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Sycomore Asset Management

PRI reporting framework 2020

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Objectives and strategies

SG 05. RI goals and objectives

05.1. Indicate if and how frequently your organisation sets and reviews objectives for its responsible investment activities.

05.2. Additional information. [Optional]

One of the four strategic priorities of Sycomore AM is to lead on Socially Responsible Investment. In 2018, a "Mission and Sustainable Development Committee" has been created to steer our in-house sustainable development initiatives and bring new projects to life in accordance with our strategy. Within this Committee and with the approval of the executive committee, we have defined targets to fullfill our priorities, including the development of our SRI activities. These targets are continuously tracked and annual reporting is provided in our annual reports "Sycoway as an investor" and "Sycoway as a company". Early 2020, we have decided to integrate our corporate mission to the articles of association and thus strangthen our engagement towards responsible investment: "We invest to build a more sustainable and inclusive economy, and generate positive impacts for all of our stakeholders. Our mission: make investment more human" (see also our press release: https://en.sycomore-am.com/5e20746d-PR_Mission_SRI_January_2020.pdf)  

Moreover, our ESG specialists team meet every two weeks to coordinate development, marketing and portfolio management teams. As a consequence, new objectives can be set and reviewed relatively frequently. Once a year, there is a formal appraisal of the work carried out by the ESG team.


SG 06. Main goals/objectives this year

06.1. List the main responsible investment objectives that your organisation set for the reporting year.

Responsible investment processes

Key performance indicator

          Provide training on our SPICE model to ESG specialist, asset managers and all employees
        

Progress achieved

  • 2 greenflash for all employees dedicated to the Net Environmental Contribution metric and the launched NEC initiative
  • 2 full days of external training on corporate governance and proxy voting for 2 ESG team members
  • Update of the user guide for the internal ESG analysis tool (SPICE)
  • Continuous one-to-one or small group training in-house

Key performance indicator

          Delivery of engagement training to ESG team members and fund managers during one-on-one meetings (practical, informal training)
        

Progress achieved

  • Minimum 10 team members trained on engagement practices during one-on-one meetings with companies
  • The ESG team led an engagement programme on gender diversity within executive committees and top managements: dedicated documentation was prepared by a lead analyst following by an in-person and written briefing to all ESG analysts. This work continued in 2019 and enabled to publish the following report: https://www.sycomore-am.com/Notre-magazine/2020/01/693-Dialogue-et-Engagement-Actionnarial 

Key performance indicator

          Communication of ESG activities within the organisation
        

Progress achieved

  • Internal ad-hoc communications on ESG activities : for example in 2019, we communicated internally on the update of our SRI exclusions policy and its implementation, on the publication of our "Sycoway as an investor" reports for SRI funds as well as funds over 500 millions of AUM, etc.    
  • Sycomore AM's annual conference dedicated to the theme of useful finance in equities with the publication of SRIWay #9 on "Finance with a purpose" (https://en.sycomore-am.com/Our-Magazine/2018/10/577-Responsible-Way-9-Finance-with-a-Purpose)

Key performance indicator

          Take part in engagement actions on specific ESG issues
        

Progress achieved

  • In 2017, we joined the PRI collaborative engagement on tax responsibility which we continued to be actively involved with in 2018 and in 2019 (report available at: https://www.unpri.org/download?ac=10142)
  • In 2018, we joined the Workforce Disclosure Initiative as well as the FAIRR Initiative, a collaborative investor network that raises awareness on the material ESG risks and opportunities caused by intensive livestock production
  • In 2019, we continued an engagement action launched in 2018 on gender diversity within executive committees and top managements reaching approximately 20 companies (report available at: https://www.sycomore-am.com/files/R/a/5e3071ac-Rapport_dialogue_engagement_A4.pdf)
  • In 2019, we joined ClimateAction 100+ 

Key performance indicator

          Improvements to our methodology
        

Progress achieved

  • Continuous improvement of our proprietary environmental impact metric (Net Environmental Contribution®) with the employment of a dedicated trainee and in partnership with ICare&Consult, Quantis and BPSS 
  • Development of our analysis framework aimed at assessing the societal contribution of a company's activities based on their alignement with the UN Sustainable Development Goals: development of sectorial frameworks for the societal contribution of products & services and finalisation of The Good Jobs Rating in partnership with The Good Economy to assess companies contribution to SDG#8 on decent jobs and economic growth 
  • Continuous improvement of our SPICE model (internal analysis framework) : review of the Environment pilar that is now split in 3 sections - Responsibility & Integration, Transition risks, Physical risks; review of the Client pillar to add a criteria dedicated to cybersecurity and digital rights; minor adjustments in other pillars. 
  • Communication of in-depth analysis to the asset management team on major controversy cases (in 2019 an in-depth analysis was performed on the Dieselgate; communication was done on cases affecting Atlantia, Facebook, Fresenius and Boeing)

Financial performance of investments

Key performance indicator

          Incorporate ESG considerations in company analysis to generate alpha
        

Progress achieved

No specific progress on the matter, it is a long-standing goal: ESG factors are embedded within the research conducted on each individual stock and drives our investment decisions. Indeed, all the companies included within our long-only investment universe are analysed on the basis of our fundamental and integrated SPICE research model. Following this analysis process, each company is allocated a rating ranging from 1/5 for the weaker scores to 5/5 for the highest. As part of our company valuation models, this rating has an impact on our calculation of target prices: it adjusts by +/- 40% the risk coefficient (beta) used to calculate the weighted average cost of capital (WACC) and the discount rate for future financial cashflows, thereby impacting the company’s financial valuation. In addition to this integrated research capability, our analyst-fund managers can adapt their key estimates (sales, profitability, tax rate, capex) based on quantifiable metrics covering environmental, social or societal issues. As far as bond funds are concerned, the SPICE rating also provides a foundation for company research, as it reflects their degree of resilience and therefore their ability to pay off debt.

ESG characteristics of investments

Key performance indicator

          ESG criteria for SRI-labelled funds
        

Progress achieved

Beyond the integration of the SPICE rating to the assessment of company target prices, several SRI-labelled funds and SRI mandates apply screenings aimed at selecting companies on the basis of specific “sustainable development” criteria. For example, the Sycomore Happy@Work fund – which focuses on companies that pay considerable attention to their human capital - excludes companies with SPICE ratings under 3 from its investment universe and selects stocks displaying scores of 3 or more on the three criteria that form the People pillar.

Key performance indicator

          Increase our SRI-labelled asset under management
        

Progress achieved

Our SRI-labelled funds represented 51% at the end of 2019 compared to 40% at the end of 2018. We are in a continuous process of identifying new opportunities to develop SRI-labelled funds or convert current funds to the French SRI-label standard. 

In 2019, we launched a new SRI-fund, "Sycomore Next Generation" which selects stocks and bonds based on their ESG performance (companies must comply with the following criteria: “Happy@Work” rating strictly above 3, NEC strictly above 0 and/or a positive societal contribution; countries must have an ESG rating above 2/5).

Other activities

Key performance indicator

          Participation in and support of various RI initiatives and events
        

Progress achieved

  • In 2019, we continued to sponsor the PRI academic prize and the French FIR-PRI prize.
  • We continued our involvement as members of the French SIF (FIR): participation of Bertille Knuckey and Jean-Guillaume Peladan to Board meetings as a Board member and a deputy member, participation to the three commissions on Research, Engagement and Public awarness.
  • We took part in two working groups dedicated to the French SRI label with the French-SIF and the French asset managers association (AFG): these two working groups led to recommandations sent to the French Government. 
  • We became signatories of Climate Action.
  • Bertille Knuckey was named to be part of the Commission on Climate and Sustainable Finance created by the French financial markets authority (AMF) in July 2019.

Key performance indicator

          Training sessions to Independant Financial Advisors
        

Progress achieved

  • We regularly perform training sessions to Independant Financial Advisors on SRI (history of ESG integration, ESG integration methodology, SRI approach of Sycomore AM)
  • We participated to Patrimonia and Actionaria, two major events in France for Independant Financial Advisors
  • We published a guide on manager-guided funds and tailored funds in French: https://www.sycomore-am.com/files/G/U/5d833f2f-GUIDE_FONDS_DEDIES-GESTION_PILOTEE_page___page.pdf

Key performance indicator

          Publication of case studies
        

Progress achieved

  • SRIWay#10 - "Transformation(s), speed up the pace!" with a focus on three companies that have led a transformation within their organisation to better align their business model with societal and environmental challenges: ING, Amer Sports, Orsted.
  • SRIWay#11 on Responsibility in Tech published in 2019 includes interviews by Telefonica, The University of Essex and Wallix Group. https://www.sycomore-am.com/files/L/_/5d822d0c-L_ISR_WAY_by_Sycomore_AM_N_11_La_Tech.pdf
  • Investment case published on Maisons du Monde, a French decor and furnishing distribution company: https://en.sycomore-am.com/Our-Magazine/2019/07/649-Maisons-du-Monde-your-next-lifestyle-partner

Key performance indicator

          Clients meetings and reporting on ESG incorporation
        

Progress achieved

  • As part of call for tenders we regularly use case studies to demonstrate engagement and ESG incorporation to clients
  • As part of dedicated reportings we regularly use case studies to demonstrate engagement and ESG incorporation to clients. More specifically in 2019, we published examples of dialogues within our Sycoway as an investor report (companies covered were: Fnac Darty, Seb, Voltalia, Sanofi, Korian, Beiersdorf) as well as a synthesis of our SPICE analysis of Rockwool. Upon request we also provide clients with a summary of dialogues we engage in or our SPICE analyses.

06.2. Additional information.


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