This report shows public data only. Is this your organisation? If so, login here to view your full report.

La Française Group

PRI reporting framework 2019

Export Public Responses
Pdf-img

You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (C) Implementation: Integration

(C) Implementation: Integration

FI 10. Integration overview

10.1. Describe your approach to integrating ESG into traditional financial analysis.

LFAM's management philosophy is based on the integration of financial, ESG and strategic analysis, which supports stock picking at all levels by combining:

·         Financial analysis criteria

·         A non-traditional, more strategic and forward-looking company, sector and thematic research in order to find the best-managed companies

·         An analysis of the companies' megatrends exposure

·         ESG integration:

·         The non-traditional research is founded on an analysis of the environmental, social and governance risks that specifically apply each sector and company. It is also grounded in compliance with standards that are widely recognized and internationally endorsed such as the UN Global Compact principles or the exclusion of companies linked to controversial weapons. Accordingly, any company that is found to be violating these principles will be excluded from the investment universe.

More precisely, there are five factors that we analyse to ensure ESG integration:

·         The environment: dependence on commodities, management of carbon emissions, energy efficiency, pollution, management of waste and water, etc.

·         Human capital: workers' rights, turnover, structures for training and acquiring knowledge, corporate governance, etc.

·         Organisational capital: corporate governance, relations with regulators, suppliers and the supply chain, local communities, customers, etc.

·         Innovation capacity: innovation culture, internal structures dedicated to innovation, R&D, new products brought to market, etc.

·         Adaptability and responsiveness: management structures, ability to gather and organise information, strategic agility, public relations, etc.

In addition, we conduct an evaluation of the companies' exposure to global megatrends that will shape their economic and competitive landscape. The question is whether or not these companies will be able to put themselves in a position to benefit from these underlying trends. This analysis takes a sharp look at the nature of their businesses, products promoted, the strategies they have unveiled and the countries/regions in which they are present or will be in the future.
The megatrends include:

·         Transportation - Mobility

·         Healthcare burden

·         Access to knowledge

·         Energy demand growth

·         Changing consumer demographics

·         Urbanization and infrastructure needs

·         Climate change

·         Food, land resources and biodiversity

·         Scarcity of raw materials

·         Water availability and quality

The ESG assessment (scoring) is updated every month as part of the quant research conducted by Inflection Point. Depending on exogenous factors (publication of new elements, sudden controversies, etc.) or internal events (a manager's specific interest in a given company) some companies might be reviewed more often by the research analysts, who will make adjustments to the quant scores if required.

The 5-factor model set up by Inflection Point remains stable (, E, S, G and Adaptability and Innovation). The underlying KPI's are being reviewed regularly and updated - especially if new data sources become available. The relative weightings of the model are reviewed at least annually.  

 

10.2. Describe how your ESG integration approach is adapted to each of the different types of fixed income you invest in.

Corporate (financial)

We do not have a differentiated approach for financial and non financial. The difference lies in the metrics used for the ESG, strategi and financial analysis that vary according to the sectors under review.

Corporate (non-financial)

We do not have a differentiated approach for financial and non financial. The difference lies in the metrics used for the ESG, strategi and financial analysis that vary according to the sectors under review.

10.3. Additional information [OPTIONAL]


FI 11. Integration - ESG information in investment processes

11.1. Indicate how ESG information is typically used as part of your investment process.

Select all that apply
Corporate (financial)
Corporate (non-financial)
ESG analysis is integrated into fundamental analysis
ESG analysis is used to adjust the internal credit assessments of issuers.
ESG analysis is used to adjust forecasted financials and future cash flow estimates.
ESG analysis impacts the ranking of an issuer relative to a chosen peer group.
An issuer's ESG bond spreads and its relative value versus its sector peers are analysed to find out if all risks are priced in.
The impact of ESG analysis on bonds of an issuer with different durations/maturities are analysed.
Sensitivity analysis and scenario analysis are applied to valuation models to compare the difference between base-case and ESG-integrated security valuation.
ESG analysis is integrated into portfolio weighting decisions.
Companies, sectors, countries and currency and monitored for changes in ESG exposure and for breaches of risk limits.
The ESG profile of portfolios is examined for securities with high ESG risks and assessed relative to the ESG profile of a benchmark.
Other, specify

11.2. Additional information [OPTIONAL]


FI 12. Integration - E,S and G issues reviewed

12.1. Indicate the extent to which ESG issues are reviewed in your integration process.

Environment
Social
Governance
Corporate (financial)

Environmental

Social

Governance

Corporate (non-financial)

Environmental

Social

Governance

12.2. Please provide more detail on how you review E, S and/or G factors in your integration process.

Corporate (financial)

We use the 5 factor model scores of Inflection Point (see the LEI section for more details) as well as financial scores (sector and momentum) and equally weight both inputs to get a global score for each issuer. We then exclude the last quintile of the universe (NB: we have already excluded the last quartile in the quantitative-based Phase I). The overall selectivity rate is 40%.

Corporate (non-financial)

Same as for financial but based on different metrics:

We use the 5 factor model scores of Inflection Point (see the LEI section for more details) as well as financial scores (sector and momentum) and equally weight both inputs to get a global score for each issuer. We then exclude the last quintile of the universe (NB: we have already excluded the last quartile in the quantitative-based Phase I). The overall selectivity rate is 40%.

12.3. Additional information.[OPTIONAL]


Top