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DNCA Finance

PRI reporting framework 2019

You are in Strategy and Governance » ESG issues in asset allocation

ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation undertakes scenario analysis and/or modelling and provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe We conduct every year backtesting to assess the materiality of ESG criteria. This enables us to use ESG criteria in a more predictive manner and update our list of ESG criteria every year to select the most material ones.
Describe We have developed a climate risk assessment model based on a set of sector specific criteria (explained in the climate section of this report). We do not conduct scenario analysis in a systematic manner, but we sometimes test the sensitivity of carbon-intensive companies to a change in carbon prices.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]


SG 13 CC.

13.4 CC. Describe how the organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, the results and any future plans.

Describe

We currently use climate scenarios in a sector-specific manner for sectors the most at risk from a transition risk point of view. We use the IEA SDS (2 degree scenario) to evaluate how companies in the Utilities, Oil & Gas and Automotive sector are positioned compared to a 2 degree trajectory. This assessement is used to evaluate the climate approach of companies which helps inform our overall ESG analysis. ESG ratings are used in the construction of the SRI funds investments universe and are more broadly available to all PMs within DNCA.

Describe

We currently use climate scenarios in a sector-specific manner for sectors the most at risk from a transition risk point of view. We use the IEA SDS (2 degree scenario) to evaluate how companies in the Utilities, Oil & Gas and Automotive sector are positioned compared to a 2 degree trajectory. This assessement is used to evaluate the climate approach of companies which helps inform our overall ESG analysis. ESG ratings are used in the construction of the SRI funds investments universe and are more broadly available to all PMs within DNCA. Climate change is a key topic of engagement with companies in the Utilities, Oil and Gas and Automotive sector, and we use our analysis of the gap between the companies' current trajectory and a 2DS to challenge the companies we engage with.

13.5 CC. Indicate who uses this analysis.

13.6 CC. Indicate whether the organisation has evaluated the impacts of climate-related risk, beyond the investment time-horizon, on the organisations investment strategy.

Describe

Again, we use climate scenario analysis on a limited number of sectors, which in our view have high climate risk (Utilities, Automotive, Oil & Gas for the moment). We use the IEA SDS scenario with a 2050 horizon.

13.7 CC. Indicate whether a range of climate scenarios is used.

Indicate the climate scenarios the organisation uses.
Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other
Other
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

other description (1)

          Medecine of tomorrow (medical innovation, robotics, research against endemic disease, connected care, at-home care)
        

other description (2)

          Lifestyle transition (production & consumption changing patterns)
        

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

Specify the AUM invested in low carbon and climate resilient portfolios, funds, strategies or asset classes.

Total AUM
trillions billions millions thousands hundreds
Currency
Assets in USD
trillions billions millions thousands hundreds

Specify the framework or taxonomy used.

Both our Impact Investing fund and our SRI Global Equity funds target low-carbon investments with 2 different strategies:

- DNCA Invest Beyond Semperosa only invests in companies that generate positive environmental or social impacts, i.e. companies that manage well their climate risks (assessed through our ESG ABA model) while have a positioning on the Sustainable Transition (about half of the portfolio is positioned specifically on the ecological transition). The carbon footprint of Semperosa is rather low compared to similar Euro Equity funds, standing below 100t CO2/M€ invested.

- DNCA Invest Beyond Global Leaders only invests in companies in sectors that face limited climate risks and are positioned on providing solutions to the transition. The fund invests in 4 main investments themes: healthcare, demographics, technology, digitization. The carbon footprint of this fund is very low, below 25t CO2/M€ invested

We are in the process of calculating the green share in each company we invest in (basically calculating the exposure to the ecological transition as % of revenues), but this process will be formalised in 2019.

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

14.5. Additional information [Optional]

A comprehensive climate policy summarising all these elements will be published in H1 2019.

We already publish on a quarterly basis a set of climate indicators on our 6 SRI funds including: carbon footprint, carbon intensity, brown share, coal share and the top ecological transition picks.


SG 14 CC.

14.6 CC. Please provide further details on these key metric(s) used to assess climate related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Climate-related targets
          
        
          
        
          
        
Weighted average carbon intensity
          We monitor the carbon intensity of our portfolio to track progress on lowering the carbon content of our investments
        
          t CO2e/ M€ revenues
        
          We divide the direct emissions of the company by its revenues. We use data from MSCI
        
Carbon footprint (scope 1 and 2)
          Assessing the companies' carbon footprint over time to assess whether they meet their objectives and are aligned on the carbon reduction trajectory of their industry and/or country
        
          t CO2e
        
          We systematically report the carbon footprint of companies in our ABA ESG analysis tool. We use the company's disclosure, which on a European scope, is quite reliable
        
Portfolio carbon footprint
          Assessing the carbon content of our portfolios over time and against benchmark or peers
        
          t CO2e/€M invested
        
          We report the carbon footprint of all our SRI portfolios (monthly) and of all our portfolios > 500M€ AUM (annual)
        
Total carbon emissions
          For some portfolios, we calculate the overall carbon footprint, as it is asked by clients. However, we prefer relative metrics, as it enables comparison and to monitor progress
        
          t CO2e
        
          We use data from MSCI
        
Carbon intensity
          We monitor the carbon intensity of our portfolio to track progress on lowering the carbon content of our investments
        
          t CO2/ M€ revenues
        
          We divide the direct emissions of the company by its revenues
        
Exposure to carbon-related assets
          For all our SRI funds, we monitor the "brown share" of portfolios, i.e. investments in fossil fuel energy producers
        
          % sales
        
          We calculate how much revenues companies derive from the extraction of coal, oil, gas and/or from the production of electricity from coal
        

14.7 CC. Describe in further detail the key targets.

Target type
Time Frame
Description
Attachments
          Yearly
        
          We have set internal carbon intensity targets for our Infrastructure SRI fund (which is quite carbon intensive) to have a better carbon intensity than its benchmark. We also monitor in each of the macro sectors invested that the overall carbon intensity is better in the portfolio v. sector (no target on this though). We plan to make this commitment public in H1 2019 with the dedicated climate report on the Infra fund
        

          
        
          
        

          
        
          
        

          
        
          
        

          
        
          
        

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risks management processes for identifying, assessing, and managing climate-related risks.

Please describe

At the moment, we do not have the resources in the risk management team to monitor climate-related risk in a systematic way. Climate risk management is done by the RI team directly, and we mitigate climate risks through our investment decisions. The RI team has identified in each sector the relevant climate-related risks and has defined a set of indicators to monitor these risks. Companies with the highest climate related risks in carbon intensive sector are excluded from our SRI Funds (as generally they do not pass the 4/10 threshold if they face severe climate risks without any mitigating actions).

14.9 CC. Indicate whether the organisation undertakes active ownership activities to encourage TCFD adoption.

Please describe

We encourage companies in sectors facing high climate risks to provide enhanced climate disclosure. We often suggest the TCFD as a framework. 

But we don't have a structured engagement strategy on the TCFD in itself.


SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

2 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

Asset class invested

0.5 % of AUM
0.15 % of AUM

Brief description and measures of investment

% of revenues for each company that have a direct activity link to the topic and a demonstrated positive impact. We are in the process of developing impact metrics.

Asset class invested

0.1 % of AUM

Brief description and measures of investment

% of revenues for each company that have a direct activity link to the topic and a demonstrated positive impact. We are in the process of developing impact metrics.

Asset class invested

0.05 % of AUM

Brief description and measures of investment

% of revenues for each company that have a direct activity link to the topic and a demonstrated positive impact. We are in the process of developing impact metrics.

Asset class invested

0.05 % of AUM

Brief description and measures of investment

% of revenues for each company that have a direct activity link to the topic and a demonstrated positive impact. We are in the process of developing impact metrics.

Asset class invested

0.1 % of AUM
0.15 % of AUM

Brief description and measures of investment

% of revenues for each company that have a direct activity link to the topic and a demonstrated positive impact. 

Asset class invested

0.5 % of AUM
0.15 % of AUM

Brief description and measures of investment

% of revenues for each company that have a direct activity link to the topic and a demonstrated positive impact. We are in the process of developing impact metrics.

Asset class invested

0.1 % of AUM

Brief description and measures of investment

% of revenues for each company that have a direct activity link to the topic and a demonstrated positive impact. We are in the process of developing impact metrics.

          Waste recovery, access to connectivity, bottom of the pyramid
        

Asset class invested

0.10 % of AUM
0.05 % of AUM

Brief description and measures of investment

% of revenues for each company that have a direct activity link to the topic and a demonstrated positive impact. We are in the process fo developing impact metrics.

15.4. Please attach any supporting information you wish to include. [OPTIONAL]



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