RESPONSIBLE INVESTMENT POLICY - DNCA Finance d... · Responsible Investment Policy • October 2018...

R E S P O N S I B L EI N V E S T M E N T

P O L I C Y

OCTOBER 2018

1 Our responsible investment philosophy p. 2 —�Principles—�Our values—�Our conviction

2 Corporate responsibility p. 3—�Has corporate responsibility become a dominant trend?—�Evaluating risks for all sectors

3 Sustainable economic transition p. 4—�From sustainable development to sustainable economic transition—�Identifying investment opportunities

4 Our ESG analysis model p. 5—�A proprietary rating model: ABA, Above & Beyond Analysis—�Corporate responsibility—�Sustainable transition—�Disputes—�Dialogue and engagement—�Summary

5 Responsible investment and management policy p. 11—�Incorporation of extra-fi nancial criteria—�SRI label and funds

6 Governance and transparency p. 16—�An integrated expertise department—�A cross-functional ESG committee—�External data—�Regulatory reporting and publications—�Impact reporting

7 Our active engagement in SRI p. 19—�Our engagement—�Our ambition

S U M M A R Y

Responsible Investment Policy • October 2018

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O U R R E S P O N S I B L E I N V E S T M E N T P H I L O S O P H Y

Principles“Socially responsible investment (SRI) is a multi-faceted concept that is constantly evolving”(1) and involves a combination of economic and social requirements. SRI saw a major turning point in the 90s, when it widened its scope from predominantly ethical considerations to include the concept of sustainable development. As a result, extra-fi nancial criteria, ESG (Environment, Social and Governance), have been gradually incorporated into fi nancial management, moving from an informal framework to a statutory one.

Our valuesDNCA Finance is a management company founded in 2000 by asset management experts specialising in private and institutional investors. Over the years, the founders have put together a team of experienced and well-regarded asset managers and developed a simple, clear and successful range of funds focused on conviction management.

Our investment choices are the result of deep and fundamental analysis of companies. Before investing, we study a security from all angles to select bonds and shares o� ering the best potential performance for the risk taken.

Of course, our analysis and our continuous dialogue with companies are marked by social concerns. Our investments are fi rmly focused on long-term performance that considers all the risks and challenges that companies face. This is why governance has always been a key criterion whereas these days it is unthinkable to invest in a company without gaining assurances as to the quality of its managers, the independence of its control bodies and its respect for its minority shareholders. We have gradually incorporated social and environmental concerns into our approach, as we are convinced that they are relevant as we pursue our business: to select tomorrow’s winners.

Alongside fi nancial analysis and value creators, ESG criteria have been logically incorporated into DNCA’s management.

Our convictionIn 2017, DNCA Finance signed the United Nations Principles for Responsible Investment (UN PRI) to give a structured framework to our approach and to take part in industry discussions on the subject as an active long-term investor. This step has grounded our conviction as responsible asset managers in relation to our investor clients and to the companies we fi nance. We aim to o� er a di� erentiating and innovative approach that evolves to meet new challenges as they arise. Therefore, our Responsible Investment policy distinguishes two concepts: Corporate Social Responsibility (CSR) and Sustainable Economic Transition. We evaluate these two aspects based on in-depth analysis of economic and social trends as well as on recognised expertise in SRI. In the rest of this document, we present in detail how these two concepts emerged and our approach in response to them in the context of SRI.

1

(1)�ISR: Investissement Responsable (SRI: Responsible Investment), Hors Collection, Ellipse 2014.


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C O R P O R A T E R E S P O N S I B I L I T Y

Has corporate responsibility become a dominant trend?This question is unavoidable now after 20 years of standardisation since companies fi rst began publishing Corporate Responsibility or Sustainable Development reports.

Although the GRI (Global Reporting Initiative) has provided a framework for CSR reports since 1997 in directives that are applicable worldwide, recent regulations have laid down a legal framework: in France, for example, Article 225 of the Grenelle II law provides for mandatory publication by listed companies of information on the social and environmental consequences of their activities (NRE law in 2001, decree in 2010). More recently, integrated reporting of ESG data in fi nancial reports has been imposed, supported by the IIRC (International Integrated Reporting Council). These days, more than 3000 integrated reports are published each year worldwide.

At the beginning of the 2000s, fewer than 10% of listed companies published a CSR report. Likewise, few of them had an internal department dealing with sustainable development issues. In 2010, this rate had risen to 50% with the emergence of positions such as Sustainable Development Director or HSE (health, safety and environment) Manager. These days, most listed companies, including small ones, present an integrated ESG report and have set up a dedicated department at the highest level (Executive Committee and Board of Directors). One conclusion is clear: transparency of information in CSR reports is no longer an adequate material indicator.

Admittedly, this conclusion is to be tempered for listed companies in emerging countries but it still helps to understand how the market has changed. Historical SRI analysis o� ered obvious investment opportunities because it provided much greater transparency. Thus, the publication of procedures, internal policies, indicators and objectives was, if not a gauge of quality, at least testimony to companies’ taking account of long-term issues.

Evaluating risks for all sectorsEven though corporate responsibility no longer provides real investment opportunities, it continues to play its part in triggering alerts and is an excellent proxy for evaluating the quality of company management, particularly risk management. The many indicators presented in annual reports (49 basic indicators and 30 supplementary indicators in the GRI guidelines) o� er a second way to understand the health of companies. They can now be compared, in absolute terms, within a sector and especially over time. Changes in certain indicators o� er complementary analysis that is often still not incorporated in fi nancial statements. An unusual rise in turnover, occupational accidents or even absenteeism can be a sign of malaise in the company or of poor industrial relations, which will have an impact on competitiveness and economic performance (1% absenteeism represents 1% additional payroll costs).

In this context, we no longer consider corporate responsibility as an investment opportunity but rather as a wonderful pool of information for assessing the risks that companies face, particularly in their interactions with their stakeholders: employees, suppliers, customers, local communities, shareholders, etc., regardless of their business sector.

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4

S U S T A I N A B L E E C O N O M I C T R A N S I T I O N

From sustainable development to sustainable economic transitionThere have been many codes and guides laying out the principles of sustainable development since the concept fi rst appeared in 1987 in the Brundtland report(2). We have used several academic and professional reference sources to defi ne our approach to sustainable development. These include, in particular, the article by Robert W. Kates and Thomas M. Harris, Long-term trends and a sustainability transition (2003) or the Creating Resilient Strategies report (2014) published by Corporate Citizenship and fi nally the 17 sustainable development goals set by the United Nations in 2015.

The United Nations’ 17 sustainable development goals

Our conviction is based on a long-term perspective of the fi nancing of the economy. As a responsible asset manager, our role is to select companies with the best strategic and economic assets to respond to the challenges of the future. We are convinced that the ability of these companies to anticipate what is happening in their market is crucial to becoming or remaining leaders. Thus, it is by identifying companies’ exposure to sustainable economic transition that we are building portfolios that can strongly outperform the market.

Identifying investment opportunitiesSustainable economic transition is above all a source of investment opportunities. Our work is to identify themes that are relevant to sustainable economic transition and to categorise them in order to select the companies that are contributing to it. Our proprietary analysis model presented in the next section identifi es fi ve main aspects of sustainable transition and their practical themes. We have agreed that each company’s contribution to sustainable transition will be evaluated gradually according to its turnover, going from no exposure to a “pure player” positioning.

As social trends continue to change, each year we will review the list of themes identifi ed. Our aim is to be pragmatic and innovative so that we continue to have the most comprehensive understanding of performance drivers as possible.

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(2)�Report named after Gro Harlem Brundtland, the then Norwegian Minister for the Environment who chaired the World Commission on Environment and Development, which was submitted to the United Nations General Assembly in 1986.


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O U R E S G A N A L Y S I S M O D E L

A proprietary rating model: aba, above and beyond analysisWe attach particular importance to developing proprietary models built using our expertise, with a constant concern to provide tangible added value as we select securities for our portfolios. DNCA Finance’s ESG analysis model is in line with this principle and aims to o� er a rating system for which we are completely responsible. Most of the data used in our rating system is information from companies. We talk to senior executives and conduct site visits to increase our understanding of the companies and these provide an invaluable source of added value.

Our model is based on four areas of independent and complementary analysis:

CORPORATE RESPONSIBILITY

SUSTAINABLE TRANSITION

DISPUTES ENGAGEMENT

The aim is to provide detailed analysis bringing added value to traditional fi nancial analysis. This analysis is carried out exclusively in-house by DNCA Finance teams and is essentially based on information from companies.

Corporate responsibilityThe analysis of corporate responsibility is broken down into four aspects: shareholder responsibility, environmental responsibility, responsibility for labour relations and social responsibility. Each aspect is rated independently and weighted in accordance to how material it is for the company. This in-depth analysis leads to a rating out of 10.

S H A R E H O L D E R R E S P O N S I B I L I T Y

Respect for minority shareholders

– Control structure

– Existence of poison pill, voting restrictions

– History of not respecting minority shareholders

Management quality

– Size and membership of executive committee

– Rotation of senior executives, existence of countervailing power

– Quality of strategy

Independence of the Board and committees

– Percentage of independent Board and committee members

– Separation of CEO/Chairman powers

– Membership and size of the Board, directors’ fees

CEO compensation

– Transparency of compensation

– Relevance of bonus criteria, confl ict in Shareholders’ Meetings

– Consistency of variable portion with objectives and results

Accounting risk

– History of accounting disputes (10 years)

– Change of accounting methods/reporting

– Independence of statutory auditors

Quality of fi nancial communication

– Trust in guidance and transparency

– History of profi t warnings

– Accessibility of management

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6

E N V I R O N M E N T A L R E S P O N S I B I L I T Y

Environmental management

– Existence of an EMS and reporting scope

– Existence of governance in the event of strong impact

– Quality and consistency of reporting, quantifi ed objectives

Climate and energy e� ciency policy

– Implementation of an energy e� ciency policy

– Precise reporting and quantifi ed objectives

– Eco-design approach and inclusion of supply chain

Regulation and certifi cation

– Incorporation of sector-related regulations

– Process certifi cation

– History of industrial accidents

Impact on biodiversity and externalities

– Management of impact on biodiversity and reporting

– Incorporation of issues ahead of projects

– History of pollution

R E S P O N S I B I L I T Y F O R L A B O U R R E L A T I O N S

Corporate culture and HR management

– Position of HR in the company hierarchy

– Leadership and type of culture

– Growth model and restructuring management

Health and safety

– Implementation of health, safety and working conditions committees and procedures

– History of occupational accidents, reporting level

– Transparency and scope of indicators

Industrial relations and working conditions

– Quality of employer/employee dialogue, strike days, absenteeism

– History of industrial disputes

– Quality of working conditions and compliance with the law

Training and career management

– Training plan and age pyramid

– Transition issues specifi c to the sector

– Employee long service and internal development policy

Promotion of diversity

– Women’s share in the workforce and management

– Local recruitment policy

– Diversity of profi les within the management team

Attractiveness and recruitment– Ability to recruit the necessary talents and skills

– Management of the age pyramid


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S O C I A L R E S P O N S I B I L I T Y

Product quality, safety and traceability

– Product quality control process

– History of quality failings

– Consumer safety issues

Capacity for innovation and pricing power

– Internal or external R&D management

– Price fl exibility and brand power

– Product replacement and sector risk & risk of major stock-out

Supply chain management– Control of supply chain and model (integrated or lots of outsourcing),

restrictions on cascade of suppliers

– History of supply chain failures

Customer satisfaction and increases in market share

– Policy for monitoring customer satisfaction and change in market share

– Quality of B-to-B distribution network

– History of customer complaints

Respect for local communitiesand human rights

– Respect for human rights, ease of exercising the right to operate

– Incorporation of local communities

– History of local disputes

Personal data protection– Use of personal data as business model

– Protection of sensitive data and respect for privacy

Corruption and business ethics

– Corruption prevention governance and process

– Operations in high-risk countries

– History of corrupt or unethical practices

Tax consistency

– Alignment of taxation rate with local economic presence

– Presence in tax havens

– Change in taxation rate over 10 years

Each criterion is analysed using a combination of qualitative and quantitative criteria, some of which are set out below. In addition, the analysis and rating are conducted based on the issues facing the sector and the practices of comparable companies. The responsibility rating thus refl ects the quality of a company’s overall approach as an economic player regardless of its business sector.

THE SOCIAL CLIMATE• Valuation of companies

by employees (Glassdoor).

• Trend of turnover and absenteeism over 10 years

• Group consistency in HR reporting

• Ratio of job o� ers to sta�

TAX OPTIMIZATION• Change in the rate of tax

• Transparency of the tax rate by country

• Number of subsidiaries in tax havens

• % of auditors’ service fees

SUPPLY CHAIN SECURITY• Limitation of the chain

of subcontractors

• Ratio of supplier audit expenses to turnover

• Proportion of outsourced production

• Supplier audit coverage rate


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Sustainable transitionThis aspect analyses the positive impacts of a company through its activities, products and services. The aim is to identify whether a company contributes to sustainable transition, in what domain(s) and to what extent. For information transparency reasons, the exposure criterion used until now is turnover. However, in the longer term we want to move towards other criteria such as net profi t, research and development expenditure or even product share.

On the basis of the reference sources presented in section 3, we have defi ned fi ve major themes of sustainable transition, each of which is described below:

The analysis of the exposure to each theme is based on information published by the companies. We do not make estimates and if there is no precise information we send a specifi c request to the company. The aim is to defi ne a level of contribution so that we can class companies in fi ve categories: no exposure (0%), low (0-10%), improving (10-40%), major (40-80%) and pure player (80-100%).

M E D I C A LT R A N S I T I O N

— Healthy food, sport— Medical

diagnostics— Control of

endemic diseases— Personal care— Medical robotics— Access to care— State-of-the-art

medicine andmedical research

D E M O G R A P H I CT R A N S I T I O N

— Inclusion of senior citizens

— Inclusion of emerging populations

— Access to education — Access to housing,

comfort — Safety and security — Public transport,

tra� c regulation — Personal services

L I F E S T Y L ET R A N S I T I O N

— Extension ofproduct life cycle

— Eco-design— E� cient production

system— Circular economy— Collaborative

consumption— Dematerialisation— Artifi cial

intelligence— Sustainable

mobility

E C O N O M I CT R A N S I T I O N

— Infrastructuredevelopment

— Digitalisation ofexchanges

— Certifi cation,quality, producttraceability

— High-performancelogistics

— Sustainable tourism— Access to

connectivity— Transparency and

security of fl ows— Access to fi nancial

services

E N V I R O N M E N T A L T R A N S I T I O N

— Energy storage— Renewable

energies— Energy e� ciency— Water treatment— Waste recovery— Biodiversity— Sustainable

agriculture— Green mobility

Source: Above & Beyond Analysis (ABA) proprietary model


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DisputesThis aspect is used to monitor the level of company disputes using the types specifi ed in the responsibility analysis: shareholder disputes, environmental disputes, labour relations disputes and social disputes. Our aim is to analyse whether companies’ principles match what we see in reality, and thus to set up a database of alerts for asset managers. Each dispute is comprehensively analysed and a specifi c report produced. At the end of the work, we distinguish disputes according to their severity level to obtain an aggregate rating.

We use this rating as an advanced indicator supplementing our responsibility analysis, not as a systematic tool for sanctions. The international dimension of companies and the profusion of information mean that in each situation we have to discern isolated cases of major alerts. Nevertheless, a succession of isolated cases can, for example, testify to widespread infringements across the whole company.

The level of disputes is taken into account directly in the Corporate Responsibility rating. Depending on the level of disputes observed for each area of responsibility (shareholder, labour relations, social and environmental), the associated rating is gradually a� ected, from a 10% reduction for a low level of disputes to a 50% reduction for a severe level of disputes.

Dialogue and engagementOur management DNA is to select securities based in particular on in-depth analysis of the company’s fundamentals. Thus, exchanges with senior executives are the heart of our asset management business. In the same way, our extra-fi nancial analysis requires us to meet companies as often as possible to discuss responsibility and sustainable transition matters. We place an emphasis on this dialogue as it helps us to understand the company and its strategy better. Therefore, we meet companies very regularly in the form of “one-on-ones” with senior executives and in the form of site visits.

Precise reports of these meetings devoted to extra-fi nancial issues are entered in our analysis tool, which also includes important information on companies (news fl ow), and this may enable us to adjust the rating. In addition, we apply a voting policy specifi c to DNCA Finance for companies’ shareholders’ meetings, which is published on our website. Votes lost by companies are systematically included in our tool so that we have information about the degree to which shareholders contest matters.

SummaryOur model enables us to combine assessment of investment risks identifi ed via the Corporate Responsibility rating, adjusted by the level of disputes, and analysis of the company’s positive contribution to sustainable transition, via the Sustainable Transition rating. By combining these two aspects we can map companies by adopting a risk/opportunities approach.

Our exchanges with and information about the company are retained in the model and form our data history.

In our proprietary tool ABA, the summary of our analysis is presented as follows:

CO

RP

OR

AT

E R

ESP

ON

SIB

ILIT

Y R

ISK

(/1

0) Managed

risk(8/10)

Law risk

(6/8)

Moderate risk

(4/6)

High risk

(2/4)

Severe risk

(0/2)

Pure player80-100%

Major40-80%

Trend10-40%

Low0-10%

None0%

CONTRIBUTION TO THE SUSTAINABLE TRANSITION

RESPONSIBILITY

IMPACT

STOCKS EXCLUDED FROM SRI FUNDS


10

_� ABOVE AND BEYOND ANALYSIS


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R E S P O N S I B L E I N V E S T M E N T A N D

M A N A G E M E N T P O L I C Y

Incorporation of extra-fi nancial criteriaWe consider extra-fi nancial analysis as supplementing traditional fi nancial analysis. By looking in a di� erent way to how we look at fi nancial statements, we gain an understanding of long-term issues and this o� ers a framework for anticipating on the one hand the company’s external risks (new regulations, technological disruption, etc.) and internal risks (industrial accidents, social movements, etc.) and, on the other hand, for identifying long-term growth drivers. The aim is to enhance our fundamental knowledge of companies so that we can select the best securities for our portfolios.

In terms of DNCA Finance’s management, all its teams of analysts and asset managers have access to the ESG research and the internal tool ABA. In addition, important information is systematically circulated internally by email and at management committees, for example the occurrence of a serious dispute, a major change in governance, an industrial accident, etc.

To go further, all asset managers are o� ered a conversion table to incorporate an ESG risk premium in the fi nancial valuation models’ risk premium. This may have a positive impact (by reducing the risk premium) and thus increase the price objective; or, conversely, it may have a negative impact.

SRI labels and fundsSRI management is a management style that goes beyond incorporating ESG criteria in company analysis. The responsible funds in the DNCA Finance range aim to select responsible and sustainable securities. This implies that extra-fi nancial analysis is used to defi ne investment universes and therefore in the process of selecting portfolio securities.

In general, responsible funds are commonly defi ned as follows: selection of portfolio securities with controlled corporate responsibility risks and o� ering at the same time sustainable transition opportunities. The fi rst responsibility fi lter relates to the requirements in the government SRI label to exclude at least 20% of the initial investment universe.

The example of an investment process below illustrates this defi nition.

CO

RP

OR

AT

E R

ES

PO

NS

IBIL

ITY

Limited risk

CONVICTION

Weak risk

STRONG OPPORTUNITY

NeutralOPPORTUNITY

RiskWEAKNESS

High risk

Pure player80-100%

Major40-80%

Trend10-40%

Low0-10%

No0%

SUSTAINABLE TRANSITION

-20%

-10%

-5%

+10%

IMPA

CT

ON

RIS

K P

RE

MIU

M

5


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DNCA Finance applies the fi rst fi lter to all funds with a responsible management philosophy. The second fi lter is then adapted to the management strategies specifi c to each fund to o� er a varied product range covering several themes. This is the case in particular of the three funds described below, which currently make up DNCA Finance’s SRI range.

DISPUTES ALERTExclusion of highly controversial securities

RESPONSIBILITY FILTERExclusion of securities with corporate responsibility risks(shareholder, environmental, labour relations and social)

DNCA UNIVERSE-1000 securities

RESPONSIBLE UNIVERSE-500 securities

ELIGIBLE UNIVERSE-250 securities

SUSTAINABLE TRANSITION FILTERSelection of securities with a positive impact on sustainable

transition: population, health/well-being, globalisation,production/ consumption and environment

STOCK PICKINGSelection of portfolio securities accordingto our fundamental and financial analysis

and analysis of valuation criteria

RESPONSIBLEPORTFOLIO-40 securities

_� THUS, SINCE 2018 DNCA HAS BEEN DEVELOPING A DEDICATED RANGE OF ISR FUNDS,

CALLED BEYOND AND WHICH SHARE A COMMON MANAGEMENT PROCESS.


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DNCA Beyond European LeadersThe DNCA Beyond European Leaders fund considers corporate governance a fundamental criterion of quality. The management philosophy of this portfolio is to select securities recognised for the quality of their management bodies, respect for minority shareholders, regular sharing of added value and rigour in their accounting. The choice of responsible governance means that we can target high-quality companies and guarantee their transparency and integrity. The visibility provided by these companies is often synonymous with resilience, “the ability to withstand an adverse and di� cult environment”, recurrence, “the ability to ensure a long-lasting shareholder return” and long-term performance.

M A N A G E M E N T

Quality of management team

F I N A N C I A L C O M M U N I C A T I O N S

Credibility of fi nancial information

C A S H F L O W

Regularity of cash generation

F I N A N C I A L S T A T E M E N T S

Reliability of accounting documents

O R G A N I C G R O W T H

Foreseeable long-term earnings

D I V I D E N D

Sustainable shareholder returns

_� THE FUND’S INVESTMENT PROCESS FOLLOWS THE DEFINITION OF

THE SRI FUNDS IN DNCA’S BEYOND RANGE:

EUROPEAN GOVERNANCE

UNIVERSE~�400 stocks

RESPONSIBLE UNIVERSE~�200 stocks

ELIGIBLE UNIVERSE~�150 stocks

DNCA BEYOND EUROPEAN LEADERS

PORTFOLIO~�30 stocks

RESPONSIBILITY FILTERFilters out stocks carrying

corporate responsibility risk(shareholder, environnement,

workforce and social)

CONTROVERSY ALERTFilters out highly

controversial stocks

SUSTAINABLE TRANSITION FILTERSelects stocks whose

profi le favors a contribution to sustainable transition

STOCK PICKINGSelection of portfolio stocks

based on fundamental and fi nancial analysis and

valuation criteria

1 2 3

_� THIS STRATEGY FAVOURS FOUR INVESTMENT SECTORS, WHICH ARE PRESENTED BELOW:

D E M O G R A P H I C T R A N S I T I O N

Responding to the development of new modes of consumption

(connectivity, digitization, well-being) and the emergence

of new consumers (millennials, growth of middle

classes, bottom-of-the-pyramid).

SOCIAL CHANGE

M E D I C A L T R A N S I T I O N

Improving health and quality of life by providing as many

people as possible with access to biological diagnostics, care and medicines, as well as by

developing healthier and more sustainable nutritional

and consumption habits.

HEALTHCARE

E C O L O G I C A L T R A N S I T I O N

Developing less energy-intensive and more sustainable mobility solutions, in particular through

electrifi cation, automation and the use of new materials.

MOBILITY


Taking into account climate challenges and improving

the energy mix by favoring electrifi cation and low-carbon energies (clean gases, biofuels,

solar and wind energy).

ENERGY


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DNCA Invest Beyond Transition & InfrastructuresThe DNCA Invest Beyond Transition & Infrastructures fund invests in infrastructure contributing to sustainable economic transition. The types of infrastructure selected in the starting universe provide essential products and/or public services (transport, satellite networks, electricity production, water treatment, waste processing, energy transport networks, renewable energy, hospitals and schools, etc.) to a large population for a long period in a comprehensive regulatory framework.

The main focus of the fund is environmental. The European aim, in line with the Paris Agreement, is to contain the global temperature rise “well below 2°C” with a target of 1.5°C. Infrastructure has signifi cant impact on the environment and on climate change in particular. Thus, the aim is to select companies that contribute to energy and economic transition.



INFRASTRUCTURE UNIVERSE~�400 stocks


ELIGIBLE UNIVERSE~�120 stocks

INFRASTRUCTURE & TRANSITION

PORTFOLIO~�40 stocks


corporate responsibility risk(ownership, environment,




SUSTAINABLE TRANSITION FILTER

Selects infrastructure stocks whose profi le

favors a contribution to sustainable transition



valuation criteria

1 2 3

_� THIS STRATEGY FAVOURS FOUR INVESTMENT SECTORS, WHICH ARE PRESENTED BELOW:

E C O N O M I C T R A N S I T I O N An innovative sector

in improving connectivity and security.

TELECOMMUNICATIONS


A highly carbon-intense sector to be renewed (40% of energy demand; 20% of greenhouse

gas emissions).

CONSTRUCTION

L I F E S T Y L E T R A N S I T I O N

A sector at the core of development of sustainable

mobility.

TRANSPORTATION


A key sector in the production of renewable energy.

UTILITIES


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DNCA Invest Beyond Global LeadersThe DNCA Invest Beyond Global Leaders fund invests in companies considered global “pillars” or “leaders” in sustainable economic transition, wherever they are in the world. The portfolio selects securities that are well positioned in new structural trends and which are seeing secular growth. The fund favours three areas of investment: the inclusion of the emerging middle classes, technologies for health and the environment, and fi nally health and well-being.



TOTALUNIVERSE~�1500 stocks


ELIGIBLEUNIVERSE~�250 stocks

GLOBAL LEADERSPORTFOLIO

~�40 stocks


corporate responsibility risk(shareholder, environment,




SUSTAINABLE TRANSITION FILTER

Selection of stocks that make a positive

contribution to sustainable transition



valuation criteria

1 2 3

_� THIS STRATEGY FAVOURS THREE INVESTMENT SECTORS, WHICH ARE PRESENTED BELOW:

D E M O G R A P H I C T R A N S I T I O N

Anticipating demographic changes and their impacts on changing consumption

patterns, particularly in emerging countries.

EMERGING CONSUMPTION

M E D I C A L T R A N S I T I O N

Understanding key healthcare challenges to be able

to select the best investment opportunities:

the ageing population, medical robotics, development

of diagnostics, etc.

HEALTHCARE

E C O L O G I C A L T R A N S I T I O N Drawing on cutting-

edge technology to provide answers

to the climate challenge (making industries and products more

energy-e� cient, producing components essential to renewable

energies).

L I F E S T Y L E T R A N S I T I O N Leveraging dynamic

growth drivers in sectors linked to the digital economy and new business models (circular

economy, collaborative consumption).

E C O N O M I C T R A N S I T I O N

Supporting the development of infrastructure,

connectivity, digital services and optimized

logistics to meet economic and

social challenges.

TECHNOLOGY


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G O V E R N A N C E A N D T R A N S P A R E N C Y

An integrated expertise departmentin 2018, DNCA Finance set up a dedicated responsible investment team within the asset management team. The aim is to o� er internal research for all asset managers and specifi cally for the SRI funds. The Responsible Investment Department is responsible in particular for the Responsible Investment Policy, the Voting Policy, the Engagement Policy, legal publications (transparency codes, article 173 reports, etc.), the ABA analysis model, responsible investment processes, SRI fund labelling, dialogue with companies, impact reports and DNCA’s active representation in industry bodies.

_� LÉA DUNAND-CHATELLET

Asset Manager – Head of the Responsible Investment Department 14 years of experience in SRI

Léa Dunand-Chatellet studied at the Ecole Normale Supérieure, holds an agrégation in economics and management and is a member of various industry committees. Each year she teaches modules on responsible investment in the commercial grandes écoles; she is also co-author of a reference work published by Ellipse in 2014: “ISR et Finance Responsable” (SRI and Responsible Finance).

Léa started her career with Oddo Securities in its extra-fi nancial analysis department in 2005. In 2010, she was asked to join Sycomore Asset Management and became a partner and head of ESG management. She developed a pioneering model of extra-fi nancial analysis and integration of sustainable development issues within asset management. During her fi ve years with the company, she set up and managed a range of SRI funds with a total of €700 million of assets under management, which obtained AAA ranking from Citywire. In 2015, she joined Mirova as Head of Equity Management and led a team of 10 equity managers with €3.5 billion of assets.

In June 2018, she was appointed head of DNCA Finance’s Responsible Investment Department.

_� ALIX CHOSSON

Responsible Investment Analyst 8 years of experience in SRI

Alix Chosson is a graduate of Sciences-Po (Institute of Political Studies) Lyon and Sciences-Po Bordeaux and holds a master’s degree in portfolio management from the Institut d’Administration des Entreprises at Paris XII University.

In 2010, she began her career at Amundi as an SRI and governance analyst before joining Generali Investments, and then Standard Life Investments in 2013 where she was involved in setting up the new ESG integration strategy and in creating the impact investing approach. In 2016 she joined Axa IM’s SRI team in London where she was actively involved in developing expertise in climate issues. She then returned to France to Natixis CIB, as a senior sell-side senior analyst specialising in environmental matters and carbon-intensive sectors.

In September 2018, she joined DNCA Finance as an analyst in the Responsible Investment Department.

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A cross-functional esg committeeAs our aim is to o� er di� erentiating and high-performance responsible asset management, we do not systematically use external databases to populate our analysis model. Our main sources of information are company publications and regular meetings with senior executives.

External dataAs our aim is to o� er di� erentiating and high-performance responsible asset management, we do not systematically use external databases to populate our analysis model. Our main sources of information are company publications and regular meetings with senior executives.

However, we are watchful and incorporate relevant research from brokers and the press, certain NGO reports or specifi c alerts. In addition, expert reports with high value added are used to reinforce our analysis. We work in particular with OFG Recherche, which o� ers detailed and di� erentiating analysis of corporate governance. Similarly, we work in partnership with MSCI on three specifi c subjects: carbon data, mapping of SDG issues(3) for companies and dispute analysis.

Regulatory reporting and publicationsDNCA Finance publishes various reports required under regulations on www.dnca-investments.com:

Voting policy and voting report

Policy on banning controversial weapons

Annual report - Article 173

Transparency is a key issue for responsible investment. As a result, DNCA Finance wants to promote and disseminate its practices so that they are understood as clearly as possible. There is a dedicated area on www.dnca-investments.comthat provides investor customers with large amounts of information:

Our responsible investment philosophy

Our responsible investment strategies (SRI)

Our news and publications

Our specialist reports

The transparency codes of SRI label funds

Our PRI (Principles for Responsible Investment) evaluation

(3)�Sustainable Development Goals set by the United Nations in September 2015.


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Below is an example of a specifi c report on the carbon footprint of our portfolios:

Top avoiding companies in portfolio TCO2�/�M€ Weight% of avoided

emissions

BANQUE PSA FINANCE -383 1.45% 27%

TARKETT -300 0.99% 14%

AP MOLLER-MAERSK A-S-B -500 0.47% 11%

SIEMENS -134 1.73% 11%

SCANIA CV AB -62 1.88% 6%

EOFP 3.125 0622 -112 1.04% 6%

COMPAGNIE DE SAINT-GOBAIN -40 2.14% 4%

DAIMLER FINANCE NORTH AME -45 1.84% 4%

Top emitting companies in portfolio TCO2�/�M€ Weight% of induced

emissions

SIEMENS 1�216 1.73% 11%

MTNA Float 040918 2�065 0.89% 10%

CGGFP 5.875 051520 1�759 0.99% 9%

BANQUE PSA FINANCE 1�019 1.45% 8%

BP ENERGY CAPITAL PLC 410 3.27% 7%

CIMENTS FRANÇAIS SA 1�028 1.24% 7%

TARKETT 903 0.99% 5%

VALLOUREC 325% 19 2�173 0.32% 4%

Portfolio All

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Induced emissions (tCO2/M€) 242

Induced emissions (tCO2/M€) -26

Coverage 79%

Impact reportingOur aim is to o� er total transparency on extra-fi nancial issues. We therefore attach particular importance to sharing our expertise in an area that is becoming standardised and which still has great potential for development. Thus, each change to our model or our analysis process will be communicated and feedback shared.

Moreover, measuring the environmental and social impacts, of the responsible portfolios in particular, is a priority. There are many obstacles, mainly in defi ning criteria and their relevance, in data reliability and access to this data. Nevertheless, at this stage it is vital for DNCA Finance to contribute actively to this area of development.

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O U R A C T I V E E N G A G E M E N T I N S R I

Our engagementDNCA Finance wants to actively promote responsible investment to its investor customers and the fi nancial community. This is why we have fi rst of all signed the UN PRIs and are active on their collaborative platform.

In addition, DNCA Finance is a member of AFG’s Responsible Investment Committee and of the working group on European consultation on sustainable fi nance initiatives. DNCA Finance has also signed up to the AFG-FIR-EUROSIF transparency code for SRI funds open to the general public.

Similarly DNCA Finance pays particular attention to the government SRI and TEEC labels in their current form and intends to take part in their development.

Our ambitionOur desire is to take part in all industry institutions and events that enable us both to disseminate relevant SRI information (to the general public, institutions or companies) and contribute to regulatory issues (consultation of the public authorities in particular). We also want to enable academic research on these subjects to develop, and any positive action in this direction will be supported.

In addition, the responsible approach will always be put forward and promoted specifi cally in DNCA Finance’s internal and external communications and events.

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DNCA Investments is a trademark of DNCA Finance.

This promotional document is a simplifi ed presentation tool and does not constitute either a subscription o� er or investment advice. This document may not be reproduced, distributed, or communicated, in full or in part, without prior authorisation of the management company. Access to the products and services presented may be subject to restrictions with regard to certain individuals or certain countries. Tax treatment depends on the individual situation of each person. The KIID must be submitted to the subscriber prior to all subscriptions. For complete information on the strategic direction and all fees, please refer to the prospectus, KIIDs and other regulatory information available on our website www.dnca-investments.com or by simple request free of charge from the registered o� ce of the management company.

DNCA Finance - 19 place Vendôme, 75001 Paris - Tel.: +33 (0)1 58 62 55 00 Email: [email protected] - www.dnca-investments.com

Intranet site dedicated to independent companies. Management company certified by the French Market Authority (Autorité des Marchés Financiers) under number GP 00-030 on 18 August 2000. Non-independent investment advisor pursuant to the MiFID II Directive.

— DNCA Finance19 place Vendôme – 75001 Paris

Tel.: +33 (0)1 58 62 55 00

Contact: [email protected]

www.dnca-investments.com

RESPONSIBLE INVESTMENT POLICY - DNCA Finance d... · Responsible Investment Policy • October 2018...

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