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La Banque Postale Asset Management (LBPAM)

PRI reporting framework 2019

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (A) Implementation: Screening

(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

  • Country exclusions: We exclude investments in countries sanctioned by the United Nations, the European Union and the French Government (ie. Irak, Iran, Lebanon, Libya..). We also exclude investments in countries included in the FATF Recommendations and countries identified as tax heavens.
  • Sector exclusion: Companies belonging to the tobacco and gambling sectors are systematically excluded of RI equity funds.
  • Within our RI funds we systematically exclude companies with ESG ratings between 6 and 10. Within our mainstream approach, we exclude stocks having laggard scores (8, 9 and 10 ratings).
  • Moreover, for all funds (SRI or not) we have a formal policy which excludes investments in companies involved in controversial weapons, encompassing the production, trading or storage of cluster munitions, landmines, chemical and biological weapons.

 

Screened by

Description

For RI funds we apply a positive selection for companies developing best ESG practices within each sector based on our internal ESG rating (scores between 1 and 5).

Sector bias linked to ESG risks/opportunities have been implemented within our RI rating methodology, thus going beyond the traditional best-in-class approach. In RI equity funds, sector allocation is also influenced by ESG considerations.

Screened by

Description

We have identified a list of stocks that violate in a severe and frequent manner Global Compact principles. These companies are systematically excluded from RI Funds.

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

The GREaT framework is based on 4 pillars :

  • Responsible Governance
  • Sustainable management of Resources
  • Economy and Energy transition
  • Local development

To obtain an ESG rating of companies, we implement this philosophy through a quantitative and a qualitative approach, for which we selected a certain number of criteria. We have selected the ESG ratings providers that cover our ESG criteria in the most relevant way (Vigeo and MSCI ESG Research).

We then adjust weights per pillars according to sectors. This is done in a qualitative manner by the RI Team in a periodic basis. For example, environmental issues for a driller and a media group cannot be equally considered.

All companies are rated between 1 and 10 (1 for the best, 10 for the worst) using Z-scores in order to reduce bias within our universe. Companies are eligible when they have a rating below or equal to 5. Overall, it means that 50% of the rated issuers are eligible within our RI funds.

This matrix has a sector bias:

  • it excludes approximately 50% of companies in "neutral" sectors
  • it excludes approximately 60% of companies in "SRI high-risk" sectors (for instance Energy)
  • it excludes approximately 40% of companies in "SRI high-opportunity" sectors (for instance Healthcare)

Every 3 months, RI analysts can modify/adjust ESG ratings calculated by the AGIR tool, under a formalized process. Changes have to be explained and agreed collectively by the Review committee. After the meeting, the system generates an email that is sent to all portfolio managers and results are integrated in all investment tools (SRI or mainstream). This tool also feeds into front office systems thus expanding the use of ESG ratings across all investment platforms. Quarterly meetings are also organised between the RI team and the other investment platforms to explain the main changes in ratings across the universe.

Changes impacting clients portfolio are documented either in monthly reporting or during investment committees.


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.

          RI labelling process is performed by an Independent auditor
        

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]

ESG rating methodology relies on several external sources, in order to strengthen the quality of the analysis.

External sources are generally chosen by the RI team after having benchmarked different providers. Depth, granularity and responsiveness are important criteria to select external ESG providers.

ESG ratings are reviewed on a quarterly basis - through AGIR our quantitative rating tool - to ensure that ESG data is updated and accurate.

The internal audit department controls on an annual basis the engagements, investment procedures and rating process of the RI Team.


LEI 06. Processes to ensure fund criteria are not breached (Private)


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