derivatives are in some cases a central part of the investment strategies and as such, they contribute to the performance and risk management of the funds. Derivatives are also used as a pure hedging tool to eliminate for example currency risk.
        

11.4. Please indicate whether the use of derivatives triggered ESG risks/opportunities at the fund level?

11.5. Additional information [OPTIONAL]

          
        

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