3 ESG themes
Proprietary ESG platform START
- ESG indicators use multiple data sources
- Proprietary scoring and analysis by analysts
- Smart interface for all portfolio management
Approach tailored to asset class or strategy
- Rules-based “Outcomes Framework” in line with the United Nations SDGs
- Proprietary model for sovereign bonds
- Controversial weapons
- Tobacco-free supporter
- Coal exclusions and commitment to total coal exit in 2030
- Power companies not aligned with the Paris Agreement
- Adult entertainment
- Engagement to effect change
- Exercise all our voting rights across equity and bond holdings
- Collaboration through affiliations
OUR ESG THEMES
ClimateWe believe that climate change poses an existential threat and is a source of systemic risk for our economies and the financial markets. We expect every investee company to mitigate their impact on the environment and understand climate change impacts on their activities and operations. We encourage them to contribute to the development of a lower carbon economy in line with the goals of the Paris Agreement.
EmpowermentCompanies cannot successfully operate without appropriately balancing the interests of their stakeholders. We expect our investee companies to value their employees whilst providing a supportive, safe and inclusive environment at work. With regards to customers, the appropriate processes and internal controls should be put in place to ensure customer welfare, enhancing their experience and therefore, their loyalty. We also look for companies to ensure, to the best of their ability, strong human rights standards through their supply chain.
LeadershipWe believe that a robust leadership underpins the long-term performance and success of any corporation. Whilst there is no one formula to good governance, we expect our investee companies to put in place the appropriate governance structure which will contribute to fostering innovation as well as ensuring strong checks and balances are in place.
OUR PROPRIETARY ESG RESEARCH SYSTEM: START
Effective management of ESG factors is inherently linked with long-term performance and risk management. In 2020, Carmignac invested in a significant development enabling more uniform and efficient understanding and integration of ESG factors across all the key investable asset classes: equities, corporate and sovereign bonds. START (System for Tracking and Analysis of a Responsible Trajectory) is a systemised platform aggregating multiple sources of raw ESG data for our proprietary scoring systems for companies and also our Sovereign ESG model, Controversy analysis and SDG alignment.
START provides forward-looking ESG analysis that gives our investment teams the insights they need to make appropriate investment decisions, to best serve our clients’ long-term interests.
- Comparing what's comparable
- Collecting all that's available
- Sorting it all out
- Putting the data into perspective
When assessing a company’s ESG credentials, we start by comparing it against its peers to allow for a fairer and more accurate assessment.
Company stakeholders (employees, customers, suppliers, environment, community, board…) have differing significance depending on sector and geography. We call this their 'materiality', the impact of which is critical to a company's present and future value, depending on how it deals with them.
Once assembled by common ‘materiality', we segregate the companies by region and size,to constitute our own ESG peer groups.
Large quantities of raw data are collected from specialised sources and automatically transferred into the system.
- external ESG ratings,
- company reported data (employee turnover, energy usage, gender equality, etc.),
- past and present controversies.
These data points enable the system to create an ESG performance-based profile for each company.
The system then ranks the companies within the ESG peer group, based on financially material ESG metrics – ESG metrics which can significantly impact companies' financial performance.
A score from A to E is automatically calculated for each E, S and G pillar to give us an overall company score.
This gives us a snapshot of how well the company is managing its stakeholders and if it has positive contribution to society and the planet through its revenues.
At this stage, the system has created the strongest possible starting point for the rest of the analysis.
WHY GO FURTHER?
Some information is not quantifiable, some data requires interpretation, some statistics are backward looking; an additional input is needed: the human factor.
Our analysts have in-depth knowledge of companies and industries gained through years of experience, hours of research and daily engagement with management.
This allows for unique insights, which they incorporate in the system through:
- A rating – they can override the systematically generated score
- A written comment – details of their analysis and any information they think is relevant
- An outlook on the company’s ESG trajectory – is it making effort?
What is the company’s ESG strategy and how is it part of its overall corporate philosophy?
Is it aware of its key stakeholders today, and how is it managing them? Has the importance of stakeholders changed through time?
Does it contribute positively to society and the planet? Can it do more?
Is it positioned to deliver on its commitments?
OUR OUTCOMES FRAMEWORK
At Carmignac, we strive to identify firms generating positive change based on the Sustainable Development Goals (SDGs) defined by the United Nations. We have identified nine SDGs as ‘investable’, which means that companies in which our funds can invest are able to support progress towards these goals through their products and services.
In this sense, our funds aim to have a sustainable objective investing more than 50% of the fund’s AUM in companies with over 50% of their revenues derived from goods and services positively aligned with at least one of the nine ‘investable’ SDGs by Carmignac:
(1) No Poverty; (2) No Hunger; (3) Good Health and Well Being; (4) Quality Education; (6) Clean Water; (7) Affordable and Clean Energy; (9) Industry, Innovation and Infrastructure; (11) Sustainable Cities and Communities; and (12) Responsible Consumption and Production.
SDG alignment information at company-level is included in our proprietary ESG research system START.
United Nations Sustainable Development Goals
As part of our sustainable investment journey, Carmignac Gestion uses the United Nations Sustainable Development Goals as illustrations of the company Outcomes Framework. The SDG logos, icons, colour wheel and design rights are and remain the property of the United Nations. Carmignac Gestion is a UN PRI signatory but is in no way affiliated with the United Nations. The United Nations did not endorse the content or data behind the SDG logos, icons and colour wheel. All content and data related to each UN SDG are compiled by Carmignac.
OUR SOVEREIGN DEBT MODELS
At Carmignac, we think that it is key to integrate ESG criteria in the monitoring of sovereign bonds as these are globally dominant in asset allocation. While external solutions are slowly being developed, we have chosen to build our own proprietary models in order to ensure ESG integration and to provide material information to our investors. Two models have been developed in the last years:
- A global sovereign ESG risk model, which aims to assess ESG risks faced by developed and emerging countries
- An Emerging Markets -focused model that aims to identify positive ESG trajectories.
OUR ESG INDICATORS USED IN START
We analyse over 30 specific ESG indicators that we have defined as financially material for around 8,000 companies, to which we add controversy data. START allows our teams to add unique human insight and conduct company engagement surrounding these key indicators:
As an active owner, Carmignac sees value in both direct and collaborative engagement, and it is the combination of both which leads to the most influential and effective stewardship. It is by joining forces that investors can most effectively influence their investee companies on material ESG issues, including market-wide and systemic risks, and ultimately help improve the functioning of markets.
Membership to affiliations provides different levels of collaboration opportunities and involvement. We provide below an exhaustive list of the affiliations we are part of either as a signatory, supporter or participant.
Our approachOur approach to ESG is built around the following three following themes: Climate, Empowerment and Leadership.
Our methodologiesWe have developed proprietary methodologies to the assessment of the ESG profile and performance of our investments across our equity and fixed income holdings. This includes our research platform START.
Our collaborationsWe seek to collaborate with other investors to have more weight and influence in our engagement with investee companies. We also collaborate with essential players of the finance industry with the aim of ultimately improving how markets function.
Carmignac's point of view
What we need for energy transition.Speakers : Michel Wiskirski
How to reduce our carbon emissions?Speakers : Michel Wiskirski
How to achieve the Paris Agreement targets?Speakers : Mark Denham
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