- Overweight/underweight at stock level:
Our internal financial analysis model is based on a "fundamental risk score" to determine a company's risk premium. This "fundamental risk score" ranges from 5 to 1 depending on whether a company creates value and respects its key stakeholders. 5 sub-scores are calculated. One for the company's interaction with Suppliers & Society (S); the second for its People (P); the third for Investors (I), which includes corporate governance; the fourth for its Clients (C); and the fifth for the Environment (E). We thus refer this "fundamental risk score" as the SPICE score of a company. This SPICE score, ranging from 5 to 1, has a direct impact on a company's risk premium and thus on a company's target price. This applies to the entire investment universe.
- Reduce or prioritize the investment universe:
Integrating ESG puts the spotlight on ESG risks and opportunities. As a result, the investment universe for SRI funds is reduced (companies that are too risky are excluded and we aim to favour companies that are part of the solution for a more sustainable future).
- Buy/sell decisions:
Specifically for our SRI funds, there is a permanent controversies watch. Controversies are rated from 0 to 3 according to their severity. When there is a severe controversy (level 3) or when the newsflow is negative, fund managers have to make an active decision whether to keep or divest the company. For SRI funds, a level 3 controversy leads to immediate divestment. When the level of controversy for a company is considered too high, the ESG team can blacklist the company for all fund managers regardless of whether they manage an SRI fund or not.
Analyzing from an ESG perspective our investment universe means also spotting the areas of improvement a company has on ESG factors. Our analysis framework is therefore setting the basis for our engagement. On the voting side, the results of the governance pillar analysis can also influence our voting intentions.