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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 » (C) Implementation: Integration of ESG factors

(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the ESG factors you systematically research as part of your investment analysis and the proportion of actively managed listed equity portfolios that is impacted by this analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

As explained previously, our proprietary ESG model looks at 4 pillars of corporate responsibility: governance, environment, labour and society.

In each of these pillars, we have identified a set of criteria that we systematically assess for each company (with an overall importance in the final ESG rating that varies depending on the sector and the company's specifics that affect its risk exposure). Here is the list of the criteria we assess for each of the 4 Responsibility pillars:

Governance

  • Quality of the Board and committees
  • Quality of the management
  • Remuneration policy
  • Respect of shareholders' rights
  • Accounting risks
  • Quality of financial communication

Environment

  • Management of environmental issues
  • regulation and certification
  • Climate and energy policy
  • Impact on biodiversity and externalities

Labour

  • Corporate culture and management of human resources
  • labour relations and working conditions
  • Attractiveness and recruiting
  • Training and career development
  • Health & safety
  • Promotion of diversity

Society & external stakeholders

  • Quality, safety and traceability of products
  • Innovation capacity & pricing power
  • Customer satisfaction & competitiveness
  • Management of the supply chain
  • Tax strategy
  • Respect of local communities and human rights
  • Data management & privacy

All these criteria are systematically assessed, but some can be deactivated in certain sectors if they are not relevant.

 


LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on a robust analysis.

09.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your integration strategy.

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information.[Optional]

We conduct all our ESG analysis internally based on our proprietary ESG assessment model. Our analysis is supplemented by regular meetings with top management, sustainability managers, IR and site vists. We are confident that this is the best set-up to ensure that we have robust analysis across our investment universe and that we take into account company's business models and specifics. We backtest on an annual basis all of our ESG data, to evaluate which ones are the most materials and to make our ESG model evolve accordingly.


LEI 10. Aspects of analysis ESG information is integrated into

New selection options have been added to this indicator. Please review your prefilled responses carefully.

10.1. Indicate which aspects of investment analysis you integrate material ESG information into.

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

10.2. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

10.3. Describe how you integrate ESG information into portfolio weighting.

The weight in portfolios depends on the fundamental quality, valuation (update) and liquidity. The ESG analysis has a direct impact on the fundamental quality of the company and is translated into valuation through our adjusted risk premium mechanism. In that sense, ESG analysis impact the financial evaluation of every stock and is thus totally incorporated in portfolio construction. 

10.4. Describe the methods you have used to adjust the income forecast / valuation tool

The ABA model (internal ESG analysis tool) results in a matrix that combines Corporate Responsibility Risks (High risk, medium risk, moderate risk, low risk and managed risk) and Sustainable Transition Exposure (none, low, trend, major and pure player). This combination results in 4 levels of recommendation and each level has a impact on the risk premium rate :

1- Conviction: -20% on the risk premium rate

2- Strong opportunity: -10% on the risk premium rate

3- Opportunity: -5% on the risk premium rate

4- Weakness: +10% on the risk premium rate

10.6. Additional information. [OPTIONAL]


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