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Sycomore Asset Management

PRI reporting framework 2017

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You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (A) Implementation: Screening

(A) Implementation: Screening

LEI 06. Types of screening applied

06.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

1. Exclusion of all controversial weapons for all investments

In line with the Oslo and Ottawa conventions, Sycomore AM excludes any investment in controversial weapons.

2. Exclusion policy for SRI funds

It also excludes any investments in companies involved in controversial weapons. For SRI funds, it does not invest in companies that produce weapons or weapon systems, nuclear power, GMOs and tobacco, and that derive more than 5% of their revenue from these activities.

3. Negative screening for Sycomore Selection Responsable

Sycomore AM's main SRI equity fund excludes companies that do not meet the following ESG requirements:

- E: minimum environmental performance (water and energy consumption, greenhouse gases emissions, waste, energy efficiency...)

- S: minimum working conditions (average salary, training, absenteism, turnover, working accidents, social climate...)

- G: limited accounting risks (quality of financial statements, auditors' independence, accounting irregularities...)

- ESG: a minimum ESG score

We require a minimum grade of 2.5 out of 5 on every criterion for a company to enter our investment universe.

Screened by

Description

Sycomore AM's main SRI equity fund also selects companies that offer sustainable development opportunities:

-  E: good environmental positioning of products and services (recycling, energy efficiency, sustainable building, sustainable transport...)

- S: job creation (positive average growth of the workforce over the past 3 years)

- G: protection of minority shareholders (absence of poison pills, absence of multiple classes of shares or voting rights, voting caps...)

Also, it is worth noting that for our thematic funds (Sycomore Eco Solutions and Sycomore Happy@Work), we screen our investment universe to select companies that are well positioned to benefit from the ecological and energy transition, and from the well-being of employees and the strong integration of human capital in company strategy.

Screened by

Description

Sycomore AM's SRI funds will not invest in companies that contravene international norms.

06.2. Describe how the screening criteria are established, how often the criteria are reviewed and how you notify clients and/or beneficiaries when changes are made.

For our main SRI fund, the negative and positive selection criteria have been established to help the team:

1. Identify companies showing ESG risks

2. Identify companies showing sustainable development opportunities

From the first implementation of this screening strategy in 2011 until now, we never changed the screening criteria. However, we are, of course, regularly reviewing how companies score on these different criteria as we are updating our database daily. In addition, we carry out every 2 years a complete ESG review of all investee company.


LEI 07. Processes to ensure screening is based on robust analysis

07.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

07.2. Additional information. [Optional]

ESG analysis of Sycomore AM's investment universe is led by the 6-people ESG team with the input of the other 13 analysts/fund managers. All investment professionals share the same investment tool named SYCOVALO. In that regard, every investment professional is responsible for the ESG analysis of companies he or she covers. This ensures an on-going quality review by professionals whose analysis is directly impacted by ESG criteria and analysis. In addition, the Head of Sustainable & Responsible Investment approves all ESG scores.


LEI 08. Processes to ensure fund criteria are not breached

08.1. Indicate which processes your organisation uses to ensure fund criteria are not breached

08.2. If breaches of fund screening criteria are identified - describe the process followed to correct those breaches.

Should a company held in one of Sycomore AM's SRI funds breach one or more of the fund's ESG criteria, the fund managers would sell the stock without delay (maximum 4 weeks). However, we have implemented various level of controls to prevent such events from happening.

In the case of a severe controversy (level 3 out of 3) affecting one of our SRI holdings, the fund managers would immediately sell the stock. Here are a few examples of such divestments, specifically because of controversies: Sonova (March 2011), Standard Chartered (July 2012), Bull (December 2012), Alstom (2013), Sanofi (2014), BNP Paribas (2014), Volkswagen (2016).

Moreover, we have a specific portfolio construction tool to screen companies that pass our exclusion and selection criteria and thus are eligible to our SRI funds.

08.3. Additional information.[Optional]


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