The BlueBay Capital Income Fund is designed to invest in subordinated debt securities issued by financial and non-financial issuers, combined with environmental, social and governance (ESG) criteria.
The Fund promotes environmental, social and governance (ESG) characteristics and investments which follow good governance practices but does not have as its objective a Sustainable Investment. It does this through favouring investment in issuers whose business activities and/or conduct take an appropriate and responsible approach to ESG matters. The Fund aims to only invest in fixed income securities which contribute to the attainment of the ESG characteristics promoted by the Fund. BlueBay’s ESG evaluation applies to all fixed income securities held and ESG Factors applied by the Fund are binding independent of any investment materiality.
The Fund’s ESG characteristics is achieved through the application of binding ESG requirements resulting from (i) ESG Exclusions / Screening, and (ii) ESG Integration which can additionally restrict issuers depending on the outcome of the ESG evaluation. The Fund shall also implement enhanced ESG engagement as part of its stewardship commitment, which means dialogue which not only consider ESG risks (those which are likely to be investment material) but also ESG factors.
The Fund does not reference any benchmark.
The following summarises information on the methodologies used to assess, measure and monitor the ESG characteristics of the Fund, including its data sources, screening criteria for the underlying assets and the relevant ESG characteristics.
Screening Criteria:
Full details of the ESG screening applied for the Fund is available in this file.
Data Sources:
A combination of external sources:
Process managed internally by our Investment Policy function.
Metrics:
No active breaches of the criteria.
Screening Criteria & Process:
100% of (in scope) fixed income securities are screened in terms of a proprietary issuer ESG evaluation, which results in two complementary ESG metrics: a Fundamental ESG (Risk) Rating (which refers to the assessment of ESG factors/risks), and the Investment ESG Score (which denotes the extent to which the ESG factors/risks are investment relevant/material).
The key metric which can lead to additional restrictions on investment is the Fundamental ESG (Risk) Rating, specifically: where an issuer is deemed to have ‘very high’ ESG risks it is systematically excluded. Any issuer assigned a ‘very high’ on the governance pillar of the ESG evaluation are systematically excluded.
The Credit Analysts conduct the initial ESG evaluation assigning the ESG metrics, and this is reviewed and finalised by the ESG Investment team, prioritised depending on the assigned ESG risk. The process operates by consensus. There is a formal full deep dive review of the ESG evaluations every two years, although it can be initiated sooner where we have sufficient cause to question the ongoing validity of the assigned ESG metrics (particularly the Fundamental ESG (Risk) Rating).
It is mandatory for all investments to have a ‘preliminary ESG screening’ check conducted before an investment to ensure they do not breach any of the formal ESG screening criteria and would be unlikely to be considered to have ‘very high’ Fundamental ESG (Risk) Rating making it unsuitable for investment and once invested, a full issuer ESG evaluation is required shortly thereafter to confirm it remains suitable for investment (if not, it must be divested). The Credit Analyst leads on this preliminary ESG screening process, with the ESG investment team reviewing, prioritised depending on the assigned ESG risk and providing authorisation as appropriate where there is a likelihood of ineligibility. Where not authorised, the investment is not permitted.
Data Sources:
Data input into the ESG evaluation process comes from a mix of external (fee-based and open access) and internal (credit and ESG) insights:
Process for managing the excluded names by ESG integration is managed internally by the Investment Policy function.
Metrics:
No active breaches (issuers with ‘very high’ Fundamental ESG (Risk) Rating making it unsuitable for investment (either at an overall ESG level, or on the ‘governance’ pillar specifically).
Screening Criteria & Process:
This is not a binding screening criterion as such but rather engagement is conducted where deemed appropriate to do so on ESG factors and/or risks. It can be undertaken proactively or in response to an external event which could put into question its ongoing suitability for investment. Engagement may be focused on gaining insights and/or influence to bring about change. It can occur bilaterally or working in collaboration with an external stakeholders and can be undertaken by the credit and/or ESG analysts. The outcome of the engagement could result in a decision to exclude the issuer but this is at BlueBay’s discretion.
Whilst not a material activity given the fixed income asset class, proxy voting may still occur from time to time, and where this does occur, BlueBay will exercise its votes responsibly. Decisions are made by the relevant investment teams, informed by input from the ESG Investment resource as appropriate.
Data Sources:
Information from the various data sources and stakeholders mentioned above can inform on engagement activities as well as voting decisions.
Proxy voting is managed by our internal Corporate Actions function, with voting carried out using a third-party vendor platform.
Metrics:
Reporting on engagement and proxy voting activities (qualitative and quantitative)
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