Ce rapport s’inscrit également dans une démarche de transparence vis-à-vis des investisseurs, en matière de critères, de méthodologies et d’investissement.
ESG policy
Rothschild & Co Asset Management Europe | ESG policy 1
Contents
1. Our approach
5
2. Resources
8
3. ESG integration
11
4. Engagement
14
5. Monitoring & Controls
16
6. ESG reporting and impact measures
18
7. CSR initiatives
20
8. Investor disclosures
22
Over 10 years of integrating sustainability issues
New biodiversity data provider (Carbon4 Finance & CDC)
96% of AuM in open-ended funds classified SFDR Articles 8 and 9 and 86% in AMF Categories 1 & 2 New ESG data providers (Carbon4 Finance & EthiFinance) 10 labelled funds, including 2 funds of funds Member of Finance for Tomorrow’s Investors for a Just Transition coalition, the Net Zero Asset Managers Initiative, and the fossil fuels working group of the French Asset Management Association (AFG) Partnerships with Polar Pod and Café Joyeux Signatory to the UN Global Compact, at Rothschild & Co Grouplevel
Involvement in the Finance for Tomorrow working group dedicated to biodiversity Participation in the 2DII and ADEME working group on financial products environmental communications Member of 1% for the planet
2022
2021
Rothschild & Co’s sustainable investment roadmap Rothschild & Co Group’s thermal coal investment principles
2020
2019
4Change SRI labelled product range Member of “Climate Action 100+” Rothschild & Co’s Group Sustainable Investment Committee
2018
Launch of R-co 4Change Green Bonds and R-co 4Change Moderate Allocation funds, both Towards Sustainability-certified
2017
New ESG data provider (MSCI ESG Research) Signatory to the CDP
(Carbon Disclosure Project), at Rothschild & Co Group level
2015
Launch of the work on carbon and social issues
2012
ESG rating tool for portfolios
Signatory to the UN PRIs ISS sustainable voting policy implementation
2011
4 ESG policy | Rothschild & Co Asset Management Europe ESG Policy
1. Our approach
A sustainable approach to performance
100 % of ESG integration in our assets under management 96 % of our open-ended are Articles 8 or 9 SFDR
Initiated more than a decade ago, our approach to sustainability is consistent with our investment management DNA, i.e., creating value for our clients by anticipating structural evolutions in the market. As conviction-based fund managers, we are guided in our investment decisions by 3 key principles:
Integrating sustainability issues into financial analysis Sustainability criteria are not only extra-financial but must be integrated into the overall assessment of an asset as major contributors to the performance. That’s why we decided to combine both financial and ESG analysis. Having convictions means going beyond a regulatory vision or an “extra-financial process” to establish a more comprehensive evaluation of the robustness and relevance of a business model, the credibility of a strategy, and the ability to contribute to the transformation towards a more sustainable world. Supporting all economic players through a transition approach We believe that the transition towards a more sustainable world requires integrating all sectors, including the least virtuous. Even so, embracing a transition goal requires rigorous analysis combined with a long-term vision. We are convinced that by supporting companies from all industries we will achieve a more significant sustainable impact, which shall be associated with a significant increase in market value. Participating in the development of a more inclusive economy A long-lasting transition can only be achieved through a socially acceptable process Our approach intends to articulate the environmental and social dimensions consistently. We believe that a more sustainable model is based on a more inclusive economy in which all people, particularly the most vulnerable, are fully integrated and contribute to its development. We want to encourage companies in our portfolios to adapt their practices and steer their financial flows towards actors that integrate these challenges into their strategies and offer concrete solutions. At a time when investors are being encouraged to invest massively in sustainable themes, we have chosen to develop a transition approach that allows us to invest in all sectors and to combine our support to companies’ sustainable transformations of companies with our financial returns objectives. These three principles are applied to all our investment expertise according to investment strategies’ levels of sustainability integration.
1
2
10 labelled funds
3
Source: Rothschild & Co Asset Management Europe, 31/06/2022.
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A common sustainable approach to all our products and all our asset classes A common exclusion framework ■ Regulatory exclusions: controversial weapons and international sanctions ■ Discretionary exclusions: United Nations Global Compact (UNGC) and thermal coal Integrating material ESG criteria into analysis processes
5 SFDR Article 9 funds
■ The use of 3 ESG data providers: MSCI ESG Research, EthiFinance and Carbon4 Finance ■ An evaluation combining financial and ESG criteria. The integration of ESG criteria is adapted to the analysis process of each investment team and can be applied at the sector level as well as at the issuer level, at the management company level and/or at the mutual fund level, depending on the asset class. Sustainable requirements in portfolios ■ Minimum BBB ESG rating objective for all Rothschild & Co Asset Management Europe investment vehicles ■ Minimum ESG data coverage and ESG rating higher than that of the investment universe – for the majority of our directly managed open-ended products ■ Minimum taxonomic investments – for Article 8 & 9 products Active engagement ■ A dialogue focused on our priority themes (climate transition, inclusion and just transition...) and controversies ■ A responsible voting policy on 100% of our equity perimeter ■ Active participation in several working groups (ADEME, Finance for Tomorrow, AFG, Climate Action 100+, etc.) on strategies set up in the portfolios (impact, biodiversity, fossil fuels, just transition, etc.) ■ A detailed ESG reporting ( 1) ■ ESG profile (ESG rating, rating trends and breakdown by sector) ■ Carbon intensity (deviation from indices, sectoral contribution and identification of main contributors) ■ Transition profile (reduction targets, green share, categories of activities in transition, etc.)
4 impact strategies
■ Governance: representation of women on the board of directors ■ Sustainable Development Goals (SDGs): percentage aligned with SDGs
(1) Source: Rothschild & Co Asset Management Europe, 31/06/2022.
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A product offering ranging from light green to dark green
We seek to set up a pragmatic approach that is suited to all our investment strategies. Three levels of intensity have been structured to best address the specific features of each investment expertise and to offer our clients a diverse range of investment solutions integrating sustainability challenges : ESG integration: 100% of Rothschild & Co Asset Management Europe products All Rothschild & Co Asset Management Europe products are managed in line with exclusions, portfolios ESG objectives (i.e., an ESG score greater than, or equal to, BBB) and come with a detailed ESG report (2) . In order to appreciate risk exposure and practices that are in place within the industry, our research process is based on MSCI ESG Research’s ESG assessments and more in-depth analysis on the sector and/or issuer by internal teams. Controversies are also integrated and constitute a key element of the engagement process, on top of the responsible exercise of our voting rights. This common framework contributed to better protect our portfolios from sustainability risks and to disseminate good practices in terms ESG integration. We seek to gradually integrate relevant investment mechanisms that are rolled out as part of our SRI investments strategies. SRI strategies: our 4Change funds Since 2018, as part of our dedicated products and our 4Change range of open-ended funds we have managed labelled socially responsible investment strategies. These are based on enhanced sustainable selection criteria, additional exclusions, specific engagement programs and can be dedicated to specific sustainable thematics (Net Zero, Green Bonds, Inclusion & Disability). The 4Change funds are aligned with the most demanding European standards (3) , it includes SRI and/or “Towards Sustainability” labelled funds and covers all asset classes and geographical areas. It constitutes a demonstration of our know-how and our commitment in favour of specific sustainability challenges. Impact investing By embracing the three principles of impact investing (intentionality, additionality and measurability), our ambition is to maximise positive impacts through a selection of issuers with a significant potential to improve their social and environmental practices. The themes currently addressed: the reduction of carbon emissions according to a “Net Zero” scenario, green bonds, inclusion and disability. All our dedicated and open-ended management capabilities and investment vehicles are part of our sustainable approach
Tailor-made ESG solutions As part of our offering of dedicated solutions, Rothschild & Co Asset Management assists its clients in strengthening their investment processes through the integration of customized factors: normative and sector exclusion criteria, ESG objectives and/or a thematic approach, in accordance with our clients’ commitments and values.
(2) Except for category 3 products according to AMF doctrine DOC-2020-03. (3) a) Labelled funds have AFG-Eurodif transparency codes. b) Investments in sustainable bonds (green bonds, social bonds and sustainability bonds) comply with all the principles set out in the AFG-Eurodif transparency code. (b) Investments in sustainable bonds (green bonds, social bonds and sustainability bonds) all comply with the principles laid down by the International Capital Market Association (ICMA), namely the Green Bond Principles "GBP", the Social Bond Principles "SBP" and the Sustainability Bond Guidelines "SBG". Sustainability Bond Guidelines "SBG".
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2. Resources
In addition to our dedicated ESG team, all our teams are involved in implementing our sustainable strategy
ESG team and dedicated financial research Rothschild & Co Asset Management Europe possesses a cross-disciplinary ESG team of seven persons, of which four analysts and three persons dedicated to transversal projects and reporting to Ludivine de Quincerot: ■ A project manager who takes part in ESG methodologies and strategies development and in business development ■ A cross-disciplinary analyst who takes part in coordinating our engagement actions and research on specific sectors ■ A financial engineer who helps develop quantitative tools and coordinate our voting policy. European equity analysts are organised by sectors. The selection of securities for our portfolios is based on a financial research process that integrates ESG criteria. They are also contributing in controversies assessments and engagement procedures involving their sectors as regards both dialogue and voting. The European research team works in cooperation with other investment teams and disseminates good practices on all these subjects. The team contributes actively to steering and harmonising ESG processes within investment expertise, to coordinating research, and to engaging with the investment teams and external service providers. In addition, the team takes part in discussions on the product offering development, the establishment of investment strategies with the managers and sales teams, as well as complying with regulations and market labels alongside the operational teams. The team is also involved in business development of the 4Change funds offering. The investment teams In tight collaboration with the dedicated ESG & Financial analysis team, the ESG, financial research and the engagement with issuers are conducted in each expertise analysts team: ■ 3 international equity analysts ■ 4 fixed-income analysts ■ 5 multi-management analysts The fund managers are responsible for properly integrating the asset manager’s sustainable investment principles for their funds. Working alongside the analysts, they are mobilized both on the sustainable approach, common to all generalist investment vehicles, and on the labelled strategies with dedicated sustainable thematic and enhanced selection criteria. The SRI labelled solutions are based on the same investment universes and contributes to spread bests practices across all expertise.
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The operating teams The Risk and Compliance teams are involved in establishing solutions to control and monitor our commitments. The Business Development teams actively contribute to the development of marketing materials, monitoring tools and commercial strategies. The Product Management team is involved in managing the existing range and in creating new products. The team also update the products database and support the creation of new responsible investment-related projects. As each team is involved in and responsible for its contribution to our sustainable approach, sustainability related topics and their integration are not a matter of an independent expertise but rather of all internal skills and employees. A committed governance At the firm level, the governing bodies of Rothschild & Co Asset Management Europe, i.e., the Executive Committee, the Management Committee and the Supervisory Board, monitor the ESG strategy deployed. The integration of sustainability challenges represents a strategic focus. In addition, several committees have been set up to decide and implement our responsible investment decisions: ■ A bimonthly “ESG Taskforce” organised by the ESG & Financial analysis team and with the Managing Partners , the heads of operating departments and the business development ■ A bimonthly “Sustainable Regulation” committee, coordinated by the Product Management, involving a Managing Partner, the head of compliance, and the Risk and Legal teams Sustainability issues and our developments in this area are also discussed with our governance bodies within the structure: ■ In the executive committee of Rothschild & Co Asset Management Europe, by the presence of Ludivine de Quincerot, head of the ESG & Financial analysis team In Rothschild & Co’s two responsible investment (RI) committee, with the participation ■ of Pierre Baudard, Managing Partner, and Ludivine de Quincerot. These committees are organised by Rothschild & Co’s RI team. The team's ambition is to advance the roadmap of the investment businesses towards the integration of ESG considerations into their approaches. To this end, it develops common exclusion policies, ensures regulatory harmonisation and participates in the development of synergies between the various business lines. The Group IR team reports directly to François Pérol, Co-Chairman of the Group Executive Committee.
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Our ESG data providers Combining our research capabilities with recognized external data providers: MSCI ESG Research, EthiFinance and Carbon4 Finance We rely on research and ESG ratings established by MSCI ESG Research, which rates companies on a CCC to AAA scale (with AAA being the best rating). MSCI ESG Research’s rating philosophy is based on ESG-issues materiality . Ratings are assigned on a sector-by-sector basis via a “best-in-class” approach which favors the highest ESG rated companies within their sector of activity, without privileging or excluding any sector.
MSCI rating correspondence table:
Rating letters
Final industry score / 10
AAA
8.6 – 10.0
AA
7.1 – 8.6
A
5.7 – 7.1
BBB
4.3 – 5.7
BB
2.9 – 4.3
B
1.4 – 2.9
CCC
0.0 – 1.4
MSCI ESG Research uses public data provided by governments, NGOs, academic institutions or directly from company disclosures. To summarize, for each key ESG challenge identified per sector (between three and eight, depending on the industry): ■ MSCI ESG Research assesses a company exposure to potential risk (based on its business model, its presence in certain countries, etc.) and the policies and actions implemented to oversee it ■ Similarly, if MSCI ESG Research considers it as a sector opportunity, it evaluates the company exposure to the opportunity and the initiatives that have been taken to address it. In their rating process, MSCI ESG Research analysts integrate any controversies to which issuers are exposed. The ESG ratings are reviewed at least annually and may be revised on an ad hoc basis to integrate a new controversy. The MSCI ESG Research ratings allow us to sort and steer our investment universe transparently. In case of major corporate events, likely to materially alter the issuer’s ESG rating and the delay the MSCI ESG Research updates, a provisional in-house rating may be assigned during the adjustment period. We have upgraded our ESG data architecture with two additional data providers: ■ EthiFinance, providing ESG ratings on request and helping optimise ESG coverage of portfolios ■ Carbon4 Finance, which offers a set of carbon data, in-depth temperature profiles, as well as biodiversity footprint data In addition to the quantitative information of our data providers, we also use external research: ■ Brokers studies (JPMorgan, Exane, Goldman Sachs, Barclays, Morgan Stanley, Oddo, etc.) ■ Academic, scientific or supranational institution research, NGO reports and free-access databases (SBTi, TPI or CDP)
(1) Although Rothschild & Co Asset Management Europe information providers, including without limitation, MSCI ESG Research LLC and its affiliates (the “ESG Parties”), obtain information (the "Information") from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness of any data herein and expressly disclaim all express or implied warranties, including those of merchantability and fitness for a particular purpose. The Information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis, or a component of, any financial instruments or products or indices. Further, none of the Information can in and of itself be used to determine which securities to buy or sell or when to buy or sell them. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein, or any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
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3 . ESG integration
We are convinced that integrating sustainability challenges requires adjusting business models
We want to be part of this transformation by incentivizing companies of our investments universe to adapt their practices and provide concrete solutions. Our exclusion framework We have set up an exclusion framework that is common to all our actively managed and open architecture investment vehicles. We favor engagement to any systematic exclusion mechanism for our discretionary exclusions : understanding the transition momentum is part of our responsible investor role, both for our clients and our stakeholders. Our products have adopted a common exclusion framework: ■ The Ottawa and Oslo conventions regarding controversial weapons (cluster bombs and landmines). We use the list developed by MSCI ESG Research. ■ International sanctions (UN, EU, OFAC, France, etc). ■ The fundamentals principles of the United Nations Global Compact (UNGC). ■ Our investment principles related to thermal coal sector which are based on Urgewald’s Global Coal Exit List. □ We no longer invest in companies developing new thermal coalmines or coal-fired power plants;
□ We no longer invest in, or provide any new financing to, companies of which: – More than 20% of revenues come from activities involving thermal coal; – More than 20% of the energy mix (per megawatt generated) is coal-based; □ We no longer invest in, or provide any new financing to, companies of which: – Annual production of thermal coal exceeds 10 megatons (MT) per year; – Installed coal-fired capacities amount to more than 5 gigawatts (GW);
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Integrating ESG criteria into direct investment management We use quantitative data from external providers, especially MSCI ESG Research, which assigns ratings based on a best-in-class approach and a materiality analysis. In line with our transition approach, MSCI ESG Research’s best-in-class philosophy allows us to select issuers in all sectors. We have upgraded our ESG data architecture by working with EthiFinance, which provides us with ESG ratings on request and helps optimise ESG coverage of portfolios. In addition, Carbon4 Finance offers us a set of carbon data, in-depth temperature profiles, and biodiversity-footprint data. We also use broker studies (JPMorgan, Exane, Goldman Sachs, Barclays, Morgan Stanley, Oddo, etc.), as well as academic, scientific and supranational research, NGO reports, and open-access databases (SBTi, TPI or CDP). These elements may be combined with investment cases realized by our internal analyst teams on issuers and/or sectors represented in portfolios. The analysts also use companies’ publicly available data and integrate elements from discussions with company representatives. We seek to identify relevant “out of scopes” information in our ex-ante ESG profiles analysis and in the ex-post trajectory assessment of the issuer and/or industry. They are based on key impacts and dependencies, such as : controversies (type, severity and recurrence), externalities (carbon/toxic emissions, water consumption, destruction of biodiversity, accidents, layoffs, temporary contracts, fraud, etc.), and contributions (taxonomic alignment, participation in the United Nations Sustainable Development Goals “SDGs”, temperature in accordance with the Paris Agreement, etc.). Taking sustainability factors into account is an ongoing process that we update regularly, in case of event having major implications on material characteristics of the investment case. Through our process and MSCI ESG Research ratings, we already consider a broad spectrum of ESG criteria in the E pillar (physical risks from climate change, water stress, waste management, etc.) the S pillar (employee training, product safety, audits of manufacturing processes, etc.) and the G pillar (ethical and commercial practices, risk of fraud or corruption, tax controversies, etc.) as part of our generalist approach. Within our 4Change funds, some investment strategies are driven by additional specific criteria, with respect to the dedicated investment strategy thematic (Net Zero, Inclusion & Handicap, Green Bonds).
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Integrating ESG criteria into funds of funds
Within our open-architecture activity (funds of funds), we have also defined an approach that integrates ESG criteria into our selection process for long-only funds. We have set a unique due diligence questionnaire that integrates ESG criteria allowing us to benefit from a 360-degree analysis encompassing 3 axes of assessment, i.e., the ESG/SRI, investment and operational dimensions. It is conducted at the level of the portfolio management company and of the fund. We assess the following elements in particular: ■ The consideration of climate change risks and opportunities within the portfolio management company (existence of a CSR policy, systems for monitoring energy, water and paper consumption, commitments to reduce carbon emissions, etc.), in its investment processes and the company’s ability to produce carbon data on its investments, for example. ■ The management of human resources and the development of human capital: through our questionnaire and analysis, we seek to address specific criteria, such as the existence of formal employee satisfaction surveys, training structures (percentage of employees, hours of training per employee per year, etc.), as well as how challenges related to the presence of women in the company are considered and managed. We also verify the absence of social controversies and litigation between the company and its employees. ■ The governance: we assess the quality and stability of decision-making bodies based on criteria, such as the degree of independence of the management committee, audit and control systems, compensation mechanisms (whether performance-based objectives exist and are related to the management of sustainable development challenges), the capital structure with regards of tax issues, the existence of regulatory litigation, etc. ■ The engagement policies implemented by the portfolio management companies, particularly the voting and dialogue policy and their memberships in international initiatives aiming to promote good environmental practices, including the Carbon Disclosure Project (CDP), UNEP Finance Initiatives, Institutional Investors Group on Climate Change (IGCC), Montreal Carbon Pledge, etc. ■ The fund’s responsible investment process: the objective is to use qualitative analysis (1) to assess the adequacy between resources (human, IT and extra-financial databases) and the responsible investment process implemented within the fund; (2) to identify the relevance of process (filters, exclusions, ratings, etc.) compared to its philosophy and sustainable themes and its added-value compared to its peers. In addition, we consider the level of disclosure and transparency (including portfolio inventory and funds covered by MSCI ESG Research) and, the fund’s ESG rating in absolute and relative terms compared to its peers and/or its benchmark.. Based on information compiled through our proprietary questionnaire, during our discussions with the asset management company and from MSCI ESG Research and Morningstar Direct, the analysts produce an ESG assessment of the asset management company and of the fund. As most of the information used is from the portfolio management company, we are able to conduct these reviews independently of MSCI ESG Research coverage. If the fund is not rated by MSCI ESG Research, we have developed an internal tool to assign an ESG rating to the fund, in accordance with their methodology. To complement our internal analysis, we produce a scorecard, based on our proprietary methodology, and inspired by a risk/opportunity approach and the materiality challenges identified by MSCI ESG Research for the financial sector. The scorecard’s objective is to guide the analysts in their ESG assessment of the asset management company and of the fund. It provides homogenous research framework and a synthetic overview via the selection of key criteria. This synthesis is based on both tangible, systematic and objective criteria, and on factors that are more qualitative, including analysts’ evaluation. This process results in a score ranging from 1 (the best score) to 4. The criteria for analysis are as follows: ■ At the portfolio management company level: □ Environmental pillar: environmental policy at company level, exclusion policies regarding hermal coal, portfolios’ carbon emissions, etc. □ Social pillar: human resources management, signatory of UN PRI, exclusion policies related to controversial weapons and fundamental principles, etc. □ Governance pillar: board independence, compensation policy, etc. ■ At the fund level: ESG criteria integration into the investment process, ESG rating of the fund, carbon intensity, labels, etc.
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4. Engagement
We believe that engagement is key to making a positive and tangible impact by promoting the emergence, dissemination and adoption of good practices, but, most of all, by supporting companies in transforming their business models
Through our engagement initiatives, we have set 3 objectives:
1 2 3
Acting for the climate and preserve the planet
Contributing to a more inclusive economy
Facilitating the allocation of financial flows into sustainable investments
Key principles of our engagement policy By implementing our engagement policy, we intend to act on all the links in our value chain: ■ Alongside issuers, as part of our direct management practices. With a view to supporting ■ and monitoring “ESG trajectories”, we interact regularly and constructively with issuers in which we are invested. We make use of our right of oversight whenever we deem that necessary to deepen our analysis, to assess issuers’ capacity to transform, to guard ourselves from the risk of controversies, or to take concrete measures in line with our ESG investment themes (e.g. climate transition or disability). We make sure that the areas for improvement are implemented and that they have concrete results. ■ Alongside portfolio management companies. As part of our open-architecture business, we conduct in-depth ESG due diligences in order to enrich our buy list and inform our fund selection. ■ Alongside the sustainable finance ecosystem ((clients, external data providers, professional associations, local initiatives, public authorities, and NGOs). We take active part in various initiatives by participating, among other things in public consultations, working groups, and panel discussions or by conducting communications campaigns meant for the general public. ■ Alongside our associative partners. A part of our management fees, for specific SRI funds, is redistributed to our associative partners Polar POD and Café Joyeux. ■ Alongside our employees. Training and awareness-raising of our employees on our sustainable investment themes are factors in the success of our business. We carry out actions in this respect and involve them in our initiatives.
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Voting policy Since 2011, Rothschild & Co Asset Management Europe has implemented an active voting policy consistent with the principles of sustainable investment. For this purpose, we have entrusted research on resolutions to a specialised company, Institutional Shareholder Services (www.issgovernance.com) and have chosen to adopt a “socially responsible investment” voting policy, to allow us to assess companies on all ESG pillars. ISS submits voting recommendations that comply with sustainable investment principles and Rothschild & Co Asset Management Europe remains the ultimate decision-maker on the exercise of voting rights. Our voting policy covers our entire equity investment perimeter, with no geographical or market-cap distinction.
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5. Monitoring & Controls
Several teams are in charge of controls at Rothschild & Co Asset Management Europe. These departments are independent and are at the service of fund managers. Risk management Rothschild & Co Asset Management Europe has a permanent Risk Management function hierarchically and operationally independent of the operating units. It reports directly to the chief executive officer and is under the operating responsibility of the RMM group’s chief risk manager. Risk Management has the human and technical means necessary to carry out its tasks properly. The company does not outsource this task. Risk Management measures and monitors all risks arising from managing of portfolios, including sustainability risks. Within the framework of its purview, Risk Management draws up a map of financial and extra-financial risks that aims to identify and manage the risks that the portfolios are exposed to, including sustainability risks. Risk Management supervises limits on a daily basis, requirements and constraints specific to funds (AMF doctrine, SRI or Towards Sustainability certifications, SFDR). This mainly involves compliance with: ■ DProduct-specific exclusions ■ Weighted-average rating objectives, issuer minimum ratings ■ KPI and related objectives ■ Taxonomic alignment and sustainable investments minimums ■ Reinforcement/purchase bans in case of controversies ■ Calculation of PAIs (principle adverse impacts) In the event of breaches, risk management is in charge of disseminating the information within the organisation. Compliance The mapping of non-compliance risks, of operational risks and conflicts of interest take ESG risks into account. The compliance activity plan includes ESG actions and controls (in particular reviews of regulatory policies and reports, labels, etc.). On a daily basis, the department monitors compliance with the exclusions regarding: ■ Controversial weapons prohibited by the Oslo and Ottawa conventions ■ International sanctions ■ United Nations Global Compact (UNGC) ■ Investment principles for the thermal coal sector The Compliance team is in charge: ■ of regulatory monitoring to ensure that any new regulation has been addressed by the company; ■ of offering assistance and information to employees to ensure awareness regarding their professional obligations.
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Internal Controls The internal control plan includes ESG & labels related verifications processes.
The second level of control, permanent and a posteriori of operations, is carried out by the Internal Control team. The main task of this team is to monitor compliance with procedures and the quality of the tools put in place. The controls assess the effectiveness of the first-level controls.. Internal Auditing Periodic control is carried out by the internal audit department as part of an audit plan defined by the Audit Committee at Group level. This plan includes ESG controls. Portfolio management & ESG controls With ESG data fully integrated in our operating systems, ESG is monitored on a continuous basis. Our entire value chain (teams in charge of compliance, risk management, portfolio management and reporting) is covered by the same ESG data flow (updated quarterly), which allows us to monitor daily and in real time ESG constraints and requirements coded into systems by the Compliance team (with a common exclusion framework) and the Risk Management team (product-specific ESG requirements). The investment management teams have access to ESG data and can follow their sustainability constraints on a daily basis via their Bloomberg portal. Allocations within portfolios and their impacts on sustainability requirements are thus monitored in real time by fund managers. These mechanisms complement the investment committees, which meet regularly to discuss in greater depth the ESG risks and challenges of a specific issuer and/or portfolio. In order to monitor changes in ESG ratings and controversies, we have set up automatic daily and weekly notifications from the MSCI ESG Research platform. The investment teams monitor newsflow daily and disseminate relevant information each day during the morning meeting. In case of a major event, our controversy committee meets in the days following its occurrence. Our process for managing controversies is detailed in the engagement and principal adverse impact policies. ESG reports are produced monthly with the same ESG data flow. They are reviewed and validated on by the investment teams
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6. ESG reporting
and Impact measures
The ESG quality of our directly managed funds and funds of funds is reflected in ESG and impact indicators. To highlight the ESG profile: ■ The portfolio’s ESG score ■ Distribution of ESG ratings within the portfolio and by sector
■ Review of the portfolio’s ESG rating trajectory To highlight environmental performance: ■ Environmental score ■ Green share
■ Carbon intensity, calculated in tons of scopes 1 & 2 carbon emissions per million euros of revenues, review of deviations with indices, detailed contribution per sector and identification of the most contributing issuers or funds
Scope 1
Scope 2
Scope 3
Direct emissions Emissions from fixed or mobile installations located within the organisational perimeter
Indirect emissions from energy use Greenhouse gas emissions incurred by consumption of electricity, heat, steam or artificial cold
Indirect emissions incurred by other stages in a product’s lifecycle Apart from its production alone and which the company can influence but does not benefit from direct control (supply, transport, use, end-of-life, etc.)
Sources: Companies, MSCI ESG Research, Carbon Disclosure Project
Calculation of an issuer’s carbon intensity tons of CO2 emission divided by Revenues (in million)
Calculation of a portfolio’s carbon intensity of n title weight of the title i x carbon intensity of the title i ∑ n i=1
To highlight social performance: ■ Social score ■ Presence of women on the board To highlight governance performance: ■ Governance score
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To highlight the trajectory and the consideration of transition challenges: ■ The “Low Carbon Transition Management” score: this score (0 – 10) is an indicator of a company’s management performance regarding low-carbon transition related risks & opportunities. ■ The breakdown of the portfolio by “Low Carbon Transition Category”: the Low Carbon Transition Category indicator classifies companies based on their exposure to low-carbon transition risks and opportunities. ■ Exposure to issuers having set a carbon-emission reduction objective. ■ For funds of funds, assessment of exposure to fossil fuel and coal reserves of underlying companies. To highlight the participation of directly managed investments to the United Nations Sustainable Development Goals: ■ The percentage of the portfolio aligned with each of the 17 SDGs
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7. CSR initiatives
Our initiatives in favour of sustainable investment
We are confident that addressing sustainability challenges is a structural and unmissable trend in our business
For this reason, we are developing a sustainable approach that is common to all our investments. As a financial company and stakeholder in our society, we are also seeking to apply to ourself a number of commitments as an organisation and supplier of investment solutions and to participate through initiatives in steering financial flows into sustainable investments.
Engaging collectively
We have chosen to join a limited number of initiatives that are directly referring to our investment themes, in order to be involved in developing and disseminating best practices. Our contributions to the initiatives presented below are detailed in our 2021 engagement report.
We take part in working groups that include financial actors to promote credible and pragmatic sustainable finance that is applicable to all asset management companies:
■ Member of the Responsible Investment Committee of the French Asset Management Association (AFG) ■ Participation in AFG’s fossil fuels working group which in October 2021 published a Guide on Developing a Fossil Fuels Strategy ■ Member of Finance for Tomorrow, a Paris-based initiative, member of the impact finance working group since 2021 and member of the biodiversity working group since 2022
■ Contribution to ADEME, a Paris-based initiative dedicated to reviewing commercial allegations of financial products’ environmental impact since 2022
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We are member of investor coalitions that engage with companies on climate & just transition challenges:
Joining the initiative to enhance governance on climate change
Member of Investors for a Just Transition, the first global engagement coalition launched by Finance for Tomorrow
As a portfolio management company, we want to take active part in these climate and transition challenges, by inscribing our management activities into demanding and recognised frameworks:
Use of the Global Coal Exit List of Urgewald, an NGO
Signatory of the UNPRI since 2011
Joining the Net Zero Asset Managers initiative to act in favour of the climate and meet the Net Zero objective
Alongside the aforementioned initiatives and our sustainable investment ambitions, we are involved in sponsorship activities.
We are a sponsor of the Polar POD expedition and participate in a reforestation programme through Reforest'Action. We are also developing partnerships with associations, through the development of "sharing funds". Since 2022, we have committed to donating at least 1% of the 4Change range revenues to associations approved by 1% for the Planet, a non-profit organization:
Through initiatives in which we take part, we want to make our engagement more concrete. We focus on both positive contributions via the dissemination of good and consistent practices within our sector, and on reducing the adverse impacts arising from our investment decisions, mainly through actions conducted through investor coalitions.
Details of the CSR policy implemented by Rothschild & Co are available on the Group’s website.
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8. Investor disclosures
We have formalised our responsible investor approach in the form of various documents, accessible on our website. Policies / General documentation ■ This ESG policy
■ Engagement policy including the voting policy ■ Exclusion policy relating to controversial weapons ■ Exclusion policy relating to fundamental principles ■ Investment principles for the thermal coal sector ■ Principal Adverse Impacts policy ■ Sustainability risk policy in investing
■ List of open-ended funds complying with the ESG policy, and their SFDR category ■ Summary of ESG ratings and carbon intensities of our main open-ended funds ■ Rothschild & Co’s CSR policy
■ Remuneration policy Specific documents
■ AFG-FIR Transparency Code (Direct management) ■ AFG-FIR Transparency Code (Multi-management) Reports ■ Annual reports ■ ESG reports of our open-ended funds ■ Annual engagement report, including our voting rights report ■ Article 29 reporting combined with TCFD Report ■ The UN PRI transparency report, available on the PRI website
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ESG policy | Rothschild & Co Asset Management Europe
Disclaimers This is not a promotional document.
The information/opinions/data contained in this document, considered legitimate and correct on the day of its publication, The information/opinions/data contained in this document, which is believed to be correct as of the date of publication, in accordance with the economic and financial environment prevailing at that time, is subject to change at any time. Although this document has been prepared with the utmost care from sources deemed reliable by Rothschild & Co Asset Management Europe, it does not guarantee the accuracy and completeness of the information and assessments made in this document. Although this document has been prepared with the utmost care from sources deemed reliable by Rothschild & Co Asset Management Europe, it offers no guarantee as to the accuracy or completeness of the information and assessments it contains, which are for guidance only and are subject to change without notice. This document is published by Rothschild & Co Asset Management Europe. It contains opinions and statistical data that Rothschild & Co Asset Management Europe considers legitimate and correct on the day of publication in accordance with the economic and financial environment in place on that date. This document does not constitute investment advice, an invitation, an offer to subscribe or a solicitation to buy or sell any financial instrument and should not be relied upon in any way. This information is provided without knowledge of the investor's specific circumstances. Before subscribing, investors should check in which countries the fund(s) referred to in this document are registered and, in the countries in question, which sub-funds or asset classes are permitted for public sale. Investors considering subscribing for units are advised to carefully read the most recent version of the fund's legal documentation (prospectus, DICI and annual report), which are available from Rothschild & Co Asset Management Europe's Client Services and on the website www.am.eu.rothschildandco.com, or from the fund's distributors. Investors are advised to consult their own legal and tax advisers before investing in the fund. and tax advisers before investing in the fund. Given the economic and market risks, there can be no guarantee that the fund will achieve its investment objectives. the fund will achieve its investment objectives. The value of the units may fluctuate up and down by nature. The performance figures are given after deduction of fees. The figures quoted relate to the past months and years. Past performance is not a reliable indicator of future of future performance. Although Rothschild & Co Asset Management Europe information providers, including without limitation, MSCI ESG Research LLC and its affiliates (the “ESG Parties”), obtain information (the “Information”) from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/ or completeness, of any data herein and expressly disclaim all express or implied warranties, including those of merchantability and fitness for a particular purpose. The Information may only be used for your internal use, may not be reproduced or disseminated in any form and may not be used as a basis for, or a component of, any financial instruments or products or indices. Further, none of the Information can in and of itself be used to determine which securities to buy or sell or when to buy or sell them. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein, or any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. Rothschild & Co Asset Management Europe, a “société en commandite simple” [French limited partnership] with a share capital of EUR 1,818,181.89, registered with the Paris Trade and Companies Register under number B 824 540 173, having its registered office at 29, avenue de Messine in Paris, France (75008). Portfolio Management Company approved by the AMF, under number GP-17000014.
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Contacts
FRANCE – UNITED KINGDOM Paris 29, Avenue de Messine 75008 Paris +33 1 40 74 40 74
SWITZERLAND Geneva Equitas SA Rue de la Corraterie 6 1204 Geneva +41 22 818 59 00
GERMANY- AUSTRIA Frankfurt Börsenstraße 2 - 4 Frankfurt am Main 60313 +49 69 299 8840
BELGIUM - NETHERLANDS - LUXEMBOURG Brussels Avenue Louise 166
1050 Bruxelles +32 2 627 77 30
ITALY - SPAIN Milan Via Santa Radegonda 8 Milano 20121 +39 02 7244 31
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