- 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.