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Edmond de Rothschild Asset Management (France) (EDRAM)

PRI reporting framework 2018

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ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

New selection options have been added to this indicator. Please review your prefilled responses carefully.

13.1. Indicate if your organisation executes scenario analysis and/or modelling in which the risk profile of future ESG trends at portfolio level is calculated.

Is this scenario analysis based on a 2°C or lower scenario?

SG 13.1a CC. Pleased describe the resilience of your organisation’s strategy, considering different future climate scenarios.

Strategy affected
Changes to strategy
Description of scenario and time-horizon
How analysis has been used
          SRI equities funds
        
          The funds is not invested in the 10 sectors considered risky in our climate  roadmap
        
          3 horizons have been identified: short term(2017-2020), mid term (2020-2030)  and long term (2030-2040)
        
          The climate roadmap uses the TCFD typologie to identify the subsectors considered at risk.
        

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]

We will progressively work on it to integrate this in 2017-2020.

As part of the FIR’s Research Committee, we also became the joint co-ordinator of a new FIR exploratory working group on the theme of “ALM / Strategy asset allocation and Responsible Investment”, which met for the first time in November 2017. The group will address questions relating to the connection between SRI and asset allocation, and the consequences in terms of risk, asset classes and management constraints. Four deliverables are expected in 2018.


SG 14. Long term investment risks and opportunity

14.1. Describe the process used to identify short, medium and long-term risks and opportunities that could have a material impact on your organisation and its activities.

Climate change represents a major research axis for Edmond de Rothschild Asset Management. In 2017, we  moved one step further with the formalisation of our 2°C Roadmap, drawn on the final recommendations of the Task Force on Climate-related Financial Disclosures (TFCD) and on the scenario 450, issued by the International Energy Agency (IEA) The 2°C roadmap applies to both Equity and Fixed Income asset classes. We have developed a proprietary rating model that quantifies the main climate-related risks and opportunities, at sector and sub-sector level. At this stage, our 2°C roadmap is global and does not provide distinctions for different geographical regions. As far as climate risks are concerned, our roadmap recommends staying focused and concentrating on a limited number of sectors and issuers. In practical terms, 90% of climate-related risks are to be found in 10% of issuers, across ten industries at most.

14.1 CC. Describe the processes used to determine which climate-related short, medium and long-term risks and opportunities could have a material impact on your organisation and its activities.

EDRAM used the TCFD framework to identify the risks and opportunities related to climate change: analysing the transition risk and physical risks. 

To learn more about our process, please see the description in SG 01.3.b.CC

14.2. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following you act on.

14.2a cc. Please describe how you define “short”, “medium” and “long term”, and describe your material climate-related issues over these time horizons.

Definition
Description of material climate-related issues
Short term
          2017-2020
        
          Market risks, regulationl risks, reputation risks
        
Medium term
          2020-2030
        
          Market risks, regulation risks,  reputation risks technology risks,
        
Long term
          2030-2040
        
          Market risks, regulation risks,  reputation risks technology risks,
        

14.3. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

14.4. Indicate which of the following tools you use to manage emissions risks and opportunities

14.4a CC. Please provide further details on these key metric(s) used to assess climate related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Metric Trend
Limitations / Weaknesses
Climate-related targets
          most companies
        
          assess the opportunity
        
          % of reduction, SBT target
        
          % of companies with a target
        
          depending on the fund
        
          scope 3 is not often included
        
Weighted average carbon intensity
          most companies
        
          risk
        
          tCO2/ euro
        
          Refer to  http://www.edmond-de-rothschild.com/SiteCollectionDocuments/asset-management/isr/EDRAM-FR-EN-empreinte-carbone-carbon-footprint.pdf
        
          depending on the fund
        
          scope 3 not included
        
Carbon footprint (scope 1 and 2)
          most companies
        
          risk
        
          tCO2
        
          Refer to  http://www.edmond-de-rothschild.com/SiteCollectionDocuments/asset-management/isr/EDRAM-FR-EN-empreinte-carbone-carbon-footprint.pdf
        
          depending on the fund
        
          scope 3 not included
        
Portfolio carbon footprint
          most companies
        
          risk
        
          tCO2
        
          Refer to  http://www.edmond-de-rothschild.com/SiteCollectionDocuments/asset-management/isr/EDRAM-FR-EN-empreinte-carbone-carbon-footprint.pdf
        
          depending on the fund
        
          scope 3 not included
        
Total carbon emissions
          most companies
        
          risk
        
          tCO2
        
          Refer to  http://www.edmond-de-rothschild.com/SiteCollectionDocuments/asset-management/isr/EDRAM-FR-EN-empreinte-carbone-carbon-footprint.pdf
        
          depending on the fund
        
          scope 3 not included
        
Carbon intensity
          most companies
        
          risk
        
          tCO2/ e
        
          Refer to  http://www.edmond-de-rothschild.com/SiteCollectionDocuments/asset-management/isr/EDRAM-FR-EN-empreinte-carbone-carbon-footprint.pdf
        
          depending on the fund
        
          scope 3 not included
        
Other emissions metrics
          european companies
        
          opportunity
        
          rating
        
          internal
        
          depending on the fund
        
          scope 3 not included
        

14.4b CC. Please describe in further detail your key targets.

Target type
Time Frame
Base Year
KPI
Target Methodology
Limitations / Weaknesses
Attachments
          
        
          
        
          
        
          
        
          
        

          
        
          
        
          
        
          
        
          
        

14.5. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

In line with the commitments of the Edmond de Rothschild Group during the COP 21, and consistent with its Responsible Investment policy, Edmond de Rothschild Asset Management (France) wanted to mean its commitments to fight against global warming by signing the Montreal Carbon Pledge in 2015.

As a signatory, Edmond de Rothschild Asset Management (France) has committed to measure progressively and make public annually the carbon footprint of its investments. A first commitment it honoured on December 1, 2015 on a portion of its equity investments, namely portfolios shares France/Zone Euro/Europe (except Midcaps Fund). It was about 60% of the stock of the equity management. This indicator is measured by the in-house RI team from data it collects : this testify of the quality of our proprietary extra-financial analysis.  For the year ended 2016, we had just extended the carbon footprint coverage to the US equities portfolios and most global equities portfolios. corresponding to 16 open-ended funds and about 80% of the AUM of our overall open-ended equity funds.  The next update and extension of our carbon footprint measure will be disclosed in the second quarter 2018. All the details of the methodology used can be found on the following public document: http://www.edmond-de-rothschild.com/site/France/en/asset-management/our-expertise/socially-responsible-investment).

Please note that, in addition to  the carbon footprint, which is disclosed publicly on our website, we can also follow two other complementary carbon measures: the carbon exposition and the carbon intensity.

These measures have no immediate consequences for a mainstream systematic reduction of the relevant portfolios CO2 footprint, but it represents the first step for the integration of carbon risk in the management of our portfolios. It also allows to raise the awareness of all our stakeholders to the carbon issue and, to underline the intention of Edmond de Rothschild Asset Management (France) to be transparent.

However, Edmond de Rothschild Asset Management (France) manages several SRI open-ended funds and dedicated mandates (eg: low carbon mandate of the amLeague, www.am-league.com/fr/rankings/) with a low carbon footprint which invest in low carbon / green companies. Indeed, the analysis of the green impact of the companies is already integrated into our internal ESG research through two different perspectives:

The operational footprint: energy consumption criteria (sub-criteria: Objectives, Actions, Results) and emissions of greenhouse gases (idem)

The products footprint: impacts of products and services criteria (sub-criteria: life cycle analysis, green innovation, reduction of products impact).

These two categories represent a significant part of the environmental rating of a company (20% for the cement industry, 26% for players in energy efficiency).

14.6. Additional information [Optional]

OUR POSITION REGARDING CARBON RISKS

Edmond de Rothschild Asset Management is strongly committed to accompany its institutional clients so that they can better address this emerging risk and thus meet their fiduciary duty and their own commitments. We also want to give them access to investment opportunities that have a positive impact on the energy transition for green growth.

  • A responsible and prudent approach

​Identify and manage risks, assessing the impacts of our investment decisions at the outset.

Reconcile financial performance, fiduciary responsibility and climate change solutions, avoiding knee-jerk reactions that could precipitate abrupt changes with negative short-term economic and social impacts. Understanding the extent to which risks have been integrated into the price of a security is an essential step to facilitate investment decisions.

=>Measurement of the carbon footprint of portfolios, Identification of securities/sectors at  risk, individual and collective engagement.

  • A proactive and positive contribution to tackle climate change 

Identify and seize the opportunities in promising markets reconciling growth and sustainable development, while exercising caution on markets which are not yet fully mature in terms of volumes, financial and ESG  performance and which have shown weakness in the past.

=> Assets and funds integrating the energy transition for green growth theme, green infrastructure, sustainable real estate, etc.

OUR INITIAL COMMITMENTS TO ADDRESS CLIMATE CHANGE

  • A key step : signing the Montréal Carbon Pledge (see SG 14.5)

A 2°C roadmap 2017-2040 defined in 2017 in cooperation with our clients, especially the institutional investors. 

In 2016, Edmond de Rothschild Asset Management developed a first public document, “Our Contribution to Tackling Climate Change”, to articulate its reflections and positions regarding the management of carbon risks and opportunities and the ways in which it seeks to support its institutional investors in fulfilling their fiduciary duty on this subject. These first reflections have been developed in 2017 with the launch of  a dedicated 2°C roadmap, itself part of the 2017-2020 Responsible Investment strategy.

To know more about Edmond de Rothschild Asset Management's Climate change positive contributions, you can access our Climate brochure through this web link : http://www.edmond-de-rothschild.com/SiteCollectionDocuments/asset-management/isr/EDRAM-EN-Climate-Brochure.pdf . The key components of our 2°C roadmap  is described within the additional Climate-related questions of our PRI reporting.

EDRAM focus on sectors with high carbon intensity such as cement, coal, etc. The analysis is done in absolute terms and in relative terms and include the scope 3 in a qualitative manner. EDRAM is convinced that the biggest risk are borne by 10% of the companies in less than 10 economic sectors..

On the funds levels, we concentrate our efforts on high intensive funds such as energy, and /or funds which perform well below their benchmark. Regarding our engagement policy, Edmond de Rothschild Asset Management (France) identified 60 among 180 top emitters globally over which it will concentrate its dialogue and engagement.

Our climate research also tends to focus on the climate opportunities.  The review of five pillars (resource management, sources of energy, products and services, markets, and degree of resilience) has enabled us to identify 19 opportunities related to climate change, 10 of which are to be seized immediately.

It is used for all funds and especially the dedicated fund Nikko Green New Deal, a thematic fund on environment, (such as energy efficiency, renewables energy, etc). and the fund EdR Euro Sustainable Growth, whith the focus on growth opportunities including the climate solutions.

14.7 CC. Describe your risk management processes for identifying, assessing, and managing climate-related risks.

Please describe

Based on TCFD guidelines, all management teams have access to the 5 subsectors identified as at  high risk (level 5, highest risk) on the climate change issue and the 10 strong opportunities (level 5, top opportunities)

14.8 CC. Describe your processes for prioritising climate-related risks.

EDRAM focus on sectors with high carbon intensity such as cement, coal, etc. The analysis is done in absolute terms and in relative terms and include the scope 3 in a qualitative manner. EDRAM is convinced that the biggest risk are borne by 10% of the companies in less than 10 economic sectors..

On the funds levels, we concentrate our efforts on high intensive funds such as energy, and /or funds which perform well below their benchmark

14.9 CC. Do you conduct engagement activity with investee companies to encourage better disclosure and practices around climate-related risks?

Please describe

The engagement has both goals of obtaining a better transparency and ameliorating the climate performance of companies. EDRAM targets the companies:

1/ in its portfolio and,

2/ having the biggest carbon footprint (scope 1-2 or 1-2-3).

For instance it is engaged via the PRI Clearinghouse with other investors to have a better transparency and performance from energy companies on their methane emissions.

Regarding our engagement policy, Edmond de Rothschild Asset Management (France) identified 60 among 180 top emitters globally over which it will concentrate its dialogue and engagement

14.10 CC. Describe how you use data from climate-related disclosures.

Our climate research tends to focus on the climate opportunities.  The review of five pillars (resource management, sources of energy, products and services, markets, and degree of resilience) has enabled us to identify 19 opportunities related to climate change, 10 of which are to be seized immediately.

It is used for all funds and especially the dedicated fund Nikko Green New Deal, a thematic fund on environment, (such as energy efficiency, renewables energy, etc). and the fund EdR Euro Sustainable Growth, whith the focus on growth opportunities including the climate solutions


SG 15. Allocation of assets to environmental and social themed areas (Private)


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