The aim of our approach to integrating ESG is to measure the impact of ESG criteria on financial criteria and therefore on our final recommendations. In our analysis of securities, we concentrate on the “material ESG” criteria, i.e. the criteria having an impact on the financial criteria.
Definition of substantive ESG criteria : Our approach concerning the substantive ESG criteria combines both top-down and bottom-up analysis. We start with a macroeconomic analysis, i.e. with the three transitions that we have identified as having structural significance, and then translate them into a microeconomic approach at the level of the sector and the individual security. This enables us to evaluate whether the company integrates the evolving changes of its ecosystem and to measure the company’s ability to adapt rapidly to new data in its established strategy.
Impact on financial elements : Analysis of these ESG criteria provides an ESG evaluation with 3 ratings (positive, moderate and negative), together with an outlook. The analyst then defines which financial factors are impacted by these criteria, thereby providing an understanding of how the analysis of these extrafinancial factors will be integrated in the overall recommendation concerning the investment security concerned.
Qualitative approach : E, S and G qualitative analysis is therefore integrated as a part of the fundamental analysis of an issuer.
The research 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.The choices of the relevant indicators are made by ESG analysts, and are reviewed regularly.