Octagon believes the integration of environmental, social, and corporate governance (ESG) risk factors enhances the research process and better allows us to adhere to the fiduciary duty we owe each client. As a signatory of the Principles for Responsible Investment (PRI), we are committed to upholding the PRI's six principles. 

Our ESG Initiatives Focus on Integration, Collaboration and Accountability

Octagon seeks to integrate ESG factors into the investment process and incorporate effective ESG practices into our own operations. We are committed to promoting an organizational culture that demands ethical conduct and compliance with the law. As it befits Octagon’s collaborative culture, we are committed to promoting ESG and socially responsible behavior across the organization, providing adequate employee training to reinforce best practices, and actively soliciting feedback from Octagon personnel and our affiliates in an ongoing effort to improve our existing framework.

ESG Integration in our Investment Process

We believe analyzing ESG factors can enhance our ability to assess a borrower’s creditworthiness, and thus we have integrated ESG considerations into our credit research and risk monitoring processes. 

Please note that while certain funds or separate accounts adhere to specific ESG-related restrictions, Octagon does not represent any Funds or services as “ESG Compliant”, “Green,” or otherwise designed or managed to promote ESG and sustainability initiatives or meeting any ESG-related regulatory standards. Certain legacy and new investments are not subject to a formal ESG review process. Accordingly, portfolios managed by Octagon hold positions that have not been subject to any ESG-focused evaluation. 

• Octagon does not generally negatively screen investment opportunities, however, we adhere to exclusion criteria for some funds, and for certain separate accounts at the request of the underlying client.
• As per Octagon’s ESG Policy, Investment Research Professionals utilize various information sources to evaluate ESG considerations as part of their credit diligence process for most new loan and bond purchases. Octagon's Investment Research Professionals must disclose material ESG considerations in written credit memos when presenting an investment recommendation to the Investment Committee. Octagon contracts with the Value Reporting Foundation to license and use the SASB Standards Disclosure Topics to help standardize the diligence process when evaluating financially material ESG considerations for issuers across different sectors.¹ 

• Post-investment, Octagon’s Investment Professionals continuously monitor ESG factors within their issuer universe, and proactively alert the Investment Committee to any significant ESG-related developments or concerns for further scrutiny.
• As it relates to investments in CLO debt and equity tranches managed by third-party investment managers, Octagon’s CLO Investment Team assesses each manager’s approach to ESG as part of the manager’s investment process by reviewing and analyzing the ESG Diligence Materials as part of our CLO Investment Team’s pre-investment and monitoring (post-investment) process.

1. In October 2021, Octagon contracted with the Value Reporting Foundation (the “VRF”) to license and use the Sustainability Accounting Standards Board (“SASB”) Disclosure Topics to help standardize the diligence process when evaluating ESG considerations for issuers across different industries and sectors. Effective August 1, 2022, the VRF consolidated with the International Financial Reporting Standards Foundation (the “IFRS® Foundation”) to form the International Sustainability Standards Board (the “ISSB”). At that time, the SASB Standards became materials of the IFRS® Foundation.

Stewardship and Engagement Efforts

Octagon strives to contribute to the broad improvement of responsible investment (RI) practices by working with our investors in support of their own ESG-driven initiatives and reporting requirements, engaging with management teams to enhance our Investment Team’s ability to analyze ESG risks and opportunities presented by the issuers in which we invest, encouraging such issuers to improve their ESG risk management, be more transparent, and develop more sustainable business practices, and actively participating in industry-wide efforts to promote ESG and RI across the loan and CLO markets. We believe good stewardship, founded upon a sound governance and risk framework, and supported by active engagement with corporate borrowers and third-party CLO managers (as applicable), and in some instances policymaker engagement, is key to delivering on those responsibilities. 

Click here to read Octagon’s Stewardship and Engagement Policy

• Octagon is a member of the PRI’s Global Policy Reference Group, which seeks to strengthen public policy engagement on RI topics and encourage greater alignment between RI commitments and public policy efforts.
• Octagon is a member of the Loan Syndications and Trading Association’s (LSTA) ESG Committee, comprised of LSTA members and buy-side participants in the loan market.
• As an affiliate of Conning,² Octagon participates in various initiatives to share ESG-related knowledge and best practices across the CHL¹ organization. 

When in the best interest of Octagon or our clients, we will seek to engage in formal collaborative engagements, such as the following initiatives prompted by the PRI:

• Octagon Endorses PRI-Coordinated Statement on ESG in Credit Risk and Ratings
  • The PRI has been working with investors and credit rating agencies (CRAs) through the ESG in Credit Risk and Ratings Initiative to promote a more systematic and transparent incorporation of ESG factors in credit risk assessments since 2016 and commenced the second phase in 2020. As of December 31 2022, Octagon is one of 183 investors with over US$40 trillion of assets under management (AUM) and 28 CRAs that support this initiative. Click here to learn more