RPIA SUSTAINABILITY REPORT 2023
OVERVIEW FIRM
23
INVESTMENT MANAGEMENT
RP Barometer in Action Example
When utilizing the Barometer, we generally focus our efforts on issuers either where there is a current concern or a concerning trend. We may already own the issuer’s debt, or we may be contemplating making an investment. The following Barometer output of an Aerospace & Defense issuer illustrates how the Barometer can be used to consider ESG factors in the investment process. This example focuses on an issuer we were holding in several of our portfolios. The company had been under scrutiny following negative headlines, prompting us to conduct a deep dive into both the credit fundamentals of the issuer and the pertinent ESG risks. Specifically, we were interested in what the data would reveal about recent developments in the company’s production operations. There were some concerns regarding environmental risk factors as the company’s production had relatively high emissions and energy intensity compared to peers in addition to not having any GHG reduction targets. Governance had been an issue historically, but the company’s new management team has focused on improving oversight and addressing legacy issues. Improvements thus far include a better process for line workers to report issues directly to senior management, prioritizing production quality over speed, and financially supporting suppliers to ensure stability and quality. The following pages contain excerpts of the Barometer report. We have not included the full report, which is quite comprehensive, but focused on the relevant sections given the sector this issuer operates in and the specific concerns we had. We have annotated the relevant sections, providing commentary on the data our team considered during their analysis. The Barometer findings supplemented our fundamental analysis and confirmed our theory on the company’s improving governance, and as a result, did not impact our position sizing. However, this analysis gave us the confidence to commit to adding more exposure to the issuer in the event of a better entry level.
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