Our policy for ESG incorporation has been developed with the support of a specialized consulting firm (Sitawi).
Our approach to integrating ESG into listed equity funds that invest in listed companies comprises the following steps:
1. The first step consists of a materiality assessment, where we filter the environmental, social and corporate governance issues relevant to the companies we are analyzing. Themes considered non-relevant or non-material are downgraded.
2. Then, using sectoral ESG assessment questionnaires, we evaluate the main indicators and metrics of the companies, based on public information. The questionnaires were developed using some of the main sustainability standards for company analysis. From these questionnaires, we were also able to identify critical gaps and recurrent ESG controversies, which can be further explored later.
The information to carry out these analyzes comes especially from annual and sustainability reports of companies, providers of financial and sustainability information, direct questions from our analysts to the companies analyzed, as part of our traditional research process, as well as news.
3. In the subsequent stage, we assign an overall score and theme for the companies analyzed, ranging from one to one hundred. This score is a summary of the companies' ESG performance, which allows us to create sectoral and general rankings.
4. Finally, the ESG analysis is integrated into our investment analysis based on the following actions:
• Potential adjustment in the discount rate according to the perception of the responsible analyst;
• Committee discussion and in-depth analysis of ESG topics considered critical;
• Limit on exposure to papers issued by a company with ASG performance in the last quartile;
• Requirement of a higher rate of return for the acquisition of papers from companies with lower performance.