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DNCA Finance

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

We have retained the four traditional dimensions of corporate social responsibility, selecting for each only the most material ESG criteria:

- shareholder responsibility (governance)

- environmental responsibility (environment)

- labour responsibility (human resources)

- social responsibility (society)

Corporate responsibility analysis is conducted relatively to each specific sector and taking into account the company's specifics (activities, geographical exposure) if any. Each dimension has a different weighting depending on the sector and the company's specifics. We use a total of 24 criteria within the 4 dimensions above (some can be deactivated in some sectors if they are not relevant). The final Responsibility rating ranges from 0 to 10 and results in a recommendation on the level of responsibility risk. Distribution of the universe takes into account outlying ratings. Below the threshold 4 out of 10, a company is screened out from the SRI eligible universe.
 

We also have a strict exclusion of controversial weapons for every funds; and we apply sector/activity exlusions for SRI strategies (tobacco, coal, unconventional oil and gas, defense). 

Screened by

Description

We analyse the contribution to the sustainable transition for each company. This analysis identifies a company’s exposure (% of revenues) on one or more sustainable transition themes. A total of 38 themes and business areas have been identified as contributing to the sustainable transition. This number can vary every year, depending on the materiality of each transition theme and the mergence of new ones.

Our framework of sustainable transition themes is set up around 5 transitions: demographic, medical, economic, lifestyle and ecologic. Each company is assessed according to its absolute level of revenues in each transition theme. Exposure ranges from 0 to 100% and results in a recommendation on the extent of the company’s exposure and contribution to the sustainable transition going from a "no exposure" position to a "pure player" profile. 

Screened by

Description

The analysis of corporate responsibility and the contribution to a sustainable transition are supplemented by a continuous monitoring of controversies and ongoing dialogue with companies. The assessment and monitoring of controversies has an impact on the corporate responsibility rating (companies facing severe controversies suffer a discount on their rating that can go up to 50%). A dedicated Controversy tool on our ABA ESG platform allows us to record and monitor controversies for all companies under our coverage. Above a certain rating on the severity of the controversy/ies, a company is considered in breach of international norms.
 

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

Our internal ABA ESG tool is reviewed annually (Responsibility criteria, KPIs, sustainable transition themes). We will communicate publicly (on our website, in our RI policies and in client presentations) about any change made to the model.


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.

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

05.5. Additional information. [Optional]

As we do not use external providers in our ESG analysis, the criteria relative to external providers or third-parties in question LE05.1 are not relevant (therefore unticked).

The RI team works in coordination with the risk management team, the compliance team, the investment teams (who all have access to our internal ABA ESG platform) to ensure that the ESG screens are robust and well implemented. We are also very transparent with our clients and provide regularly upon request samples of our ESG analysis to them. The monthly ESG committee, which includes the risk management team, the compliance team, the investment teams, commercial teams, also discuss and review how our ESG screens are applied to the relevant funds.

Last but not least, all our SRI funds (Beyond range) are certified according to the French SRI Label, which mostly evaluates the robustness of SRI processes.


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.

Pre-trade controls have been put in place by the internal control and risk team on controversial weapons (across all funds) and on ESG criteria for our SRI funds. Stocks that do not meet the relevant criteria/threshold cannot be traded. This is the first line of defence to avoid any breach.

The internal control and risk team has also established post-trade alerts. If breaches are identified, the department of internal control and risk send a formal alert to the portfolio manager, the head of the Responsible Investment team and the CIO. Breaches have to be explained and regularised within a week. 

An assessment of all the breaches identified is made regularly to correct processes, if needed.

06.3. Additional information.[Optional]

 Pre-trade controls have been put in place by the internal control and risk team on controversial weapons (across all funds) and on ESG criteria for our SRI funds. Stocks that do not meet the relevant criteria/threshold cannot be traded. This is the first line of defence to avoid any breach.

The internal control and risk team has also established post-trade alerts. If breaches are identified, the department of internal control and risk send a formal alert to the portfolio manager, the head of the Responsible Investment team and the CIO. Breaches have to be explained and regularised within a week. 

As part of the French SRI Label, an external auditor reviews annually that the SRI processes are in place and working. 


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