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Sycomore Asset Management

PRI reporting framework 2020

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Outputs and outcomes

LEA 09. Number of companies engaged with, intensity of engagement and effort

Indicate the proportion of companies in your listed equities portfolio with which your organisation engaged during the reporting year.
We did not complete any engagements in the reporting year.

Number of companies engaged

(avoid double counting, see explanatory notes)

Proportion of companies engaged with, out of total listed equities portfolio

Individual / Internal staff engagements

86
21

Collaborative engagements

42
10

09.2. Indicate the breakdown of engagements conducted within the reporting year by the number of interactions (including interactions made on your behalf).

No. of interactions with a company
% of engagements
One interaction
2 to 3 interactions
More than 3 interactions
Total
100%

09.3. Indicate the percentage of your collaborative engagements in which you were the leading organisation during the reporting year.

Type of engagement

% leading role
  Collaborative engagements

09.5. Additional information. [Optional]

Regarding the number of interactions: most engagement activities occur over several years. Typically, engagements asks are formulated during an initial meeting/call and followed up by email and/or in the framework of our regular dialogue with the company. Successful engagement activities usually require several interactions before reaching their objective, but these do not necessarily occur over one reporting year. 

 

 


LEA 10. Engagement methods

10.1. Indicate which of the following your engagement involved.

10.2. Additional information. [Optional]


LEA 11. Examples of ESG engagements

11.1. Provide examples of the engagements that your organisation or your service provider carried out during the reporting year.

ESG Topic
Diversity
Conducted by
Objectives

WOMEN IN LEADERSHIP

Despite the recent rise of the share of women on boards of directors across Europe, encouraged by several local regulations, the promotion of women in executive management remains a challenge and a significant gap still exists in most companies between the proportion of women in management and women in staff.

Having identified this topic as a key long-term performance driver, we have initiated a dialogue with companies with 3 objectives:

1. Share the importance that we place on the topic as investors

2. Identify best practices and potential challenges faced by companies

3. Encourage the adoption of best practices

Scope and Process

Scope: We have selected companies depending on their sector, geography, size and degree of maturity on the topic in order to examine a broad range of practices and performance. 

Process: During the dedicated meetings/calls held with each company, we seek to get deeper insight into the companie's approach along the five following dimensions: Governance, Strategy, Measurement and Monitoring, Actions, Disclosure. We also share best practices from most advanced companies and formulate company-specific engagement asks accordingly. 

Status: The engagement was launched in October 2018. In January 2020, Sycomore published a report outlining the outcome, key takeaways from the engagement and next steps:
https://www.sycomore-am.com/files/R/a/5e6109b6-Rapport_dialogue_engagement_UK.pdf
Since 2018, we have: 
- made recommendations for improvement to 33 companies specifically on gender equality at work. 
- conducted 15 meetings dedicated to the issue 

Outcomes: The engagement meetings enabled Sycomore to get a deeper understanding of companies' actions and challenges encountered. Moreover, we have noted that a significant number of companies have made some headway since our first discussions. At end 2019, progress was witnessed on 48% of the recommendations made in 2018.  

Outcomes
ESG Topic
Company leadership issues
Conducted by
Objectives

CO-FILING OF 2 SHAREHOLDER PROPOSALS TO ELECT INDEPENDENT BOARD MEMBERS 

In the context of the governance crisis experienced by EssilorLuxottica following the combination of the two groups, which resulted in March 2019 in the filing of an arbitration request with the International Chamber of Commerce by Delfin (holding of Luxottica’s founder Del Vecchio), Sycomore AM co-filed with 6 other international investors two shareholder proposals at the shareholders meeting held on 16 May 2019.  The objective was to elect 2 new independent board members, Wendy Lane and Jesper Brandgaard, in order for them to represent minority shareholders and contribute to the resolution of the crisis between the two parties. Both nominees had strong governance, strategic and financial experience and expressed their interest in helping the group overcome the govenance blockage.

 

Scope and Process

Process: co-filed 2 shareholder proposals at the AGM held on 16 May 2019

Outcomes : both resolutions received high support rates, respectively 43.7% and 35% of votes in favour, demonstrating very high support from minority shareholders (considering that Delfin, which held 31% of voting rights and Valoptec (Essilor's shareholder employees and retirees holding), which held 4.3% of voting rights did not support the resolution). Even though those resolutions were not adopted, they enabled minority shareholders to send a strong and unified message to the group, expressing their concern over the risk that the governance crisis represented for the sucess of the combination, the pursuit of the group's mission and its value creation potential for all stakeholders. Those proposals and the significant echo they had contributed to both parties announcing a settlement agreement a few days before the AGM on 13 May, including changes in the governance to overcome the crisis as well as the termination of all claims and legal proceedings.

Outcomes
ESG Topic
Aggressive tax planning
Conducted by
Objectives

PRI-LEAD COLLABORATIVE ENGAGEMENT ON TAX RESPONSIBILITY

Key objectives defined by the group:

- Clarify investors’ expectations around corporate tax planning 
- Encourage the development of responsible corporate tax strategies and relevant implementation
- Improve company scores across the three pillars of tax policy, governance and risk management, and tax reporting
- Identify existing best practices 
- Identify potential barriers to disclosure

 

 

Scope and Process

Scope: 41 target companies in the healthcare and IT sectors 

Process: calls/meetings 

Status: An outcome report was published in March 2020: https://www.unpri.org/download?ac=10142
Among the 41 companies contacted in this initiative, 33 responded to investor requests for discussions on tax transparency. 

Outcomes : Over the engagement period, the group did see some improvements in disclosure among targeted companies, especially through the publication of tax policies and public commitment to tax responsibility - which was one of the key engagement asks. However, most companies exluded the possibility of providing more country-by-country information, which shows the need for evolving disclosure standards and regulation to achieve progress in this regard. 
Both companies engaged by Sycomore as lead investor were receptive to the engagement, potentially due to existing dialogue. Following the engagement, one of them added to its annual report a section dedicated to tax responsibility outlining its tax strategy and its commitment not to engage in aggressive tax practices, which was one of the engagement ask formulated. We witness no significant progress on the engagement asks communicated to the other company to date. We will continue to engage on the topic with both companies through our individual dialogue with them.

 

Outcomes
ESG Topic
Health and Safety|Sustainability reporting|Other

specify

          
        
Conducted by
Objectives

TRANSPARENCY ON QUALITY OF CARE AT A FRENCH CARE COMPANY (SENIOR CARE AND CLINICS)

Key objectives: 
- Improve measurement and reporting on quality of care and working conditions (which are highly correlated) in order to help restore public confidence in the sector following several incidents and negative press coverage
- Integrate those KPIs to managers' remuneration schemes
- Increase the number of board members bringing expertise on quality of care and the sector's social challenges (high turnover, absenteeism and incident frequency rates due to difficult working conditions and high psychosocial risks)



 

 

Scope and Process

Process: Since 2018, we held 10 meetings dedicated to ESG issues with the company (5 meetings / year) including one on-site visit, with a specific focus on quality of care and human capital. In addition to our usual interlocutors from the Investor Relations, CSR team and the Chief Financial Officer, we had meetings with the Chairman of the board, the Head of Human Resources, the Chief Medical, Ethics & Quality Officer and the Head of a Business Unit. 

Outcomes: Those meetings enabled us to deepen our understanding of the challenges the company is facing (both sector related and company specific) and its strategy and actions to address them. In 2019, we witnessed progress on the governance of those issues (both in terms of measurement and integration to remunerations) and the clarity of the company's strategy in this regard. We also made several suggestions based on best practices observed at other healthcare companies in order to improve reporting and quality and social performance. We will continue engaging in 2020 as this will be a crucial year to monitor how the different actions initiated by the company start delivering measurable results.

 

 

Outcomes
ESG Topic
Other

specify

          
        
Conducted by
Objectives

FAIRR-LEAD SUSTAINABLE PROTEIN ENGAGEMENT WITH THE FOOD INDUSTRY

In 2017 Sycomore AM joined the FAIRR Initiative "Farm Animal Investment Risk & Return".
The objective of the sustainable protein collaborative engagement is to encourage the world’s largest food companies to develop a global, evidence-based approach to diversify protein sources away from an over-reliance on animal proteins. The engagement asks 25 global food companies to diversify their protein sources to drive growth, increase profitability, reduce risk exposure, and improve their ability to compete and innovate in a resource-constrained world.  Currently, Phase 4 of the engagement is supported by 88 institutional investors representing over $13.1 trillion in combined assets.

 

 

 

Scope and Process

Scope: 25 global food companies 

Process: calls / meetings 

Outcomes: As lead investor for the engagement with an Irish ingredient and food company, Sycomore AM organised with FAIRR a first call with the company in 2019. Despite being well positionned through its Ingredients division (80% of revenues) to contribute to the growth of the plant-based food market by offering a wide range of plant-based ingredients to its B2B clients, the dynamic is less favourable in its Food segment (20% of revenues), through which the company mostly produces milk and meat-based B2C products. 

During this call, we asked the company to :
- set and communicate on targets to increase offer of alternative protein products
- as part of the strategy on agricultural sourcing and alternative protein portfolios, investigate and integrate the following dimensions: scope 3 emissions, scope 4 or avoided emissions, food waste, nutritional profile of plant-based products

We will follow up on the company's progress on theses asks as part of our ongoing individual dialogue. 

 

Outcomes
ESG Topic
Executive Remuneration|General ESG
Conducted by
Objectives

INTEGRATION OF ESG CRITERIA TO EXECUTIVE REMUNERATION

In 2019 we continued to advocate for the integration of ESG criteria to executive remuneration schemes. With those becoming increasingly common, we have paid particular attention to their degree of precision, measurability, ambition, and relevance with regards to the company's ESG risk and opportunities.

Scope and Process

Scope: Since 2018, Sycomore engaged 24 companies of its universe on extra-financial criteria in executive remuneration. Asks were either to include such criteria or to enhance clarity or measurability for those already in place.

Process: On an ongoing basis, during pre-AGM dialogue or regular meetings

Status: We keep on tracking progress on thoses asks as part of our ongoing dialogue with those companies. In 2019, we noted some progress on improvement areas communicated to companies in 2018. For example, we engaged with an Irish packaging company ahead of its AGM in 2018 because the safety performance criteria included in the CEO's remuneration scheme did not take into account fatalities but only the incident frequency rate, thus enabling significant payout on this criteria in a year were facilities were recorded (which was the case in 2017). In 2019, the company changed the criteria to include a more sophisticated one (the Total Recordable Injury Rate), which includes fatalities. 

Outcomes

11.2. Additional information. [Optional]


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