At Gryphon, we recognise Responsible Investing is increasingly becoming part of the mainstream investment process for fixed income investors. It is Gryphon’s desire to increase our exposure to investments that make a positive social and environmental impact on top of their financial objectives. Assessing Environmental, Social and Governance (ESG) risks in the investment process is consistent with our mandates’ objectives as long-term investors.
Gryphon’s investment style is a long-only, deep-credit, research-driven, macro-aware approach using top-down and bottom up techniques to build portfolios of what it considers to be the best relative-value securities consistent with its client’s individual investment parameters. ESG factors can affect the performance of fixed income securities at different levels, therefore ESG factors are integrated into Gryphon’s investment activities, this includes due diligence and monitoring of the ESG policies and practices of Australian Fixed Income Issuers.
As an Investment Manager, Gryphon commits to incorporate ESG factors into our Investment Process using a combination of the following 3 practices:
- Screening - Negative screening of certain sectors based on specific ESG criteria
- Integration - Integrate ESG factors into the investment decision making process
- Thematic - Investment in Green or Sustainable Bonds aimed at solving social or environmental issues
ESG Integration into Gryphon’s investment process involves identifying the relevant ESG factors alongside traditional financial factors when forming an investment decision. This stage of the investment process includes a due diligence framework to monitor the qualitative aspects of a transaction that includes the capabilities of the loan originator and servicer to understand their impact on the potential performance of the transaction.
The key ESG factors during this phase of the investment process include:
- The ‘Environmental’ impact of the properties and assets that are financed by the underlying loans
- The ‘Social’ impact of the loan originators responsible lending practices on their customers’ ability to afford and repay the loans
- A review of the loan originator corporate ‘Governance’ strengths and weaknesses such as their senior management expertise.
Gryphon has recently been admitted as a signatory to the United Nations Principles for Responsible Investment (PRI); a collective international framework for institutional investors to integrate ESG considerations into their investment decision-making. Gryphon is working progressively towards implementing the six PRI principles for Responsible Investment which we believe will align our investment objectives with achieving a sustainable global financial system.
Download Gryphon’s ESG Policy