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Edmond de Rothschild Asset Management (France) (EDRAM)

PRI reporting framework 2018

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エンゲージメント

概要

LEA 01. Description of approach to engagement

この指標には新しい設問が追加されています。事前に入力されている回答を精査してください。

01.1. 貴社に正式なエンゲージメントポリシーがあるかどうか示してください

01.2. エンゲージメントポリシーのファイルの添付、もしくはURLを記載してください。

01.3. エンゲージメントポリシーがカバーしている内容を示してください。

01.4. Provide a brief overview of your organization’s approach to engagement

As a responsible investor, we have always striven to meet our responsibilities as a shareholder. The best way to do this is still to take part in companies' activities and decision-making by voting at shareholders' meetings and by increasingly promoting a constructive but active dialogue on corporate governance and issues relating to new areas of corporate social responsibility. This is responsibility in action, and we practice it with a view to long-term development and as a partner of the companies we hold shares in. Moreover, we are convinced that this source of leverage helps make companies aware of the operational and reputational risks that could affect their valuations and encourages them to adopt good ESG practices in order to manage those risks optimally.

Consequently, Edmond de Rothschild Asset Management (France) has formalized an ESG Engagement policy promoting dialogue on ESG issues at all companies’ organizational levels. As part of our ESG analysis, we conduct around 100 ESG meetings per year on the average and engage annually with 3 to 4 companies and for which we have identified significant ESG issues. Themes concerned vary depending on companies being engaged.

01.6. Additional information [optional]

Edmond Rothschild Asset Management (France) considers dialogue as one of the cornerstones of its process of integration of the ESG criteria within its management.

As a priority issue, we want to promote dialogue with companies to improve transparency and the performance of companies: by refining our understanding of the issues and performance of companies and encouraging them to apply the best practices. Indeed, we firmly believe that a better ESG risk management allows to reduce financial risk and improve the business performance over the long-run.

Our engagement is mainly led individually at two levels:

< > Edmond de Rothschild Asset Management (France)'s RI team develops a  direct dialogue format in the context of its ESG research and analysis and, prior to the shareholders meetingsThrough company visits, the RI portfolio managers and analysts use their proprietary ESG framework and actively discuss with companies on the evolution of their ESG practices. Since 2016, this type of engagement has started to be applied for all our European Equity management expertise and is progressively being extended to the overall equity teams.

Comprehensive engagement: It aims at promoting good ESG practices with the management of the companies held within the portfolio of our funds when we perceive that ESG risks and opportunities can affect their valuation on the long term. In such cases, the dialogue process is closely monitored and documented. In 2016, this type of engagement is applied for one flagship European Equity fund : Edmond de Rothschild Tricolore Rendement.

Please note that we started our experimentation of an active ESG engagement (“Comprehensive engagement”) in 2010 under the leadership of one of our flagship funds mainly invested in French stocks, but with a diversification on the eurozone stock market : Edmond de Rothschild Tricolore Rendement which accounts for 1. billion euros of assets in December 31,2017 and represents 18 7% of the european equities assets under management. For 7 years, this pioneer fund of ESG engagement in France has opened the path to become the close link between an SRI strategy and the pilot ESG integration process that is being implemented from 2016 across the equities management expertises of Edmond de Rothschild asset Management (France). This mainstream ESG engagement within our equity funds is fed by a direct dialogue (“Streamlined engagement”) on the ESG material issues during the meetings with companies and is led by the RI and/or equity managers until, if necessary, a more comprehensive dialogue is driven by the Edmond de Rothschild Tricolore Rendement  Management team and the RI analysts team.

 

FOCUS ON THE COMPREHENSIVE ESG ENGAGEMENT APPROACH LED BY EDMOND DE ROTHSCHILD TRICOLORE RENDEMENT BETWEEN 2010 AND 2017

Objectives

The engagement  approach implemented by Edmond de Rothschild Asset Management (France) for the Edmond de Rothschild Tricolore Rendement fund has a two-fold objectives:

1. To encourage companies, in priority currently held within its portfolio, to make effective progress and communicate on ESG issues with the view to improving their practices, their transparency and their awareness on ESG challenges.

2. To upgrade the investment process applied to Edmond de Rothschild Tricolore Rendement by incorporating ESG criteria into its financial analysis, and using ESG Engagement as a lever to add value to the stock - in keeping with the fund's investment style and objectives.

Indeed, the no style multicaps management: aims to deliver long-term capital appreciation and low volatility. This optimization of  the risk-return combination of the portfolio aims to protect the capital with the goal to anticipate potential ESG related risks that have not or inaccurately been factored in by the market and that if materialized, could have a negative impact on stock market performance. The process also requires identifying ESG issues that the market is already well aware of, that are having a negative impact on the valuation of a given company, and that if improved upon – driven by Edmond de Rothschild Tricolore Rendement - could deliver potential upside.

Securities are subject to non-financial analysis based on ESG criteria. . From the ESG analysis, based on an internal, proprietary analysis method, and on the rating level determined using portfolio securities, the manager identifies non-financial issues, which then form the focus of engagement and dialogue. However, the implementation of this ESG engagement process is not intended to define an eligible investment scope. At the end of the engagement and dialogue period, the manager may decide to sell the investment in question if insufficient progress has been made in terms of ESG transparency and/or performance.Companies the fund will engage with as a priority

Once the ESG analysis has been conducted on the portfolio, the fund's investment team is alerted by the SRI Research team for any stock rated lower than the minimum threshold of "A ".Consequently, our Engagement policy will be initiated as a priority with companies that:

-   are given low SRI ratings (under "A"),

-   have ratings under the average on one of the ESG criteria despite a SRI rating above “A”),

-  may potentially be exposed to ESG controversies

-  are part of strong financial convictions from the portfolio managers on targeted ESG issues.

 

People responsible for engagement on behalf of the fund and, people engaged within the investees companies

The comprehensive engagement  is implemented by the portfolio managers of Edmond de Rothschild Tricolore Rendement and  the RI analysis team. The ESG engagement activity is reviewed by the Engagement and Voting Committee.

With the support of Edmond de Rothschild Asset Management (France)'s RI team, the managers of Edmond de Rothschild Tricolore Rendement, promote direct dialogue at all levels within the companies (executive management, strategic and financial directors, sustainable development departments, HR, Investor Relations…) and if needed, ask for ad-hoc meetings with operational team members in order to review some of the issues in more depth.


LEA 02. Reasoning for interaction on ESG issues

02.1. エンゲージメントの方法および対話を行う理由を明示して下さい。

エンゲージメントの種類
対話を行う理由​
Individual/Internal staff engagements
          To anticipate potential material ESG risks that have not or inaccurately been factored in by the market => upwards or downwards revision of stock valuation
        
Collaborative engagements
Service provider engagements

サービスプロバイダーを通じて関与しない理由を明記してください。(最大200語)

As the ESG research is done internally, our RI team is the best positioned to do the engagement on these issues. We do consider that internal engagement by our team is more valuable and effective than by external service providers. In addition, our internal approach facilitates thoroughed and precise dialogue and engagement. Finally our own curve of experience shows that we impact and get more results when we do it ourselves.

02.2. Additional information. [Optional]

Unlike activism, Edmond de Rothschild Asset Management (France)  prefers to engage in a constructive dialogue and apply a proactive voting policy. 

Consequently, Edmond de Rothschild Asset Management (France)  promotes individually ESG dialogue at all levels of the companies engaged and, also keeps a close watch of on-going shareholder coalitions and assesses whether it would be relevant for the firm to join Collaborative Engagement initiatives.

If you want to know more about our objectives for undertaking engagement activities, please refer to the descriptive in LEA 01.5.  


プロセス

貴社内で実行するエンゲージメントのプロセス

LEA 03. Process for identifying and prioritising engagement activities

この指標には新しい設問が追加されています。事前に入力されている回答を精査してください。

03.1. 貴社内のスタッフが実行するエンゲージメント活動を特定し、優先順位を決定する正式なプロセスが貴社にあるかどうか示してください。

03.2. 貴社内のスタッフが実行するエンゲージメントを特定し、優先順位を決定する際に使用する基準を説明してください。

03.3. Additional information. [Optional]

Consistent with its active fundamental management strategy, Edmond de Rothschild Asset Management (France) manages its portfolios and engages with companies in the purpose to safeguard fund-holder interests, and its constant quest for performance, with a view to long-term and sustainable value creation.

In order of importance, several factors are looked at to decide of the interest to launch an ESG engagement initiative with a company:

Geography / market of the companies targeted: For the moment, our streamlined and comprehensive engagement activities are mainly implemented for the securities held within our European equities funds but are being extended on the overall perimeter of our equity management expertise.

 

In reaction to ESG impacts which has already taken place and, Exposure

Our SRI funds and mandates, that develop a best-in-universe and ESG engagement strategies, represent  12,7% of our AUMs. Consequently, prior the launch of an ESG active dialogue, we are paying particularly  close attention to the evolution of the ESG practices and performance of the companies held in the portfolios of these funds, as well as their level of exposure regarding ESG controversies, and weights within the european equities funds' portfolios of Edmond de Rothschild Asset Management (France).

For the Engagement fund, Edmond de Rothschild Tricolore Rendement, the Engagement policy will be initiated as a matter of priority with companies that are badly rated (ratings that are strictly under A or lower than average on one criterion despite being above A on an accrued basis), and that are potentially exposed to ESG controversies.

 

Materiality of ESG factors and as a response to divestment pressure

As part of the investment process applied to the fund Edmond de Rothschild Tricolore Rendement, and before we initiate our engagement process with companies, the RI team screens the portfolio based on ESG criteria. This screening enables the fund managers to identify the companies that they will seek to engage with due to their low ESG rating - as this may generate investment risk over the long term.

The fund's investment team is also informed of the ratings per ESG factor for each stock in the portfolio and of any sensitive-type developments, on a material point of view. This information enables them to initiate a proactive comprehensive Engagement process with companies whose ratings are down, covering one or more pillars.

By extension of this core SRI process of engagement, please note that the ESG integration process implemented by the European Equities management team involves a supportive action to the engagement process led by Edmond de Rothschild Asset Management (France) with Edmond de Rothschild Tricolore Rendement. Indeed, with the support of the RI analyst team, the portfolio managers measures the ESG quality of their funds' portfolio in order to identify material ESG risks and opportunities that could occur dedicated questions on these specific issues during the financial meetings.

Consequently, on a scalable manner, the European equities fund managers tend to meet increasingly with company officers on a regular basis to discuss both strategic, financial and ESG themes with them. These meetings are also an opportunity for fund managers to bring up shareholder meeting resolutions, in order to move the company towards better practices.

 

Systemic risks to global portfolios

Regardless of the nature of the risk, financial or ESG, the  Fundamental Asset Management Department and Risk Department are particularly vigilant with regard to any systemic risk to the funds of Edmond de Rothschild Asset Management (France). For example, weekly equity and fixed-income management meeting are held with the reporting done by the RI team of current issues (alerts regarding controversies or sensitive issues, highly material events related to the stocks) to detect any risk that could have a negative financial impact on several portfolios. The RI team also proceeds by day-to-day informal and email discussions with RI asset managers regarding an issuer's material ESG risks.

Furthermore, all equity management teams are contributing to and co-operating with ten ESG integration projects in 2017-2020. These innovative projects, chosen by asset management teams, are giving concrete, traceable results, and are focusing on precise subjects identified as highly material in financial terms. For example, one project untitled  “Valuation impact of ESG research” was achieved in 2017: the impact of ESG ratings on the valuation of equities has been assessed using an internal methodology and validated by the equity management teams involved in the project. The positive or negative impact of ESG ratings is shown by a percentage change (upward or downward) in the share price.

 

As a follow-up from a voting decision

Edmond de Rothschild Asset Management (France) also acts prior and post to the Shareholders meetings by:

Proactively sending out the firm's Voting Policy  to  companies invested by Edmond de Rothschild Tricolore Rendement  and EdR Euro Sustainable Growth funds, explaining Edmond de Rothschild Asset Management (France)'s approach as a responsible shareholder and inviting companies to engage with our fund managers on ESG issues.

Responding to companies' requests to inform them of the portfolio managers' voting intentions prior to the shareholder meeting, particularly in the event of negative votes or abstentions.

Conducting regular meetings with company management,  prior or post shareholders meetings, in order to exchange views on strategic, financial and extra-financial issues.

 

Client request

As Edmond de Rothschild Asset Management (France) manages SRI mandates on behalf of pioneering institutional investors that have adopted an engagement policy, we regularly engage with companies in the name of our clients. We also regularly discuss with our clients to have their view on ESG issues or companies and integrate these in our decisions to focus our dialogue on any company.

Stakeholders consultations;

We regularly meet NGOs, trade unions and other stakeholders. We can use their inputs to engage with companies.

 


LEA 04. Objectives for engagement activities

この指標には新しい設問が追加されています。事前に入力されている回答を精査してください。

04.1. 貴社内のスタッフが実行する貴社のエンゲージメント活動に具体的な目的を定義しているかどうかを記載してください。

04.2. 貴社内のスタッフが実行する貴社のエンゲージメントを受けた企業の行動をエンゲージメント中および後で監視しているかどうかを記載してください。

04.3. 貴社内のスタッフが行うエンゲージメント活動の進捗を監視のうえ評価するために以下のいずれかを実施しているかどうか示してください。

04.4. Additional information. [Optional]

An efficient comprehensive Engagement process requires that we set up a constructive dialogue with the target company, and that this company is receptive to tackling the ESG challenge(s) we have identified.

 Monitoring the efficiency of engagement initiatives

  • Edmond de Rothschild Asset Management (France) has the means and resources to monitor its Engagement initiatives:
  • For each company held by the fund Edmond de Rothschild Tricolore Rendement, Edmond de Rothschild Asset Management (France) identifies an ESG issue in sufficient detail to enable regular progress reports,
  • We set a target horizon (i.e. 24 months) that is long enough to allow companies to make the necessary changes,
  • We have set up a consultative and monitoring body empowered to check the reality and the continuity of our Engagement initiatives: the "Voting and Engagement Committee".
  • We communicate regularly with the companies and the general public (the "Annual Report on voting rights" and, the "Annual ESG Engagement Report for Edmond de Rothschild Tricolore Rendement").

Measures taken if Engagement is successful or unsuccessful

At the end of the engagement period, and if the dialogue was unsuccessful, Edmond de Rothschild Asset Management (France) may submit resolutions to the Shareholder Meetings, or join shareholder coalitions.

If a company shows no tangible improvement on a given ESG issue, the stock's weighting within the portfolio of Edmond de Rothschild Tricolore Rendement may be reduced, or the position even sold. These extreme outcomes will only be considered as a last resort, and following Edmond de Rothschild Asset Management (France)'s unsuccessful prompting of the company concerned. We believe in establishing a constructive and positive process over a long-term perspective.

If the engagement action proves successful, the fund manager may maintain or strengthen the weight of the stock in the portfolio to reflect improved confidence in the company's performance potential or ability to mitigate corporate risks.

As an example, Edmond de Rothschild Asset Management (France)'s investment team has initiated a dialogue with Atos, as it was concerned about the HR KPI it follows. The meetings with the management reassured the analysts and showed that the subject was taken seriously. The management gave some interim  figures collaborating this view


協働によって実施されたエンゲージメントのプロセス

LEA 05. Process for identifying and prioritising collaborative engagement

この指標には新しい設問が追加されています。事前に入力されている回答を精査してください。

05.1. 協働的なエンゲージメントを特定し、優先順位を決定する正式なプロセスが貴社にあるかどうか示してください。

05.2. 協働的エンゲージメントを特定し、優先順位を決定する際に使用する基準を説明してください。

05.3. Additional information [Optional]

Collaborative engagement is complementary with our individual engagement because it mainly allows us to :

  • benefit from synergies with others active investors (eg: means, research, preparation of the engagement action)
  • increase the impact of the engagement

Until now, Edmond de Rothschild Asset Management (France)'s RI team keeps a close watch of on-going shareholder coalitions (eg.  PRI’s Collaboration Platform), examines the consistency with its Policies (Responsible Investment Policy, Voting Policy, Engagement Policy), assesses whether it would be relevant for Edmond de Rothschild Asset Management (France) to join up and at what level of involvement (as a simple supporter or active contributor) . We are also watchful of players who contact us with a view to joining shareholder coalitions In 2016 and 2017, we were part to the PRI clearing house engagement on the methane in oil and gas sector. Our clients interests in these subjects comforted us to continue this engagement.


LEA 06. Objectives for engagement activities

この指標には新しい設問が追加されています。事前に入力されている回答を精査してください。

 

06.1. 貴社が関与する協働的なエンゲージメントに目的が定義されているかどうか示してください。

06.2. 貴社の協働的なエンゲージメントを受けた企業の行動をエンゲージメント中および後で監視しているかどうかを記載してください。

06.3. 貴社の協働エンゲージメント活動の進捗を監視し、評価するために以下のいずれかを実施しているかどうか示してください。

06.4. Additional information. [Optional]

Before joining a collaborative engagement initiative, we ensure that we are in full agreement with the objectives of this action and with the operational methods used, to ensure that the engagement process remains constructive: the action must not be in contradiction with our own ESG factor analysis, voting and engagement policies. The experience, know-how and values that characterize the leaders of any such action are also looked at closely so that we can engage confidently throughout the process, which can last for several months or even years.

We monitor the engagement actions we are involved in on a direct and permanent basis. This process involves a close monitoring of the answers given by the company(ies) regarding the given issue. We are also in regular contact with the investors who initiated the action and communicate on the progress made, from the launch to the final conclusion.

Depending on our degree of interest in the engagement action we are supporting (for instance in relation to the weighting of the stock in Edmond de Rothschild Asset Management (France)'s portfolios) and which may have an impact on our investment decisions, we may also engage operationally alongside the action leaders. In return, we expect to be involved in the decision-making process for the entire duration of the engagement.

Whether conducted on an individual or collaborative basis, these engagement actions are very carefully selected and the results feed our expertise as a responsible investor. Year after year, the feedback received from every single action helps to enrich our ESG and engagement analysis process and improve our investment teams' proprietary knowledge on ESG integration.

 

EXAMPLE OF A COLLABORATIVE ENGAGEMENT INITIATIVESUPPORTED

In 2016, Edmond de Rothschild Asset Management (France) joined the PRI engagement group on methane emissions. This action was followed with concrete actions by the companies, as in n November 2017 senior executives from top operators signed principles to cut emissions  from natural gas production, transportation and consumption.  As members of the collaborative engagement, we will continue to encourage these companies as they roll out this commitment.

On the corporate governance issue, Edmond de Rothschild Asset Management (France)  co-filed a resolution at the shareholder meeting in 2017 requesting for the respect of the principle “one share one vote”. The resolution gained 52.4% support but required a two-thirds majority to be passed.

 


サービスプロバイダーと共同で、または、サービスプロバイダーが貴社のために

エンゲージメントを行っている3つのグループすべてに対する一般的なプロセス

LEA 09. Share insights from engagements with internal/external managers

09.1. エンゲージメントから得た考察を、貴社内の運用担当者や貴社外の運用会社と共有しているかどうかを記載してください。

エンゲージメントの種類

共有する考察
単独/貴社内のスタッフのエンゲージメント

協働的なエンゲージメント

09.2. Additional information. [Optional]

Whether they are conducted on an individual or collaborative basis, these engagement actions are very carefully selected and the results feed our expertise as a responsible investor. Year after year, the feedback received from every single action helps to enrich our ESG and engagement analysis process and improve our investment teams' proprietary knowledge on ESG integration.

The outcome of these actions helps feed our stock specific ESG assessment and may have an impact on investment decisions within our SRI funds. In the event of an unsatisfactory response, a company's ESG rating can be downgraded; this will affect our confidence in the stock and cause the weightings to be reduced, or the stock to be exited from the portfolio. We communicate on the outcome of any engagement action to our investment teams who will decide on their own on the impact this may have on the management of their funds.


LEA 10. Tracking number of engagements

10.1. 貴社がエンゲージメントの数を追跡しているかどうかを記載してください。

エンゲージメントの種類
エンゲージメントの追跡
単独/貴社内のスタッフのエンゲージメント

協働的なエンゲージメント

10.2. Additional information. [OPTIONAL]

Edmond de Rothschild Asset Management (France) ensures that a constructive dialogue is established with the target company, and that this company is receptive to tackling the ESG challenge(s) that have been identified. Furthermore, Edmond de Rothschild Asset Management (France) ensures it has the means and resources needed to monitor its Engagement initiatives:

• For each company held by the fund EdR Tricolore Rendement, the RI and European equity investment teams identify ESG issues in sufficient detail to enable regular progress reports;

• We set a target horizon (i.e. 24 months) that is long enough to allow companies to make the necessary changes;

• We have set up a consultative and monitoring body empowered to check the reality and the continuity of our Engagement initiatives: the “Voting and Engagement Committee”.

 

In addition, Edmond de Rothschild Asset Management (France) publishes annual voting and engagement reports which are freely available on our website(http://www.edmond-de-rothschild.com/site/France/en/asset-management/our-expertise/socially-responsible-investment). These reports provide an overview of our votes in shareholder meetings and engagement efforts with companies in the portfolio. As far as engagement action is concerned, please note that we only communicate on the details once the action is over to prevent any interference with the on-going dialogue: we ensure that external communication on our engagement actions does not upset the relations of trust we have with the companies, and that dialogue and progress can be sustained over the long-term.


成果および結果

LEA 11. Number of companies engaged with, intensity of engagement and effort (Private)


LEA 12. Engagement methods

12.1. 貴社のエンゲージメントが以下のどの項目を含むか明示してください。

          Sending out the firm’s Voting Policy to all  companies within Edmond de Rothschild  Tricolore Rendement and Euro Sustainable growth portfolios
        

12.2. 補足情報 [任意]

Unlike activism, Edmond de Rothschild Asset Management (France) prefers to engage in a constructive dialogue and apply proactive voting and engagement policies.

Edmond de Rothschild Asset Management (France) promotes dialogue at all levels of the company (Executive management, Strategic and Financial Directors, Sustainable Development Directors, HR, Investor Relations), and where necessary, requests ad hoc meetings with operational team members in order to pursue some of the issues in more depth.

Edmond de Rothschild Asset Management (France) may help with the launch of communications incentives such as the signature of the United Nations Global Compact. Edmond de Rothschild Asset Management (France) is also experienced in practicing corporate dialogue in the context of shareholder meeting votes. Our 2018  Voting Policy covers voting principles in the area of corporate governance, but also on Social, Environmental or Stakeholder issues ; these are all consistent with our SRI analysis.

Edmond de Rothschild Asset Management (France) therefore acts prior and post to the Shareholders meetings (6 streamlined engagement initiatives in this context in 2016) by:

  • proactively sending out the firm's Voting Policy  to approximately 40 companies invested by Edmond de Rothschild Tricolore Rendement and EdR Euro Sustainable growth funds in 2016, explaining Edmond de Rothschild Asset Management (France)'s approach as a responsible shareholder and inviting companies to engage with our fund managers on ESG issues. Our objective here is to send out the Voting Policy on a systematic basis to all companies held in the portfolio and potentially expressing our disagreement on a number of resolutions prior to the shareholder meetings, if necessary.
  • Responding to companies' requests to inform them of the portfolio managers' voting intentions prior to the shareholder meeting, particularly in the event of negative votes or abstentions.
  • Contacting and/or conducting regular meetings with company management, prior or post shareholders meetings, in order to exchange views on strategic, financial and extra-financial issues: these meetings are an ideal venue for the portfolio managers to bring up shareholder meeting resolutions and support the company as it improves its practices.

Outside the shareholder meetings, the RI team regularly organises meetings or attends ESG roadshows for their streamlined and comprehensive engagement activities. In the context of the comprehensive engagement, Edmond de Rothschild Tricolore Rendement managers send an email  to outline the engagement and the objectives to the engaged company prior to a meeting.

One instance of our engagement was the cofilling of a resolution at the genral shareholder meeting of Accor requesting the application of the principle " one share one vote".


LEA 13. Companies changing practices / behaviour following engagement (Not Completed)


LEA 14. Examples of ESG engagements (Private)


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