Fund Size: £903.03m

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

Our thematic process starts by defining an eligible universe of companies for which enough evidence is available about their commitment to bring solutions of mitigation or adaptation to the climate issues facing the world. The resulting preliminary investment ideas are vetted by our climate specialists, either by excluding companies if for example they belong to sectors incompatible with the strategy, or by adding companies that the AI-engine did not spot. The result of this preliminary thematic screening is a long list of around 700 companies identified as potential investment ideas for the strategy.

The investment universe defined above is subjected to a preliminary ESG filter: We first apply our company exclusion policy for strategies classified article 9 SFDR, and our norms-based policy. Furthermore, we limit our investment scope to the companies receiving the best ESG scores based on a proprietary ESG analysis methodology, called Best-in-Universe. We only select the best companies with an ESG score of up to 5 (on a 1-10 scale, 1 being the best and 10 being the worst).

The screening combines the following features:

• Weapons and Controversial Activities screening,
• Norms-Based Analysis: companies must respect the ten principles of the UN Global Compact,
• Business Activities Analysis: we assess company exposure to five key sustainable challenges central to long-term sustainability,
• Stakeholders Analysis: companies are evaluated on their management of six types of stakeholders, Stewardship, through Dialogue and Proxy Voting, is a key constituent of our investment process.

Process

Candriam's ESG investment process is a two-step process that first of all calls for the definition of the eligible investment universe, followed by a financial selection which includes ESG considerations to select issuers within the eligible ESG universe. Any investment outside the ESG universe is prohibited.

The selection of ESG issuers is confirmed by the ESG team on a monthly basis, and on a one-off basis in exceptional circumstances.

ESG considerations are taken into account within the individual investment processes. Our ESG integration approach leverages on the frameworks and analysis conducted by the ESG Team. The analysis and views resulting from the ESG analysis are embedded in our financial frameworks. The consideration of ESG aspects in the financial framework will impact the final issuer score/color and valuation for our equity strategies. To this end, integrating ESG considerations will ultimately impact the construction of the final portfolio.

Key steps:

• Fundamental Analysis - Candriam’s fundamental analysis is based on five pillars: Quality of Management, Business Growth, Competitive Advantage, Value Creation and Financial Leverage. Each of these pillars receives a colour/score that determines the final assessment of a company.
• Company Valuation - We further evaluate the dynamics of their profitability and growth, the liquidity of the equity, and valuation. Our valuation is predominantly based on DCF models using at least five years of projected Free Cash Flow, based on our internal projections. We adjust the discount rate based on the final score/colour of a company which takes into account ESG criteria. For example, for green companies, we reduce the discounting rate within our DCF. This modification has a significant impact on the DCF- valuation.
• Portfolio Construction -within the eligible universe, the process is mainly colour-based, bottom-up stock selection; weightings in the portfolio are function of the global colours of the companies. The sector weight deviations from the benchmark are not a strategic objective; they result from our convictions on individual stocks, with top down sanity checks and other deviation boundaries. The weight is significantly impacted by the colour grade (including the ESG score), and the upside potential derived through our valuation analysis (that takes the ESG score into account as well). We favour companies that are 'green' in all aspects. An ‘orange’ company will have a lower weight and 'red' companies are in principle excluded, or extremely reduced, depending on the process.

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...

...contributing to the advancement of the goals set by the Paris 2°C Agreement through the integration of ESG factors with a strong focus on environmental aspects. To this end, the strategyinvests in a diversified portfolio of Climate Change solutions providers for the mitigation and adaptation to climate change.

Climate change represents two main types of risks, physical and transitional risks. The first includes direct damage caused by weather events. The latter results from transitioning to a low-carbon economy and climateresilient future. For example, this risk entails the depreciation of assets, or stranded assets, as a result ofregulatory developments that would penalize or even prohibit certain activities deemed too intensive in theemission of greenhouse gases.

The degree of risk and opportunities varies across sectors. For instance, this isparticularly problematic in the Oil and Gas sector, which is currently experiencing an increase in stranded assets as demand for fossil fuel falls in the transition to a low-carbon economy. Our ESG analysts take into considerationthese two types of risk when assessing issuers.

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 & 9 Thematics Strategies

Last amended: 25/01/24 11:11