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Groupama Asset Management

PRI reporting framework 2020

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ESG incorporation in actively managed listed equities

Implementation processes

LEI 01. Percentage of each incorporation strategy

01.1. Indicate which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities; and the breakdown of your actively managed listed equities by strategy or combination of strategies.

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied — you may estimate +/- 5%
100 %
Total actively managed listed equities 200%

01.2. Describe your organisation’s approach to ESG incorporation and the reasons for choosing the particular strategy/strategies.

Our approach aims to incorporate ESG in every asset class (equity, credit and sovereign bonds). This conviction-based style of investment management requires to understand the transformations taking place in our society, prompt and effective identification of risks and rapid detection of the new opportunities for generating added value. We believe that three transitions are profoundly transforming today's business models and that ESG provides a key to analyse their impacts on corporates :

  • Energy and environmental transition
  • Digital transition
  • Demographic transition

With the combination of the ESG and financial roles in the Research team, the same analyst is undertaking the entire investment analysis.

Our ESG integration policy involves formalizing the consideration of ESG criteria in investment decisions, depending on the materiality of the issues at stake (with respect to the issuer and the industry) and the investment process being considered. In this way, ESG criteria reinforce key decisions and help to identify specific risks and opportunities.

The RI policy of Groupama AM meets then three objectives:

- Raising awareness among fund managers and encourage them to take into account ESG factors into their investment choices

- Communicating on RI matters among all services of Groupama AM (marketing, sales, support, advertising and PR…) in order to promote RI among institutional and private clients

- Working with clients and offer them a service that answers their demand for a sustainable development approach in the management of their assets.

01.3. If assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]

Our methodology consists on the merger of two complementary approaches:

A quantitative approach: an ESG ranking methodology, by sector, to evaluate all companies of the investment universe (scoring tables)
A qualitative approach: a thorough extra-financial analysis made by our analysts. Conclusions of these analysis are integrated to the fundamental analysis, gathering both financial and extra-financial analysis. Furthermore, Groupama AM excludes companies facing several material and recurrent controversies on ESG issues. We receive specific studies on those issues from external research providers and we complete it by in-house qualitative analysis

Groupama AM can thus provide three dedicated lists related to the specific ESG issues:

  • List of Major ESG risks: a list of the highest-risk issuers in terms of ESG. These companies are identified based on two sources: controversial companies flagged by our provider and confirmed with an internal analysis, and companies with very low governance standards according to our internal analysis.
  • List of ESG Opportunities: in 2019, we added a list of the most advanced issuers in terms of ESG issues. The companies on this list are identified by analysts based on their internal analysis. The choice must be justified in a dedicated file.
  • Exit coal list

LEI 02. Type of ESG information used in investment decision

02.1. Indicate what ESG information you use in your ESG incorporation strategies and who provides this information.

Type of ESG information

Indicate who provides this information  

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

02.2. Indicate whether you incentivise brokers to provide ESG research.

02.3. Describe how you incentivise brokers.

Our broker review includes an ESG component.

02.4. Additional information. [Optional]


LEI 03. Information from engagement and/or voting used in investment decision-making

03.1. Indicate whether your organisation has a process through which information derived from ESG engagement and/or (proxy) voting activities is made available for use in investment decision-making.

03.2. Additional information. [Optional]

Our voting policy and engagement policy are updated annually and presented to all fund managers and analysts. In addition, these documents are made available to all staff and are published on our website.


(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

  • Material and recurrent controversies on ESG issues : all portfolios;
  • Coal mining,coal-related energy production : all portfolios
  • Tobacco, Gambling, Weapons : thematic fund 

Screened by

Description

Scores ranking + qualitative review : see explanations below

Screened by

          International and National Conventions
        

Description

With effect from May 2009, Groupama AM has established a policy that strictly excludes investment in companies known to be implicated in activities relating to controversial weapons. The activities concerned are the production, storage, distribution and sale of cluster bombs, as defined by the Oslo Treaty of 2008, anti-personnel mines, as defined by the Ottowa Convention of 1997 and depleted uranium weapons, which are banned by certain national legislations.

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

Negative screening

Main ESG Risks : Groupama AM excludes, from ISR funds, companies facing several material and recurring controversies on ESG issues and companies with very low governance standards according to our internal analysis. We receive specifics researches on those issues from external researches providers and we complete it by in-house qualitative analysis. The score of companies identified in Main ESG risks is downgraded to 0 in our internal tool "Notes ESG".

Carbon Opt-out policy : progressive disinvestment of companies for which more than 30% of Revenue or Production mix is linked to coal, and no new investment in companies for which oil sands represents more than 15% of their reserves.

Thematic Fund: exclusion of all companies involved in tobacco products and gambling in addition to the exclusions detailed above

Positive screening

Each stock is screened according to E, S and G indicators. Governance analysis represents for all sectors 33% of the final rating, whereas E and S pillar's weight depends on the sector. For example, for the energy sector social indicators represents 30% of the final rating and environment one's 37%. In the social pillar, the main indicators analysed are health and safety, human capital (management of skills) and corruption. In the environmental pillar it is GHG emissions, prevention of accidental pollution, management of resources, low-carbon strategy.

The choices of the relevant indicators and their weighting in the final rating are made by ESG analysts, and are reviewed regularly (usually every 18 months).

Then, through the quantitative approach, the valuation grid is completed quarterly thanks to an in-house developed tool "NotesESG" with ESG rating agencies research datas : Vigeo as for E&S pillars, MSCI /GMI (GovernanceMetrics International as for G pillar.

Each company is rated on a scale from 0 to 100. Each sector of the universe is then broken down in 5 quintiles (quintile 1 is composed of the 20% best rated companies within each sector and quintile 5 is composed of the 20% worst rated companies within each sector).

In 2019, we added a list of the most advanced issuers in terms of ESG issues. The companies on this list are identified by analysts based on their internal analysis. The choice must be justified in a dedicated file. The score of those companies is then upgraded to 100.

The clients are regularly informed through quarterly reporting's about all changes made.

Norm-based screening

Groupama AM excludes all investments in companies that have activities in the personal mines and/or cluster bomb businesses and/or depleted uranium weapons..

 


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure ESG 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.

05.3. 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]


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 : An automated system prevent investment managers from investing in excluded stocks at each order placed.

It is therefore not possible for a fund manager to buy a stock not eligible. When there is a change in the ratings, and a stock become non eligible, the fund manager has two three months to sell the stock. For that, there is a post-trade check process.

Every month, there is post trade control for SRI funds, through the ESG reporting. Post-trade checks are made at each net asset value. There is no specific reporting at the level of the risk control team. If an overshoot is found, an alert is sent and the escalation procedure is initiated. 

06.3. Additional information. [Optional]


(B) Implementation: Thematic

LEI 07. Types of sustainability thematic funds/mandates

07.1. Indicate the type of sustainability thematic funds or mandates your organisation manages.

07.2. Describe your organisation’s processes relating to sustainability themed funds. [Optional]

The fund is invested in 2 themes : 

  • environment 
  • sustainable consumption and health

and 4 subthemes : 

  • energetic transition
  • environment impact
  • food production and sustainable consumption
  • improvement of living conditions

All these themes are piloted by 9 SDGs. The companies are selected on the basis of a quantitative screening linked to the identified themes, then an analysis of the business model is carried out to determine whether the activity of the targeted companies is linked to at least one SDG. Several key indicators, linked to the themes, are used to assess the ESG impacts of the fund. Finally, a qualitative analysis, carried out by a specialist analyst, is used to validate/invalidate the selection of companies in the portfolio.

 


(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the proportion of actively managed listed equity portfolios where E, S and G factors are systematically researched as part of your investment analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

Starting in 2003, Groupama AM developed an internal research methodology that systematically integrates an ESG approach into financial analysis.

In 2016 we have developed a proprietary and evolutive tool. This tool, called "NotesESG", collects all ESG data sent by ESG providers and then calculate internal ESG rating using our in-house ESG methodology. This tool is used by both fund managers and analysts.

In 2019 we worked :

1/ On extension of the coverage of ESG data and environmental data to worldwide

2/ On the implementation of new ESG quantitative ratings

2/ To continue to improve the calculation method

The proprietary tools combine ESG ratings and research are available to all Groupama AM portfolio managers . These tools - NotesESG© and AvisRecherche© display the results of ESG analyses by sector and by value.


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 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.

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

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]

On the basis of the data from our ESG suppliers, we establish tables of quantitative data as a function of the ESG factors that we have determined internally from our qualitative analysis. So, for example, for each sector, we select and weight the criteria that we consider most relevant and substantial. This approach provides us with quantitative ratings over broad investment universes.  The qualitative and quantitative ESG data are made available to all Groupama AM portfolio managers . For example, managers are provided with the proprietary rating tools “NotesESG©” and “AvisRecherche©”, which enable them to view the macroeconomic fundamental research studies simultaneously, together with the E, S and G ratings. These tools provide input to our management tool SimCorpo Dimension. 


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.

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

With our fundamental financial and ESG analysis, we aim to identify the players that are best positioned or most at risk with regard to the three transitions – digital, demographic and environmental – that are currently causing upheaval in our societies.

Our approach is based on research that culminates in a single combined financial and ESG recommendation, with the identification of  :

1/the highest-risk issuers in terms of ESG, by means of the List of Major ESG Risks

2/the most advanced issuers in terms of ESG issues

Issuers are analysed according to six financial criteria and the three E, S and G pillars. Each ESG criteria leads to a rating from "Positive" to "Negative" opinion. E, S and G qualitative analysis is therefore integrated as a part of the fundamental analysis of an issuer. 

10.6. Additional information. [OPTIONAL]


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