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Abacus Discovery

Transparency in sustainability

Our ESG vision

The extra-financial investment objective of the Abacus Discovery (Orion) fund is to promote environmental, social, societal and good governance characteristics, as defined in Article 8 of the SFDR Regulation.

Within the investment universe, preference is given to shares of European companies whose activities and extra-financial approaches are linked to the promotion of ESG and sustainability characteristics.

DISTRIBUTION OF ESG SCORES

The Abacus Discovery adopts a comprehensive extra-financial strategy. In particular, the fund-specific analysis constrains the investment universe in the same way as the financial analysis. Within the investment universe, preference is given to shares of small and medium-sized European companies whose activities are linked to the promotion of ESG and sustainability characteristics.

Within the meaning of the SFDR regulation, the fund refers to article 8. Thus, the fund implements several approaches:

  • Normative exclusions: excluding companies involved in controversial weapons and companies found in violation of the 10 principles of the UN Global Compact and the OECD Guidelines;
  • Sectoral exclusions: fossil fuels, coal-fired power, tobacco and the adult entertainment industry;
  • “Best-in-Universe”;
  • ESG risk and impact analysis;
  • Greenhouse gas emissions analysis, scopes 1,2,3;
  • Positive impact and sustainability analysis;
  • Dialogue with companies to deepen our analysis and encourage positive impact;
  • Risk and controversy monitoring.

Lack of a sustainable investment objective

“This financial product promotes environmental or social characteristics but does not aim at sustainable investment.”

The fund ensures that it is aligned with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight core conventions identified in the International Labour Organisation’s Declaration on Fundamental Principles and Rights at Work and the Human Rights Charter.

This alignment is verified and monitored at the level of the investable universe. A company found to be in violation of these Principles is excluded from the investable universe.

Environmental and social characteristics

The criteria for ESG analysis are selected from a number of categories grouped into four main themes: environmental responsibility, social responsibility, societal responsibility and corporate governance. The four themes correspond to four pillars: environmental, social, societal and governance.

Environment pillar

  • General environmental policy
  • Emissions footprint
  • Energy consumption and mix
  • Pollution control and waste management
  • Water management and sustainable consumption
  • Climate risks
  • Biodiversity

Social pillar

  • Work standards
  • Safety and health
  • Quality of working life
  • Diversity, gender equality and equity
  • Training
  • Job creation
  • Employee ownership

Societal pillar

  • Anti-corruption policy
  • Tax compliance and business ethics
  • ESG risks in the supply chain
  • Raw materials management
  • Consideration of consumer interests
  • Charitable engagement and sponsorship

Governance pillar

  • ESG approach and transparency
  • Certification and labels
  • Internal ESG/CSR governance
  • Composition of executive bodies
  • Remuneration Committee
  • Audit Committee
  • Profit redistribution

Our ESG analysis takes into account more than 130 ESG criteria on the basis of double materiality analysis. The approach takes into account criteria reflecting sustainability risks to value and risks of negative impacts of companies on sustainability factors.

Our ESG analysis model includes an analysis focused on criteria reflecting the impact of ESG and climate change risks on companies. The ESG analysis captures the exposure of assets to risks arising from the physical and transitional impacts of climate hazards:

  • Physical risks caused by weather and climate events which include heat waves, extreme precipitation, sea level rise, etc.
  • Transitional risks resulting from the effects of the implementation of a low-carbon economic model, including political, technological, market and reputational risks related to the transition to a low-carbon economy etc.

Thus, the analysis looks at the possible negative impacts of companies’ activities on ESG factors. Investment decisions can impact sustainability factors whether the impact is positive or negative. They can be linked, directly or indirectly, to sustainability factors. The main negative sustainability impacts are defined as the impacts of decisions leading to negative effects on sustainability factors. These impacts arise from the activity and behaviour of the company, but also from the investors, their selection or their management and engagement approach. Environmental, social and societal factors can be affected, covering issues such as respect for human rights, pollution, corruption and others.
We have selected indicators of negative impact based on their significance, availability, likelihood of occurrence and the potentially serious or irreversible nature of their consequences.

Investment strategy

1 – OUR PHILOSOPHY

Our socially responsible and sustainability-conscious convictions drive our extra-financial strategy and investment guidelines.

2 – RESEARCH AND ANALYSIS

We perform our due diligence and ESG analysis on each company.

We conduct an in-depth analysis of the company’s activities, responsible approach and corporate culture.

Our analysis is done in-house using a proprietary tool.

With raw data, collected directly from the company, its reports and publications.

Our analysis is based on quantitative data, supplemented and contextualised by qualitative data.

3 – COMMITMENT AND STEWARDSHIP

We actively engage the company in order to collect data from the management and to discuss possible ways of improvement.

4 – KPI AND TRANSPARENCY

In order to ensure a minimum ESG threshold, for each fund a specific approach is assigned.

In addition, we strive to achieve an ESG performance of the portfolio above that of its benchmark.

We analyse and monitor around 130 KPIs including footprint and emissions intensity for all portfolios. We consider scopes 1, 2 and 3.

The ESG performance of our funds is subject to regular monthly and annual reporting.

The 5 postulates of our extra-financial strategy

REDUCE THE RISKS

Preventing negative impact on value and the environment

Normative and sectoral exclusions

ESG analysis based on dual materiality

Pragmatic and objective management of controversies

SEIZE THE OPPORTUNITIES

Focusing on and encouraging positive impact

Positive impact measurement

Constructive and proactive dialogue

Objectives of the fund

Minimum investability threshold

The entire universe is rated and 20% of worst rated companies are excluded

ESG analysis coverage rate

More than 90% by weighting

ESG rating

Higher than benchmark

Exposures

Exposure to sustainable development

0%
Environmental development
0%
Social development

The sustainable investment rate is calculated internally by taking into account three criteria: substantial contribution to one or more of the SDGs, absence of significant harm and good governance.

The sustainability calculation distinguishes between environmental goals related to clean water (MDG 6), clean energy (MDG 7), sustainable consumption (MDG 12), combating climate change (MDG 13) and biodiversity (MDG 15), and social goals related to human health (MDG 3), quality education and training (MDG 4), gender equality (MDG 5), decent work (MDG 8), and reducing inequality (MDG 10).

Monitoring environmental and social characteristics

Control during the life of the asset

1 – Monitoring the universe
Initial analysis

2 – Portfolio monitoring
In-depth analysis

3 – Pre-trade control

4 – Post-trade control

5 – Commitment

Methodology

Normative and sectoral exclusions

Best in universe

ESG analysis based on dual materiality

Positive impact measurement

Analysis of greenhouse gas emissions

Promoting E and S characteristics

The fund aims to promote best practice at the level of the financial product and the investee company.

Our mission, as asset managers, is to invest responsibly in order to create sustainable value for all stakeholders. Our objective is twofold:

  • On the one hand, we aim to reduce and prevent the negative effects of our investment decisions on the environment and society as a whole.
  • On the other hand, we prioritise the measurable, intentional and progressive positive impact of our assets.

All our funds, including Abacus High Yield 2028, follow this objective.

To this end, the fund promotes environmental and social attributes through the thorough integration of ESG, climate and SDG factors into its investment and asset management processes. These factors are taken into account at the level of the investment universe, as well as at the level of portfolio creation and management.

Examples of features promoted in the investment universe

Fuel exclusions

Exclusion of controversial behaviour

Examples of features promoted at the portfolio creation stage

Reducing the negative impact of GHG emissions on the environment

Good working conditions

The quest for positive impact

Direct contribution

of companies by sector and type of activity

Sustainable forest management company

Waste management and treatment company

Indirect contribution

of companies by performance

Any company that has implemented energy efficiency measures

Any company that has set up an employee training programme

The Fund uses a specific internal tool to assess the positive impact and sustainability of companies. Our specific impact analysis tool calculates each company’s direct or indirect contribution to one or more Sustainable Development Goals (SDGs). As part of the process of building an investment case, we look at companies whose activities intentionally and measurably generate positive environmental and social impacts. This analysis of the positive impact of issuers does not restrict the investment universe.

The impact analysis contains two components for measuring the positive impact of companies:

  • Calculation of the direct contribution, looking for the direct or fundamental correlation between the activity of the company invested in and the objectives of sustainable development,
  • The calculation of the indirect contribution, due to the company’s approach, behaviour and corporate culture, independently of its activity.

Sustainable investment

The fund calculates the sustainable investment rate for issuers.  This calculation is carried out in-house using a proprietary tool that takes three criteria into account: substantial contribution to one or more sustainable development goals (SDGs), absence of significant harm and good governance.

For more information:

Couverture Politique Investissement Responsable

Politique investissement responsable UK

Couverture Document

Annual Report 2022

Couverture Code Transparence Disco

Code de transparence Disco/Quality UK

Couverture Politique d’engagement

Politique d’engagement UK

Couverture Politique d’exclusion

Politique d’exclusion UK

Sources and data

External data - internal tools and analysis

We attach great importance to the development of proprietary models built on our expertise to provide tangible added value in the application of our non-financial strategy. Our analysis and monitoring tools respect this principle and aim to offer results that we control as a whole.

Our proprietary tools developed on the basis of international standards

The management team is responsible for scientific, technical and regulatory monitoring in terms of tool development and extra-financial management. It relies on international standards:

  • The UN Sustainable Development Goals (SDGs) for their granularity and in-depth, global approach.
  • The Global Reporting Initiative (GRI) and Carbon Disclosure Project (CDP), for their relevant publications and their work on improving transparency in the extra-financial field;
  • Documentary sources published by European Union bodies such as the European Securities and Markets Authority (ESMA) and the European Environment Agency (EEA).
  • Publications from national public authorities such as, for France, the French Environment and Energy Management Agency (ADEME) and the French Financial Management Agency (AFG);

Methodological limitations

The ESG analysis adopted is based mainly on qualitative and quantitative data provided by the companies themselves. It therefore depends on the heterogeneity of the quality of this information and the quantity of data available. To fill any gaps, the fund contacts companies to obtain the necessary information through ESG questionnaires.

ESG data received from third parties may be incomplete, inaccurate or unavailable from time to time. There may also be a size bias, as large caps have more budget allocated to their responsible and CSR approach.

Carbon analysis is limited by the lack of a clearly defined reporting framework. The methods used by companies to calculate their CO2 emissions may vary in quality as well as in quantity. Thus, the data published by companies may be based on different perimeters of induced emissions (Scope 1, 2, 3). In particular, Scope 3 emissions are often unavailable. All of this can affect the calculation of the portfolio’s overall footprint.

Duty of care

Monitoring of the investable universe :

  • Exclusions according to our Exclusion Policy
  • Analysis of controversies and risks
  • Entitled ESG analysis, with the exclusion of 20% of the worst rated companies (Best in Universe)

Daily monitoring and updating

Portfolio monitoring :

  • In-depth ESG analysis
  • Impact and sustainability analysis
  • Controversy monitoring

Daily monitoring, data update at least annually, ad hoc in case of controversies

Spot check of investability and ESG risk before an order is filled

Updating and monitoring daily ESG ratios.

Daily monitoring of the achievement of ESG objectives within the portfolio:

  • Rating above the benchmark
  • ESG analysis coverage rate >90%.
  • Investability rate >90%.

We communicate with companies on the subject of their responsible approach.

We make contact on several occasions:

  • Occasionally, in order to deepen our analysis
  • Regularly at ESG forums
  • At the request of the company

The management team is also responsible for the identification, measurement and control, at the first level, of the risks related to the implementation of the extra-financial approach within the managed portfolios. These risks are controlled at the second level by the management company’s Middle Office Risk, with the support of the permanent control delegate.

Commitment

Philippe Hottinguer Gestion wishes to promote the consideration of the extra-financial sphere among its clients and investors. The company encourages the integration of ESG factors into the decision-making processes and activities of the companies in which it invests.

The company is committed to the UN Principles for Responsible Investment, to the 6 Principles for Responsible Investment, including those relating to shareholder engagement. We are committed to

  • Being active shareholders, integrating ESG issues into our shareholding policies and procedures.
  • Encourage the companies in which we invest to publish information about their ESG practices.
  • Promote the adoption and implementation of the Principles in the investment industry.
  • Cooperate to improve the effectiveness of our implementation of the Principles.

To this end, we have planned several engagement approaches.

Collaborative commitment

Promoting and sharing knowledge on sustainable finance issues

Forums, conferences…

Collaborative platforms

Individual commitment

Protecting and improving the investment process, monitoring ESG performance and encouraging the positive impact of assets

ESG Questionnaire

Constructive and proactive dialogue

Votes at meetings

Aligned with the company’s investment objectives and principles

Votes at meetings

Designated benchmark index

Benchmark index: Eurostoxx Small

The benchmark follows the same ESG rating strategy with the same KPIs, calculation methods and is rated using the same variable materiality as the portfolio. Compliance with the portfolio’s sustainability objectives is measured daily. This is done in part by using the ESG rating of the benchmark. Other KPIs, such as carbon intensity or footprint, are monitored regularly and reported on a monthly basis. In this sense, the benchmark is continuously monitored and ensured to be aligned with the environmental and social characteristics promoted by the financial product.

The respective ESG scores of the investable universe and the benchmark are weighted by their capitalisation and updated daily to ensure continuous alignment with each ESG objective of the portfolio.

We use the same methodology for calculating the ESG factors of the index and the portfolio. Our responsible investment policy details the methodology applied.

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