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Comgest

PRI reporting framework 2018

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities

ESG incorporation in actively managed listed equities

Implementation processes

LEI 01. Percentage of each incorporation strategy

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

01.1. Indicate (1) which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities and (2) the breakdown of your actively managed listed equities by strategy or combination of strategies (+/- 5%)

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied
5 %
Percentage of active listed equity to which the strategy is applied
95 %
Total actively managed listed equities 100%

01.2. Describe your organisation’s approach to incorporation and the reasons for choosing the particular ESG incorporation strategy/strategies.

As long-term and responsible investors we look for quality companies which are able to provide sustainable returns over the long term. Our main ESG incorporation strategy is integration because we need to identify material ESG risks and opportunities of investee companies. This approach offers a broader / complementary assessment of companies in addition to information provided by the traditional fundamental financial analysis.

01.3. If assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]

The screening is applied to all investment strategies at a group level. Besides, an ESG integration process is implemented on 95% of the Assets under Management.


LEI 02. Type of ESG information used in investment decision

02.1. Indicate what ESG information you use in your ESG incorporation strategies and who provides this information.

Type of ESG information

Indicate who provides this information  

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

02.2. Provide a brief description of the ESG information used, highlighting any different sources of information across your ESG incorporation strategies.

To gather ESG information, Comgest uses its own research, the services of independent external service providers and information released by companies themselves.

Comgest’s ESG research is conducted internally by the dedicated ESG analysts who draw on external extra-financial information sources, such as companies’ CSR reports, information and alerts by specialist providers, contacts with companies and their stakeholders, NGO and media reports, Bloomberg, and other sources.

ESG data providers have been selected by Comgest on the basis of ESG information quality and geographical coverage criteria. The following providers are currently used:

  • MSCI ESG Research: general ESG information
  • Bloomberg: general ESG information and carbon emissions data
  • Sustainalytics: general ESG information and information on controversial weapons
  • Solaron Sustainability Services: ESG and controversial information, specialisation in emerging markets
  • BoardEx: governance specialist
  • RepRisk: controversial news and reputational risk
  • Trucost: carbon and environmental data

02.3. Indicate if you incentivise brokers to provide ESG research.

02.4. Describe how you incentivise brokers.

In its broker reviews, Comgest allocates some weighting to ESG research. The ESG analysts participate in the brokers research assessment and vote for 5% of the overall score.

02.5. Additional information.[Optional]


LEI 03. Information from engagement and/or voting used in investment decision-making

03.1. Indicate if your organisation has a process through which information derived from ESG engagement and/or (proxy) voting activities is made available for use in investment decision-making.

03.2. Additional information. [Optional]


(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

Controversial Weapons policy: exclusion of anti-personnel landmines and cluster weapons for all of our funds and mandates

Shariah investment: exclusion of Shariah non-compliant sectors and activities for certain funds and mandates

Ethical segregated accounts or funds: exclusion of sectors and activities according to clients' requirements

04.2. Describe how the screening criteria are established, how often the criteria are reviewed and how you notify clients and/or beneficiaries when changes are made.

Controversial Weapons policy: screening criteria have been established by Comgest in collaboration with a service provider based on best practice. Criteria are reviewed annually. Clients are notified on request.

Shariah investment: screening criteria have been established by DJ Shariah Supervisory Board. Criteria are public. Clients are notified on request.

Ethical segregated accounts or funds: screening criteria are provided by clients in the IMA, and reviewed with them regularly.


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]


LEI 06. Processes to ensure fund criteria are not breached

06.1. Indicate which processes your organisation uses to ensure fund criteria are not breached

06.2. If breaches of fund screening criteria are identified - describe the process followed to correct those breaches.

The portfolio manager is made aware of the breach, as well as the CIO, the ESG analysts and the Risk manager. The decision to correct is then taken and applied through the divestment of the stock, always in the best interest of the clients but within a reasonable timeframe.

06.3. Additional information.[Optional]


(C) Implementation: Integration of ESG issues

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate which ESG factors you systematically research as part of your investment analysis and the proportion of actively managed listed equity portfolios that is impacted by this analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]


LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on a robust analysis.

09.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your integration strategy.

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information.[Optional]

Material ESG issues for the portfolio are discussed on an ongoing basis during research meetings, as the ESG team is part of the investment team.


LEI 10. Aspects of analysis ESG information is integrated into

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

10.1. Indicate which aspects of investment analysis you integrate material ESG information into.

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

10.2a. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

10.3. Describe how you integrate ESG information into portfolio weighting.

With regards to portfolio construction, ESG integration contributes to all three components that determine the weights of any holding:

  1. Quality / visibility: the ESG analysis leads portfolio managers to assess the overall quality of a company (management, positioning vs. competitors, resilience…)
  2. Dynamic growth: the ESG analysis leads portfolio managers to assess the growth opportunities related to sustainability themes.
  3. Attractive valuation: the ESG quality level resulting from the ESG analysis has an impact on the inputs of the valuation model

These three components affect the level of conviction of the portfolio managers in the portfolio construction.

10.4a. Describe the methods you have used to adjust the income forecast / valuation tool

An ESG quality level is assigned to each company in the portfolio. It is the result of a consensus between the ESG analyst and the financial analyst on the level of ESG quality specific to the company.

Once the ESG quality level has been defined, it is translated into a company specific ESG discount rate which is added to the initial discount rate given by the financial analyst based on country / market risk and business risk. The ESG discount rate takes into account all ESG risk / opportunity elements found.

Proportion of actively managed listed equity exposed to investment analysis

10.2b. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

10.4b. Describe the methods you have used to adjust the income forecast / valuation tool

An ESG quality level is assigned to each company in the portfolio. It is the result of a consensus between the ESG analyst and the financial analyst on the level of ESG quality specific to the company.

Once the ESG quality level has been defined, it is translated into a company specific ESG discount rate which is added to the initial discount rate given by the financial analyst based on country / market risk and business risk. The ESG discount rate takes into account all ESG risk / opportunity elements found.

10.5. Additional information.

Investee companies are monitored on an ongoing basis from an ESG perspective. The purpose is to identify all ESG events (controversies, change in corporate structure, change of board / management…) which could affect companies’ ESG / quality profile, valuation and/or reputation. In the case of such material events, the ESG opinion and the ESG quality level would be revised accordingly and the investment case could be re-assessed.


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