Sustainable, Responsible &/or ESG Policy:

The Fund is primarily designed to decrease exposure to issuers that are significant contributors to emissions or those with large fossil fuel reserves (such as oil, gas, and coal) that may lead to future emissions. Other environmental and social sustainability considerations are also incorporated in the strategy.

Dimensional takes sustainability considerations into account through a combination of portfolio-level exclusions and sector-level weighting designed to reduce exposure to bonds from issuers with less sustainable business practices. At the portfolio level, issuers that would otherwise be eligible for investment are ranked on an environmental sustainability score. Greenhouse gas emissions intensity accounts for 85% of the total score and other environmental factors—land use and biodiversity, involvement in toxic spills or releases, operational waste, and water management—account for the remaining 15%. The lowest-scoring 10% of issuers by market value are excluded from purchase. Also excluded are issuers with high total fossil fuel reserves that may lead to future emissions.

At the sector level, issuers within each sector of the Bloomberg Global Aggregate Corporate 1-5 Year Index are ranked by total emissions intensity. Within each sector, a higher-than-market weight is targeted in bonds with better emissions profiles, and a lower-than-market weight is targeted in bonds with poor emissions profiles.

Finally, corporate issuers with an association to other social sustainability issues—such as coal, palm oil, factory farming, child labor, tobacco, controversial weapons, and civilian firearms—are generally excluded from purchase. 

We further address the primary consideration of global warming effects from emissions through weighting of corporate holdings within their sector classifications. Issuers within each sector of the Bloomberg Global Aggregate Corporate Index are ranked by total emissions intensity. A higher than market weight is targeted in bonds with better emissions profiles within each sector, and a lower than market weight is targeted in bonds with poor emissions profiles within each sector. Agency and supranational issuers whose GHG emissions intensity is within the worst 10% of the corporate universe are generally excluded.

By addressing emissions considerations at the portfolio level and within sectors, we seek to achieve a significant reduction in the portfolio’s exposure to greenhouse gas emissions intensity and potential emissions from reserves while maintaining broad diversification and focusing on higher expected returns.

Additional screens address issuers with meaningful exposure to coal, palm oil, factory farming, adult entertainment, alcohol, gambling, tobacco, civilian firearms, controversial weapons, nuclear weapons, and child labour. Generally, issuers connected with these issues can be excluded without a significant impact to diversification.

Process:

Dimensional employs a systematic, process-driven approach to build fixed income portfolios. The Global Sustainability Short Fixed Income Fund integrates key sustainability considerations within a market-driven approach to target higher expected returns in global government and credit securities. The Fund targets a duration in a range around that of the Bloomberg Global Aggregate Bond Index 1-5 Years.

Applying sustainability considerations

Dimensional takes sustainability considerations into account through a combination of portfolio-level exclusions and sector-level weighting designed to reduce exposure to bonds issued by companies with less sustainable business practices. At the portfolio level, issuers that would otherwise be eligible for investment are ranked on an environmental sustainability score. Greenhouse gas emissions intensity accounts for 85% of the total score and other environmental factors—land use and biodiversity, involvement in toxic spills or releases, operational waste, and water management—account for the remaining 15%. The lowest-scoring 10% of issuers by market value are excluded from purchase. Issuers with high potential emissions from reserves may also be excluded.

At the sector level, issuers within each sector of the Bloomberg Global Aggregate Corporate Index are ranked by total emissions intensity. Within each sector, a higher-than-market weight is targeted in bonds with better emissions profiles, and a lower-than-market weight is targeted in bonds with poor emissions profiles. Finally, corporate issuers with an association to other social sustainability issues are generally excluded from purchase. 

ESG data sources

For Dimensional’s social and sustainability strategies, Dimensional uses a combination of internal and external data to systematically evaluate companies on ESG issues. Dimensional has spent a significant amount of time and effort evaluating ESG data providers and new datasets as they become available. We use multiple ESG vendors for data on carbon emissions and fossil fuel reserves. We compare these datasets against each other to develop an enhanced set of carbon emissions data. We also invest in our own datasets drawn from our research and portfolio management teams. Examples of this include our proprietary datasets on companies involved with factory farming and palm oil. We also subscribe to data on companies engaged in certain business activities and use several vendors of proxy voting data to better inform how we exercise our proxy votes.

Dimensional’s Portfolio Management team also uses internally generated tools to track and evaluate data from third-party providers and their potential impact on portfolios. They use internal processes and tools to evaluate and monitor data from MSCI, ISS, Bloomberg, company filings, news reports, and other sources on portfolio companies with potential environmental or social controversies, as well as information on corporate governance and corporate actions. Dimensional’s Research team uses internally generated tools to integrate ESG-related data into our Investment Analytics and Data systems.

Resources, Affiliations & Corporate Strategies:

Dimensional’s team-based ESG approach combines a dedicated Responsible Investment team and a dedicated Investment Stewardship Group with ESG specialists and contributors throughout Dimensional.

The Responsible Investment team sits within the Portfolio Management team, and the Head of Responsible Investment reports to Dimensional’s Global Head of Portfolio Management. The Responsible Investment team coordinates Dimensional’s ESG strategy across areas such as ESG product design, data, ESG regulatory requirements, ESG research, and ESG thought leadership. The team’s efforts are supported by Dimensional’s ESG Steering Committee and regional ESG working groups.

The Investment Stewardship Group manages Dimensional’s global stewardship activities. The group sits within Dimensional’s Portfolio Management department and consists of dedicated stewardship personnel who work closely with Portfolio Managers. The group implements policies through proxy voting and by communicating directly with boards and management of portfolio companies, monitors day-to-day operations, and conducts research on governance-related matters under the supervision of Dimensional’s Investment Stewardship Committee.

The work of Dimensional’s dedicated ESG functions is supported by cross-functional resources embedded across Dimensional’s Research, Portfolio Management, and Investment Analytics and Data teams. As of December 31, 2022, more than 60 investment professionals contribute to ESG initiatives across our global offices

From a governance perspective, Dimensional’s stewardship efforts are overseen by the Investment Stewardship Committee, a subcommittee of Dimensional’s Investment Committee. To learn more about the Investment Stewardship Committee, see the Investment Stewardship section.

Additionally, Dimensional’s ESG Steering Committee is a collaborative group composed of key contributors to ESG-related initiatives across departments and regions, including representatives from Portfolio Management, Research, Investment Solutions, Legal, and Corporate Services. The ESG Steering Committee’s role is to strategically coordinate and communicate Dimensional’s efforts across business functions to deliver a cohesive approach to ESG that is informed by our clients’ needs.

Memberships and groups

Dimensional became a signatory to the United Nations Principles for Responsible Investment (UN PRI) in August 2012. Dimensional is a member of various organizations that work to improve transparency and accountability regarding corporate governance issues by both investors and portfolio companies. Dimensional is a signatory to the UK Stewardship Code and the Japan Stewardship Code, and publicly supports the Task Force on Climate related Financial Disclosures, which is intended to promote consistent climate related financial risk disclosures by companies. Dimensional is also a member of the Council of Institutional Investors (CII), International Corporate Governance Network, and Harvard Institutional Investor Forum (HIIF), which are dedicated to promoting good corporate governance, and the Investment Company Institute (ICI), Global Investment Company Institute, and UK Investment Association (UKIA), which represent the interests of investment companies and investment managers and regularly are involved in commenting on the development of new laws and regulations that impact investment companies and issuers, including those that relate to ESG issues. Dimensional also comments on proposed rules promulgated by the SEC and other regulators regarding corporate governance and other matters to the extent the firm deems it appropriate.

Dialshifter

Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by…

There are a currently a number of different interpretations of how portfolio alignment with the goals of the Paris Agreement should be measured; for some people it means considering net zero commitments at portfolio companies, whereas for others it means considering whether current emissions are being reduced at the portfolio level in line with a Paris aligned trajectory. The EU Paris Aligned Benchmark (PAB) regulation requires a 50% reduction in emissions intensity versus the starting universe with a 7% year-over-year reduction on an ongoing basis.

Although they are not explicitly measured against this framework, nor do they claim alignment, our sustainability strategies across both equity and fixed income currently achieve a greater reduction in greenhouse gas emissions intensity, relative to their respective benchmarks, than is required under the PAB framework.

SDR Labelling:

Not eligible to use label (out of scope)