Sycomore AM carries out a full monitoring of the controversies that affect the companies within its investment universe, based on around 60 sources including press, NGOs, unions, sell-side analysis. In addition to these primary sources, we use a news aggregator, which alerts us as soon as a portfolio company is associated with one of the negative keywords we defined in one of the thousands of sources screened.
The monitoring is embedded in our ESG analysis process as it has a direct bearing on a company's ESG rating: every controversy point lowers the relevant stakeholder group's rating by 0.1 point. We assess the severity of controversies from 0 to -3 controversy points, based on the perimeter affected, the degree of certainty, the consequences, and the reaction of the company. Every company affected by a -3 rated controversy is excluded from our SRI investment universe.
Furthermore, a controversy will trigger an engagement action from our side if the company has not provided adequate answers or taken the necessary actions to manage the controversy.