Fund Size: £1481.79m

Total screened & themed / SRI assets: £44400.46

Total Responsible Ownership assets: £51607.60

Total assets under management: £125342.06

As at: 31/05/24

Contact: benjamin.rumary@candriam.com

Overview

Filters

Fund information

Policy

In a first step, we reduce the investment universe by applying an ESG-filter based on controversial activities and the respect of the UN Global Compact principles.

Any companies exposed to the weapons industry are permanently excluded from the universe if they are involved in the production or sale of anti-personnel landmines, cluster bombs, depleted uranium, chemical, biological and nuclear weapons regardless of the sales/revenues derived from such products.

Candriam also excludes companies involved in white phosphorous weapons that derive more than 5% of their total sales/revenues from the production, manufacturing, trade, testing or maintenance of such weapons.

We also exclude all companies directly involved in the tobacco industry that derive more than 5% of their revenues from the manufacturing or retailing of tobacco products and all companies directly or indirectly involved in the thermal coal industry deriving more than 10% of their revenues from coal extraction or power generation from coal or developing new thermal coal projects. Gambling is also excluded as a controversial activity, applying a 5% revenue threshold.

Candriam also conducts a Norms-based Analysis to determine whether each company respects the ten principles of the United Nations Global Compact that cover four main categories: Human Rights, Labour, Environment, and Anti-Corruption. Based on this Norms-based review, we possibly exclude companies which have significantly and repeatedly breached any of the principles of the United Nation’s Global Compact.

As for Demographic screening, we aim to identify those companies that generate at least 30% of their revenues from one or more of the following demographic long-term sub-themes: Rising demand for food, water & natural resources, Urbanisation, Environment, Healthcare, Healthier lifestyle, Retirement & savings, Emerging markets consumer, Evolving consumption trends (including digital). Starting from a high-level market classification, it’s clear some industry groups fit squarely into one of the 8 sub-thematics. Examples would be Health Care Equipment, Pharma, Automation or Electrical Equipment players within Cap goods, Semiconductor companies, Wealth Managers, Luxury Apparel amongst others. For other sectors thematic relevancy is less clear and stocks will be screened and analysed on an ad hoc basis. Both eventually create the total universe of names for the strategy.

Process

The strategy uses a fundamental bottom-up investment process, comprising four steps:

• As a first step, we apply ESG exclusion to the investment universe. We exclude companies that have significantly and repeatedly violated one of the principles of the United Nations Global Compact, covering four main categories: Human Rights, Labour Rights, Environment, and Corruption. We also exclude companies that are involved in controversial weapons, Tobacco, and Thermal Coal.
• As a second step, we screen all companies on their exposure to key demographic trends. We reduce the investment universe to companies having at least 30% of sales exposure to key demographic long-term trends in one or more of a set of related sub-themes.
• In a third step, each company is assessed through a financial analysis according to five fundamental criteria: 1) quality of management, 2) business growth, 3) competitive advantage, 4) value creation and 5) financial leverage. ESG factors are integrated in our financial analysis and thus have an impact on the fundamental companies’ assessment. This fundamental analysis is completed by a valuation exercise to determine the intrinsic value of each stock and its upside potential.
• The 4th and last step is the portfolio construction. We build a conviction portfolio that targets between 50 to 70 companies with a buy and hold mind-set. We close the construction process with a top- down sanity check on sectors.

Resources, Affiliations & Corporate Strategies

After first implementing a formal sustainability governance for the firm in 2020, we have further refined it to reflect changes within the firm but also to increase transparency vis-à-vis the investor:

• The Board of Directors is responsible for strategy and general policy. It ensures that Candriam has defined and implements a strategy in relation to ESG and corporate sustainability. In this context the Board is responsible for validating the relevant critical policies. 
• The Candriam Board of Managementis Candriam’s key decision-making body on strategic issues including ESG and corporate sustainability. It examines and approves relevant sustainability policies, including those covering sustainability risks, climate and human rights.
• The Group Strategic Committee (GSC)sets out the strategic orientations for the firm’s ESG investing (both from a product and a commercial standpoint) and Corporate Sustainability, with sustainability focus-sessions supported by Candriam’s ESG and CSR experts. The GSC oversees the due diligence approach for Climate and Human Rights risks across the value chain, including the elaboration and review of appropriate policies.

ESG

• The Sustainability Risk Committee (SRC)oversees and steers the management of extra-financial risk in the context of Candriam’s investment activities. The SRC is responsible for approving the ESG processes and framework for funds and mandates. It assesses and monitors sustainability risks and negative sustainability impacts, including climate and human rights risks, and defines companywide ESG investment-restrictions for all Candriam investment activities. The SRC oversees monitoring of respect and breaches as well as Engagement actions plans.
• The Proxy Voting Committeeprovides strategic guidance on proxy voting best practices and monitors Candriam’s voting policy.
• The Client Solutions Committee (CSC)and Product Range Committee (PRC) are the main bodies of Candriam’s regular product governance. They steer & manage the product approval and review process, including the ESG/Sustainability characteristics of products & services.  
• The ESG Steeringfollows-up on the implementation of the strategic ESG roadmap, and consists of investment, operational, IT and regulatory team workstreams.

CSR

• The CSR Ethics Committeeassesses & monitors human rights risks related to Candriam’s operations, incl Human Resources and Suppliers. It monitors the human rights due diligence process embedded within Candriam’s operations and follows up on issues alerted by operational, procurement or risk teams or via the Compliance whistleblowing procedure.
• The Candriam Institute for Sustainable Developmentoversees Candriam’s philanthropy and community impact program, through the support of initiatives in ESG research, education & entrepreneurship, social inclusion & solidarity, environment, and the fight against cancer.
• The CSR Steeringcoordinates the implementation of the CSR roadmap (incl. environmental & social aspects) and CSR reporting in the context of Candriam’s own operations, across staff, clients, operational value chain, governance and the community.

ESG + CSR

• The Sustainability Regulations Committeeoversees the follow-up of ESG/CSR regulations and coordinates the implementation of the Sustainability regulatory roadmap.

As an investment manager, we strive to integrate ESG across all processes, offering the best services and products in ESG Investing. As a company, we commit to upholding the highest sustainability standards in every dimension of our business and we believe that our new ESG Governance Framework will allow us to so in a more efficient manner.  

Dialshifter

This fund is helping to ‘shift the dial from brown to green’ by...

...integrating ESG factors at every step of the investment process, from applying norms-based and controversial activities exclusions, to integrating ESG criteria in the fundamental stock analysis. Apart from its financial objectives, the fund has 2 ESG KPIs: achieving a carbon footprint that is lower than that of its benchmark, and obtaining an overall ESG score higher than the ESG score of its index.

Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by...

• Moving beyond integrating scope 1 & 2 carbon footprinting, and extending the measurement of carbon performance to scope 3 emissions where relevant;
• The integration of climate goals in ESG research and investment objectives;
• Articulating our Climate Strategy around the core functions and activities of the organization:
  • investment management products and services,
  • corporate stewardship & active ownership,
  •  the company’s own operations.

We publish a certain number of metrics both at company level and fund level.

Literature

• Fund overview & literature (including factsheet)
• Candriam Article 8 - Equities, Bonds & Multi Assets Strategies

Last amended: 25/01/24 11:12