Abacus Tech for Good
Transparency in sustainability
Normative and sectoral exclusions
Best in universe
ESG analysis based on dual materiality
Positive impact measurement
Analysis of greenhouse gas emissions
Our ESG vision
The extra-financial investment objective of the Abacus Tech for Good 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
CONTRIBUTION TO THE SDGS
The Abacus Tech for Good adopts a comprehensive extra-financial strategy. In particular, the fund’s specific analysis constrains the investment universe in the same way as the financial analysis. Within the investment universe, preference is given to shares of European companies of all capitalisations 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;
- 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 focuses on investing in companies that contribute to environmental and social objectives. Thus, the fund promotes the following characteristics in companies:
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.
- General environmental policy
- Emissions footprint
- Energy consumption and mix
- Pollution control and waste management
- Water management and sustainable consumption
- Climate risks
- 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
- 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 120 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.
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 double 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
Higher than benchmark
Exposure to liability risk
Exposure to sustainable development
Exposure to sustainable development
Exposure to liability risk is assessed through in-depth ESG analysis, analysing more than 120 criteria from the four pillars: environmental, social, societal, and governance. The ESG analysis captures the management company’s exposure to liability risk, which is defined as the legal risk of companies being sued and/or convicted for violating their ESG constraints and obligations.
Sustainable development exposure is assessed through the Sustainable Development Goals (SDGs), taking into account the direct and indirect contribution of the invested companies and assigning a score from 0 to 100.
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).
ESG ratings, both total and by pillar, are calculated by our proprietary tool for all invested companies. The tool is developed on a dual materiality basis, taking into account the sustainability risks to the company and the risk of the company’s negative impact on the sustainability factors.
The contribution to the SDGs is assessed by the direct contribution to one or more of the goals as a result of the company’s activity, and by the indirect contribution as a result of the company’s approach, behaviour and culture independently of the activity.
Monitoring environmental and social characteristics
Control during the life of the asset
1 – Monitoring the universe
2 – Portfolio monitoring
3 – Pre-trade control
4 – Post-trade control
5 – Commitment
Normative and sectoral exclusions
ESG analysis based on double materiality to prevent risks for the management company
Prevent financial risk to the value of the asset
Monitoring sustainability risks affecting the asset
Prevent liability and reputational risk for the management company
Ensure negative impacts of assets on sustainability factors
ESG analysis in figures
More relevant KPIs
Raw material sourcing
Human rights in the supply chain
% of renewable energy in the energy mix
Waste and water treatment
Employee health and safety
ESG and sustainability policy
Less relevant KPIs
Diversity at work
GHG emissions at entity level
These are emissions that are produced directly at the company level, from fixed or mobile installations located within the organisational perimeter, including sources owned or controlled by the company.
These are mainly emissions created in the process of producing electricity, steam, heat and cooling.
These are mainly emissions that occur in the company’s supply chain, including upstream and downstream emissions. In other words, emissions that are linked to the company’s operations.
Or avoided emissions. These are emission reductions that occur outside the life cycle or value chain of a product, but as a result of the use of the product. They are measured against a reference situation or product mix.
Scope 4 emissions are avoided emissions from the use of this product, through efficiency improvements or energy-efficient and carbon-intensive reductions. In other words, scope 4 emissions are not the emissions induced by working from home, they are the emissions avoided by not using transport to come to the office.
They are not the ‘negative’ emissions to be subtracted from the induced emissions.
These emissions are not currently established in a standardised way, so we make sure that our approach is transparent and based on recognised benchmarks and methodologies.
Scope 4 emissions are included in our analysis only as an indication to complement our carbon approach.
Using data on the emissions of invested companies, some of which may be modelled, the management team calculates the greenhouse gas (GHG) emissions footprint and intensity of our funds.
- The emissions footprint is calculated at portfolio level and represents the amount of tonnes of CO2 per million euros invested.
- Emissions intensity is first calculated at company level and represents the ratio of emissions to company turnover. The portfolio intensity is calculated as the average of the total emissions over the companies’ turnover.
The intensity and footprint can include different sums of scopes (scope 1 and 2 or scope 1 and 2 and 3), depending on the portfolio coverage. The scopes taken into account for the calculation are specified.
Promotion of E and S characteristics
of companies by sector and type of activity
Sustainable forest management company
Waste management and treatment company
of companies by performance
Any company that has implemented energy efficiency measures
Any company that has an employee training programme in place
The Fund uses a specific internal tool to assess the positive impact and sustainability of companies. Our specific impact assessment tool calculates the direct or indirect contribution of each company to one or more of the Sustainable Development Goals (SDGs). When building the investment case, we look at companies whose activities intentionally and measurably achieve positive environmental and social impacts. This positive impact analysis of issuers does not constrain the investment universe.
The impact analysis contains two components to measure the positive impact of companies:
- The calculation of the direct contribution, which looks for the direct or fundamental correlation between the activity of the invested company and the objectives of sustainable development,
- The calculation of the indirect contribution, due to its approach, its behaviour and its corporate culture independently of its activity
The fund calculates the sustainable investment rate for issuers. This calculation is carried out internally using a proprietary tool, taking into account three criteria: substantial contribution to one or more of the Sustainable Development Goals (SDGs), absence of significant harm and good governance.
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);
Duty of care
- 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
- In-depth ESG analysis
- Impact and sustainability analysis
- Controversy monitoring
Daily monitoring, data update at least annually, ad hoc in case of controversies
Daily monitoring of the achievement of ESG objectives within the portfolio:
- Rating above the benchmark
- ESG analysis coverage rate >90%.
- Investability rate >90%.
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.
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.
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.
Promoting and sharing knowledge on sustainable finance issues
Protecting and improving the investment process, monitoring ESG performance and encouraging the positive impact of assets
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
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.