Investment Process

Our fixed income impact bond portfolios are subject to our SPECTRUM Bond℠ analysis. Within SPECTRUM Bond℠ , we combine three types of analysis – Impact, ESG and Credit. This analysis is completed on both the impact-bond frameworks and the issuers. An impact bond must pass all three elements of analysis to be included in our investment universe for these portfolios. The SPECTRUM framework was designed as an independent in-house verification for all types of impact bonds.

A key part of the analysis is to confirm the extent to which an impact bond is aligned with UN Sustainable Development Goals (SDGs) and the Paris Agreement on climate change. To assess alignment to the SDGs, we complete our own analysis of funded projects to the SDGs that they support. This allows us to implement a consistent assessment of which SDGs are supported by which projects or activities, ensuring that we review critically the issuer’s alignment to underlying SDGs. Our approach identifies primary and additional SDGs supported by the underlying projects in which our holdings invest and weights SDG alignment by order of relevance per project to limit double counting.

Engagement

Engagement forms the foundation of our SPECTRUM Bond℠ analysis. This is because engagement enables us to build closer relationships with impact bond issuers and gain a more granular understanding of their sustainability strategies. We believe that establishing dialogue with such issuers is part of being an active owner of impact bonds and we use our position to advocate for fair, responsible and sustainable business practices.

We use roadshow meetings, calls, letters and in-person meetings with these issuers to influence where practices have fallen short of our expectations, concerns have been raised because of controversies or impact reporting is not sufficiently transparent for our in-house portfolio calculations. During our dialogue with these issuers, we advocate high benchmarks in environmental and social criteria.

Examples of key topics from our engagements:

• Business ethics and tax transparency
• Human rights and community relations
• Climate risk management aligned with TCFD
• Governance factors such as board independence and diversity
• Issuer strategy in relation to climate initiatives and SDGs
• Transparency of green and impact bond frameworks
• Process of use of proceeds management
• Eligible project criteria
• Impact reporting practices and methodologies

We report on our engagement in our annual impact reports.

Impact Reporting

Each year we produce an impact report for each SPECTRUM Bond℠-aligned portfolio which discusses the environmental and social impacts of the investments in each of our clients’ impact portfolios. The reports include a calculation of portfolio greenhouse gas emissions avoided, the portfolio Weighted Average Carbon Intensity (WACI), portfolio alignment with the UN SDGs and case studies of the projects supported.

Issuer impact reporting is heterogeneous, utilising different methodologies, reporting formats and performance indicators. This often means that it is difficult for users to compare reported impact data accurately or appropriately. That's why our reports also explain the detailed methodology that underpins our reporting and calculations.

Find our reports and methodologies here.

These awards and accreditations pertain to Affirmative Investment Management Partners Limited a MetLife, Inc subsidiary and in some cases were granted prior to acquisition by MetLife.