Sycomore AM identifies climate change and environmental challenges as having a significant impact on investments value. Sycomore AM has publicly disclosed its Natural Capital Strategy that provides an overview of the strategy in place to identify and manage material climate-risks and opportunities.
Our process for climate-related risks is integrated into overall risk management and in-depth assessment of companies that may become a portfolio holding. It is instrumental to our SRI investments strategies and is a key selection criteria for our green investment strategy and investment offering. Monthly and annual reporting include transition risk assessment data and information. Sycomore AM's aggregated NEC has been computed based on holdings. Results are publicly available on the website. The NEC at the entity level fuels reflexion regarding climate risks, future investment allocation and trajectory.
Since 2015, Sycomore AM has invested a great deal of time and resources in improving the way climate issues are integrated to its SPICE analysis model for any kind of activity. Climate is one of the 5 issues systematically reviewed in the Environment pillar. The SPICE analysis model now includes the specificities of article 173 and the recommendations issued by the TCFD, and in particular the following:
- Transition risk assessment or the risks associated with the transition towards a low-carbon economy, including the contribution to the Paris Agreement goals and the long-term environmental objectives and the Alignment and Trajectory i.e. the issuer’s strategic alignment with the 2°objective by 2100 (and 2050 as an intermediary check point): these risks are systematically quantified using our Net Environmental Contribution (NEC) metric (see SG 13 CC for more detailed information) and are then integrated into the Environment pillar;
- Physical risks assessment or the exposure to the physical consequences of global warming: these are monitored in the Environment pillar, under the dedicated section.
The environmental risks and opportunities assessment is part of our SPICE fundamental analysis which directly impacts asset valuation.
Governance and management of climate-related risks are described in the Natural Capital strategy and further details in the SG CC questions. Several key group of people have been instrumental in order to identify the environmental risks and opportunities at different stages of the strategy development and implementation:
- Sycomore AM top management
- Sycomore AM risk team
- Sycomore AM ESG specialists
- Sycomore AM Strategic Environment Committee chaired by Sycomore's Head of Environmental Strategy
- Consulting companies and experts on environment and life cycle assessment
The NEC is also fully integrated within the risk management tools and strategy. The risk team have performed various analysis of performance and risk according to various level of transition risks. Our key metric, NEC, is embedded to all risk management and reporting systems. Portfolio holdings are thereby monitored on a monthly basis.
Investment professionals (portfolio manager and analysts) have been trained on the Environmental pillar and on the NEC methodology consisting in 15 value chain frameworks and one general framework. Risk teams as well as sales people have also been trained on the NEC methodology with accurate level of granularity.