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Sycomore Asset Management

PRI reporting framework 2020

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (A) Implementation: Screening

(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
Corporate (non-financial)
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

04.2. Describe your approach to screening for internally managed active fixed income

Sycomore Next Generation (SNG) launched in 2019 is an SRI-labelled balanced fund. 

SNG's approach consists in filtering the universe for the best SPICE scores (rating above 2.5 out of 5) and selecting stocks and bonds based on 3 themes: 

-Better environment

-Better life

-Better work 

Sycomore Selection Credit (SSC) is Sycomore AM's corporate-bond SRI-labelled fund.

SSC excludes companies that are too risky on 6 key criteria:
1. Environmental risk (upcoming regulations, potential fines, litigation provisions, etc.)
2. Quality of social climate (known social conflicts, abnormally high rates of turnover or absenteeism, etc.)
3. Reputation risk (controversies, activities in highly-sensitive areas or businesses, etc.)
4. Financial communication risk (results vs guidance history, openness and availability to meet with investors, etc.)
5. Accounting risk (independence of auditors, complicated and obscure accounting, etc.)
6. Bondholder risk (aggressive leverage or share buyback, debt financing of dividend, etc.)

The remaining assets invested in corporate bonds integrate ESG criteria but are not SRI-labelled.

Finally, the following exclusion policies apply:
1. Exclusion of all controversial weapons for all investments
In line with the Oslo and Ottawa conventions, Sycomore AM excludes any investment in controversial weapons.
2. Exclusion policy for SRI funds
Please see LEI 04.1.

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process

05.1. Provide examples of how ESG factors are included in your screening criteria.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

The environmental risk criteria, based on physical risks exposure screens out of the investable universe most oil companies, such as Total for example.  

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

We recently declined to buy a bond issued by a Swedish credit management company. This decision was based on the "reputational risk" criteria in the client section of our analysis: we considered the company was exposed to significant risk because of its credit collection practices which were not harmonized across all countries and notably were considered as "agressive" in certain Southern and Eastern European countries. 

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

As the company Wirecard faced serious allegations of accounting fraud, we excluded it from the investable universe. 

05.2. Additional information.


FI 06. Screening - ensuring criteria are met

06.1. Indicate which systems your organisation has to ensure that fund screening criteria are not breached in fixed income investments.

Type of screening
Checks
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

06.2. Additional information. [Optional]


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