We distinguish in our approach between company dialogue and company engagement.
- Company dialogue: holding very regular meetings with the companies we invest with or are part of our investment universe is at the very basis of DNCA's investment philosophy. It is the case for all investment teams, including the RI team. As an active shareholder and long-term investor in many French and European companies, we are a privileged stop for many top managements in their European/French roadshows, especially during the result seasons. The RI team participates in these meetings with top management on a regular basis, and systematically if there are some material ESG issues. We also conduct regular site visits, which in our view add a lot of value to our fundamental analysis (we conducted a dozen of site visits in 2018).
- Company engagement: In addition, we have developed an engagement approach that identifies and selects engagement targets, based on our ability to influence practices (shareholding, relationship with the company), the weight that a company has in our overall investments, and the materiality that some ESG issues can have on the reputation and investment case of companies. The list of engagement targets is updated on a semi-annual basis.
Engagement targets are identified in diﬀerent ways depending on whether the engagement is reactive or proactive.
We monitor daily the news ﬂow of the companies that we cover and analyse in detail the controversies that they face. This enables us to identify companies with which we would like to conduct reactive engagement. Therefore, we systematically ask for a meeting with companies facing controversies considered “serious”, meaning those identifed as level 3 in our internal analysis tool.
Target companies for proactive engagement are identified based on several factors:
- The proportion of the company's equity that we own, which determines in part our power to inﬂuence
- The proportion of our total investments that the company represents for DNCA Finance, which determines the level of our risk exposure
- The presence of the company in our SRI funds, which justifies greater attention to ESG risks
- The company’s “Responsibility” rating, which can alert us to inadequate management of ESG risks
Each year, we select a list of at least 10 companies with which we would like to begin or continue engagement. In selecting the companies, priority is given to the following situations:
- We own more than 5% of the company’s equity
- Our investment in the company represents more than 1% of our total investments
- The company is included in our SRI funds and has a “Responsibility” rating of less than 5/10 and/or a rating in one of the four aspects of the “Responsibility” analysis (shareholder, environmental, social, societal) of less than 3/10 (if this aspect is considered material).
In both reactive and proactive engagement, we tend to favour direct contact with either top management or the person in charge of managing the issues identified (Sustainability Manager, Head of Business Unit, Head of Human Resources).