Approach to Responsible Investment

In the Short Term Investments and Global Credit space, the Environmental, Social and Governance (ESG) assessment most often comes through its impact on the internal credit rating (ICR) provided by the Credit Analysts via our Credit Research process.

The portfolio management team then use this to assess relative value when compared to other similarly rated issuers. For example, ESG considerations in the financial industry have led to our internal rating for some issuers being lower than that of the external rating agencies. As a result, the risk-reward assessment has often been decided such that we are underweight that sector in our active global credit portfolios.

The ICR is also used by the credit portfolio managers when making their decision to buy or sell securities and to determine position sizes for the funds that we manage.

Team Climate Change Statement

The Short Term Investment team employs the same approach as the Global Credit team relating to climate change-related factors affecting individual issuers.

Our over-arching approach is to consider how climate change – and, importantly, society's response to it – is likely to impact the business model and corporate strategy of issuers. We incorporate both internal and external data sources to help inform our ESG risk assessments.

We take into account how such ESG factors will likely impact the financial performance of each company going forward. Subsequently, we determine the overall credit risk for a company, including its risk of asset stranding. This is incorporated into our internal credit ratings and translates to an acceptable yield level to compensate for that issuer's risk across the maturity curve.