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Sycomore Asset Management

PRI reporting framework 2017

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Outputs and outcomes

LEI 14. How ESG incorporation has influenced portfolio composition

14.1. Indicate how your ESG incorporation strategies have influenced the composition of your portfolio(s) or investment universe.

Describe any reduction in your starting investment universe or other effects.

Sycomore AM's SRI approach reduces investment universes quite significantly.

For Sycomore Selection Responsable, the main SRI equity fund, applying all screening criteria (both positive and negative) reduces the initial investment universe by over 60%.

Specify the percentage reduction (+/- 5%)

60 %

Describe any alteration to your investment universe or other effects.

Applying thematic filters to obtain the investment universe of Sycomore Eco Solutions reduces the initial investment universe by 90%.

For Happy@work, Sycomore AM's other thematic fund, thematic filters recude the initial investment universe by 70%.

 

Select which of these effects followed your ESG integration:

14.2. Additional information.[Optional]

- Overweight/underweight at stock level:

Our internal financial analysis model is based on a "fundamental risk score" to determine a company's risk premium. This "fundamental risk score" ranges from C to A+ depending on whether a company creates value and respects its key stakeholders. 5 sub-scores are calculated. One for the company's interaction with Suppliers, Society and States (S); the second for its People (P); the third for Investors (I), which includes corporate governance; the fourth for its Clients (C); and the fifth for the Environment (E). We thus refer this "fundamental risk score" as the SPICE score of a company. This SPICE score, ranging from C to A+, has a direct impact on a company's risk premium and thus on a company's target price. This applies to the entire investment universe.

- Reduce or prioritize the investment universe:

Integrating ESG puts the spotlight on ESG risks and opportunities. As a result, the investment universe for SRI funds is reduced (companies that are too risky are excluded and we aim to favour companies that are part of the solution for a more sustainable future).

- Buy/sell decisions:

Specifically for our SRI funds, there is a permanent controversies watch. Every day, the ESG team inputs daily news and controversies into our internal model. Controversies are rated from 0 to 3 according to their severity. When there is a severe controversy or when the newsflow is negative, fund managers have to make an active decision whether to keep or divest the company. For SRI funds, a level 3 controversy leads to immediate divestment. When the level of controversy for a company is considered too high, the ESG team can blacklist the company for all fund managers regardless of whether they manage an SRI fund or not.


LEI 15. Measurement of financial and ESG outcomes of ESG incorporation

15.1. Indicate whether your organisation measures how your approach to ESG issues in listed equity investments has affected financial and/or ESG performance.

b) Funds’ financial performance: return

Describe the impact on:
Describe the impact
Which strategies were analysed?
Funds' financial performance: return

c) Funds’ financial performance: risk

Describe the impact on:
Describe the impact
Which strategies were analysed?
Funds' financial performance: risk

15.2. Describe how you are able to determine these outcomes.

In 2016 we compared the performance (risk and return) of the stocks with the highest and lowest ESG ratings (top and last decile) within our investment universe to the performance of our largest SRI fund SSR and its benchmark index for the past 6 years. 


LEI 16. Examples of ESG issues that affected your investment view / performance

16.1. Provide examples of ESG issues that affected your investment view and/or performance during the reporting year.

ESG issue and explanation

Diesel NOx-emissions and fine particulates.

Impact on investment decision or performance

In the context of emissions related controversies affecting diesel car manufacturers and the suspicion of generalized emissions test cheating in the aftermath of the Volkswagen scandal, we reduced our exposure to the sector in the fund Sycomore Eco Solutions. 

16.2. Additional information.[Optional]


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