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Lombard Odier

PRI reporting framework 2020

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You are in Indirect – Manager Selection, Appointment and Monitoring » Outputs and outcomes

Outputs and outcomes

SAM 08. Percentage of externally managed assets managed by PRI signatories

08.1. Describe how you ensure that best RI practice is applied to managing your assets

Measures

          For the 27 managers on our PrivilEdge platform, we assess managers and strategies using out own proprietary sustainability scoring methodology and encourage them to improve their scoring over time (see SAM 08.2 for additional information). We also introduced an annual questionnaire in 2019 to help us assess the evolution of managers’ sustainable investment practices over time (this is covered in more detail in SAM 09).
        

08.2. Additional information. [Optional]

Our ESG Solutions team analyses 115 data points using our proprietary 'CAR' methodology (Consciousness, Action, Results), which enables us to differentiate between the 'talkers', 'doers', and 'achievers', and identify companies that are making measurable progress in the transition to more sustainable business practices. We also look at the same data points to assess alignment of business practices with the 17 UN Sustainable Development Goals. Our analysis of business practices also looks at companies exposure to controversies, which occur when companies breach internationally accepted standards or norms as defined by the United Nations Global Compact Principles. In our view, controversies could have a major impact on a company’s reputation and lead to lower market performance. Our assessment of business practices also looks at certain impact metrics, including companies' carbon and water intensity.

A standardized quarterly sustainability report is produced for externally managed funds in our PrivilEdge range across asset classes, and on-demand for some other funds. This reporting provides transparency on RI criteria (long-term and short-term metrics, impact metrics) and compares results vs previous reporting periods. 

The current SRI report provides

  • Aggregated ESG scores and details for each constituent, comparing to benchmark.
  • Exposure to ethically critical business (controversial weapons, child labour,…)
  • Impact measures (carbon footprint, water consumption) with attribution of changes due to asset selection or sector allocation
  • Exposure to pure green sectors (renewable energy, green transportation and waste management) and fossil energy sectors, i.e., “green” and “brown” share
  • Exposure to electricity production, energy mix (renewables, fossil fuels, nuclear) and comparison to the Paris Climate conference targets for 2030 and 2050 to measure the transitioning effort.

This reporting is then provided to our clients, but also the manager in question. On a regular basis we will review these reports to ensure there are no significant issues or breaches of exclusions etc. We will discuss these directly with the manager as and when any issues arise. Longer-term, we monitor managers’ progress over time and would expect to see them improve their scoring over time. This analysis forms part of our standard manager review and monitoring process.


SAM 09. Examples of ESG issues in selection, appointment and monitoring processes

09.1. Provide examples of how ESG issues have been addressed in the manager selection, appointment and/or monitoring process for your organisation during the reporting year.

Topic or issue
          Sustainability assesment of the strategy and investment managers
        
Conducted by
Asset class
Scope and process

All 27 managers included in our PrivilEdge platform across all selected asset classes:

We conducted a thorough review of our external segregated mandates to assess their sustainability across Listed Equities, Fixed Income SSA, Fixed Income – corporate (financial), Fixed Income – corporate (non-financial), and Convertible Bonds. We sent our fund managers an extensive questionnaire regarding their sustainable investment approach and strategies. We then evaluated both the strategy and the asset manager at the firm level.

Outcomes

Following this review we classified our external partners in three internal categories: sustainability non-compliant, sustainability compliant, and leaders. Managers identified as sustainability non-compliant would no longer be able to be selected for our highly sustainable discretionary mandates.

09.2. Additional information.


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