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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ESG policy | Rothschild & Co Asset Management Europe
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