RPIA SUSTAINABILITY REPORT 2021
OVERVIEW FIRM
RPIA SUSTAINABILITY REPORT 2021
OVERVIEW FIRM
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INVESTMENT MANAGEMENT
INVESTMENT MANAGEMENT
EVOLVING OUR ESG FRAMEWORK RPIA has focused on incorporating ESG analysis into our investment process for many years; however, as ESG data, disclosures, reporting frameworks, and regulations evolve quickly, asset managers need to keep pace. In 2021, the RPIA ESG Committee decided to evaluate and refine the processes and tools being used to integrate ESG analysis into our investment process as a part of our broader firmwide ESG commitment. The review ultimately led to an enhanced framework, which allows the investment team to collect and analyze ESG-related data with a new materiality mapping across sectors using the SASB model as the base for the proprietary tools we developed. This allowed the team to more accurately pinpoint which ESG factors are important for individual sectors, and have a better definition of a broader set of required qualitative information needed through issuer and/or engagement meetings.
How Do We Leverage Our ESG Focus?
1. Integration
2. Targeted Portfolios
ESG Integration applies to all strategies as we believe it is important to assess fundamental, technical, and ESG risks and opportunities before adding a company’s securities to the portfolios. It is critical to link these analytical frameworks together to fully understand management’s commitments and goals as standalone targets and in the context of the respective company’s sector and/or region. The integration process does not imply or include investment restrictions – we can and do invest in issuers who may be working on or are in the early stages of improving or adapting their ESG profiles for various reasons. However, we approach this in a similar way to assessing fundamental risks in that we would likely require an additional yield or spread enhancement to compensate for the higher risk profile of that company or sector. We believe that incorporating ESG factors into our relative value discussions and decisions is a requirement in today’s fixed income markets.
As we advance our ESG integration process we are also beginning to explore opportunities to design targeted ESG portfolios in 2022, expanding on our carbon reduced mandate. Targeted portfolios would have a specific ESG focus, built around factors that are quantifiable and impactful. These future solutions may include issuers who we believe are leaders in addressing certain ESG factors or may focus on companies exhibiting improvement in their ESG risk profiles. We continue to manage our existing Targeted Portfolio, the RP Broad Corporate Bond (BBB, Carbon Reduced) strategy. This strategy has a dual mandate of producing 100 bps per annum of excess return above that of the index while maintaining a weighted average carbon intensity lower than that of the index. 1
Improvements to the ESG Processes Within the Investment Team in 2021
• Developing research templates and replicable processes to enable analysts and portfolio managers to identify and manage ESG risks • Enhanced formal ESG analysis and processes to evaluate and assess issuers based on standardized internal ESG factors and ratings methodology • Regular reporting of ESG analysis to senior management • Dedicating additional resources to the Research Team to collect and analyze ESG criteria and sharing this information throughout the broader Investment Management Team • Requiring ESG-specific training for all members of the investment team by the end of 2021 • Establishing goals for specific ESG content to inform investors and third parties about the trends and developments within the asset class • Engagement meeting targets for the investment team • Addition of new information sources and collaborations/alliances with organizations related to the ESG goals of the firm • Goals set for ESG products/funds solutions for certain investors With these improvements, the goal is for ESG analysis to occur in parallel with fundamental credit analysis before we make an investment, where possible. We also benefit from our focus on global capital markets and an active trading style, which enhances the team’s ability to engage with issuers on disclosure, trends, and gaps in their ESG profiles. The Committee intends for the firm’s ESG framework to continue to evolve each year as the global ESG landscape changes, and we are committed to exploring new ways of incorporating ESG factors into our investment processes. It is critical to the new framework that we adapt and supplement our knowledge and influence as the world of ESG itself changes.
Integration
Targeted
• Consider ESG factors for all portfolios as an input into risk management, credit analysis and relative value pricing • Use quantitave and qualitative assessments to ensure we are pricing material ESG factors into our investments, where appropriate. • Engage with issuers and relevant ESG organizations to ensure progress in improving disclosures and impact management’s approach to ESG-related risks/improvements
• Target specific factors within ESG that align with our investor’s desired outcomes • Focus on quantifiable and consistent ESG factors that we can utilize for optimizing the portfolio • Experience in carbon reduction mandates to date and updated focus on workplace diversity with our Workplace Equality Framework • Engage with issuers on these, and other, important ESG factors
1 Index: FTSE Canada BBB Corporate Bond Index
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