ESGS* ENGAGEMENT POLICY FOR THE EDMOND DE ROTHSCHILD TRICOLORE RENDEMENT FUND

Transcription

1 ESGS* ENGAGEMENT POLICY FOR THE EDMOND DE ROTHSCHILD TRICOLORE RENDEMENT FUND SEPTEMBER 2015 * Envirnment-Scial-Gvernance-Stakehlders EDMOND DE ROTHSCHILD ASSET MANAGEMENT (FRANCE) 47, rue du Fauburg Saint-Hnré Paris Cedex 08 France T F S.A. à Directire et Cnseil de Surveillance au capital de eurs Numér d agrément AMF GP R.C.S. Paris

2 Launched in 1998, the Edmnd de Rthschild Triclre Rendement fund principally invests in French stcks exhibiting attractive valuatins and the ptential fr delivering superir returns. In rder t deliver lng-term capital grwth while generating lw vlatility, the fund efficiently cmbines tw investment styles: - A Yield apprach, with a fcus n dividend grwth a guarantee f their sustainability in time - And a Value apprach the aim f which is t manage cyclical risk by investing in undervalued, turnarund stries and in quality stcks within industrial and financial cyclicals. On April 10 th 2012, the fund s investment universe was extended t include the eur zne (max. 25% f net assets) in rder t imprve diversificatin withut making any changes t the investment strategy. In keeping with the fund s wealth preservatin apprach and fcus n risk/return, an SRI Engagement apprach was intrduced late Cnsistent with Edmnd de Rthschild Asset Management (France) s SRI analysis and investment philsphy, this particular SRI apprach is cmplementary t the firm s existing vting rights at sharehlder meetings. It cnsists in engaging a psitive, cnstructive, and medium t lng term dialgue with cmpanies wned by the prtfli ver specific ESGS issues in rder t encurage them t imprve business practices. If the dialgue is unsuccessful, it can lead (as a last resrt) t Edmnd de Rthschild Asset Management (France) submitting a reslutin at sharehlder meetings, r t the prtfli selling the stcks f a cmpany which has made n effrt t imprve its practices. The dialgue prcess is clsely mnitred and dcumented (Annual ESGS Engagement Reprt fr Edmnd de Rthschild Triclre Rendement, internal reprts,). The SRI Analysis team carries ut a full ESGS screening f the prtfli in rder t identify, with the fund managers, the cmpanies which will be engaged with as a matter f pririty. These are ntably cmpanies with lw ESGS ratings which may carry lng-term investment risk. EDMOND DE ROTHSCHILD ASSET MANAGEMENT (FRANCE) 2/9

3 1. OBJECTIVES OF THE ENGAGEMENT POLICY The Engagement Plicy implemented by Edmnd de Rthschild Asset Management (France) fr the Edmnd de Rthschild Triclre Rendement fund has a tw-fld bjective: 1. T encurage cmpanies t make effective prgress and cmmunicate n ESGS issues (Envirnment, Scial, Gvernance, Stakehlders) that have been clearly identified by Edmnd de Rthschild Asset Management (France), with the view t imprving their practices, their transparency and their understanding f ESGS challenges. 2. T upgrade the investment prcess applied t Edmnd de Rthschild Triclre Rendement by incrprating ESGS criteria int ur financial analysis, and using ESGS Engagement as a lever t increase awareness and imprve practices, but als t add value t the stck in keeping with the fund s investment style and bjectives. The prudent investment style that characterises Edmnd de Rthschild Triclre Rendement aims t deliver lng-term capital appreciatin and lw vlatility. In seeking t ptimise the risk-return cmbinatin f the prtfli, the fund managers aim t prtect the capital by anticipating ptential ESGS-related risks that have nt been factred in by the market and that if materialized, culd have a negative impact n stck market perfrmance. The prcess als requires identifying ESGS issues that the market is already well aware f, that are having a negative impact n the valuatin f a given cmpany, and that if imprved upn driven by Edmnd de Rthschild Asset Management (France) s Engagement plicy - culd deliver ptential upside. Furthermre, the prtfli s lw turnver (a residual f its wealth preservatin apprach), the extended investment hrizn (apprx. 5 years), the large size f the fund, the stability f the investment team and prtfli managers dialgue with cmpany executives enable Edmnd de Rthschild Asset Management (France) t initiate a cnstructive dialgue prcess and t establish the fund s Engagement plicy in the lngterm. Edmnd de Rthschild Triclre Rendement therefre plays a key rle as the first channel fr Edmnd de Rthschild Asset Management (France) s ESGS Engagement plicy, vis-à-vis cmpanies, investrs, but als the general public- since the fund has a strng reputatin n the market. EDMOND DE ROTHSCHILD ASSET MANAGEMENT (FRANCE) 3/9

4 2. COMPANIES THE FUND WILL ENGAGE WITH AS A PRIORITY Fllwing a favrable strategic and financial analysis, cmpanies that feature in the prtfli f Edmnd de Rthschild Triclre Rendement r are ptential candidates fr the buy-list, are subjected t a prprietary screening prcess develped by Edmnd de Rthschild Asset Management (France) s SRI Analysis team. This screening cvers the fur ESGS pillars, with weights varying accrding t the sectr, market capitalisatin, and type f capital. Once the SRI analysis has been cnducted n the prtfli, the fund s investment teams will receive alerts fr any stck rated lwer than the minimum threshld f A SRI. Cnsequently, ur Engagement plicy will be initiated as a pririty with cmpanies that are given lw SRI ratings (under A SRI ), with thse that have bad ratings in ne r mre ESGS pillars, r with cmpanies that may ptentially be expsed t ESGS cntrversies. Our Engagement with these cmpanies is driven by the investment team s decisin t maintain, strengthen r intrduce stcks int the prtfli f Edmnd de Rthschild Triclre Rendement by encuraging them t imprve their ESGS practices and their respective ratings. The investment team is als infrmed f the breakdwn f ratings by ESGS criteria and f any changes (up r dwn) fr each stck in the prtfli, and f any sensitive infrmatin, in rder t initiate a pr-active Engagement plicy with cmpanies that are being dwngraded n ne r mre pillars. The cmbined wrk f SRI fund managers and analysts, based n financial and extra-financial cnvictins that draw upn the research and ESGS dialgue initiated with cmpanies, is a key factr fr the prtfli managers as they make their investment decisins fr the fund. EDMOND DE ROTHSCHILD ASSET MANAGEMENT (FRANCE) 4/9

5 3. PEOPLE RESPONSIBLE FOR ENGAGEMENT ON BEHALF OF THE FUND The Engagement plicy is cnducted by the prtfli managers f Edmnd de Rthschild Triclre Rendement and by the SRI analysis team. This plicy is reviewed by the Engagement and Vting Cmmittee which includes the Chairman f the Bard, the Chief Investment Officer fr Lng-Only Strategies, the SRI research team, the prtfli manager f Edmnd de Rthschild Triclre Rendement and Edmnd de Rthschild Asset Management (France) s Chief Cmpliance Officer. This Engagement and Vting Cmmittee crdinates: The different stages f Edmnd de Rthschild Asset Management (France) s vting rights, in cmpliance with the firm s fficial vting plicy: its members crdinate the crrect executin f vtes with prxy-vting cmpanies, mnitr any reslutins that Edmnd de Rthschild Asset Management (France) may vte against, apprve the vting reprt and update the vting plicy n an annual basis. The rganisatin f the ESGS Engagement plicy: apprving the Engagement Plicy and any updates, infrming the cmpanies that feature in the prtfli r that are due t enter Edmnd de Rthschild Triclre Rendement n the fund s Vting and Engagement plicy, discussing the ESGS ratings f prtfli cmpanies and their revisins, issuing warnings in the event f a dwngrade affecting ne f a stck s ESGS pillars, identifying pririty cmpanies fr engagement, identifying key ESGS issues t be addressed with the target cmpany, launching actin plans, apprving minutes relating t Engagement initiatives as well as the Annual ESGS Engagement Reprt. In additin, t give further weight t the Engagement plicy and t take int accunt the cmplexity f sme f the ESGS issues we may have t address n behalf f Edmnd de Rthschild Triclre Rendement, Edmnd de Rthschild Asset Management (France) may rely n insights frm utside experts. This input enables the dialgue t be as dcumented as pssible and ensures the arguments put frward are enfrceable. EDMOND DE ROTHSCHILD ASSET MANAGEMENT (FRANCE) 5/9

6 4. ENGAGEMENT METHODOLOGY EMPLOYED Unlike activism, Edmnd de Rthschild Asset Management (France) prefers t engage in a cnstructive dialgue and apply a practive vting plicy. Edmnd de Rthschild Asset Management (France) prmtes dialgue at all levels f the cmpany (Executive management, Strategic and Financial Directrs, Sustainable Develpment Directrs, HR, Investr Relatins), and where necessary, requests ad hc meetings with peratinal team members in rder t pursue sme f the issues in mre depth. Edmnd de Rthschild Asset Management (France) may help with the launch f cmmunicatins incentives such as the signature f the United Natins Glbal Cmpact. Edmnd de Rthschild Asset Management (France) is als experienced in practicing crprate dialgue in the cntext f sharehlder meeting vtes. Our 2015 Vting Plicy cvers vting principles in the area f crprate gvernance, but als n Scial, Envirnmental r Stakehlder issues ; these are all cnsistent with ur SRI analysis. Edmnd de Rthschild Asset Management (France) therefre acts prir t the Sharehlder meetings by: Practively sending ut the firm s Vting Plicy and Engagement Plicy t all prtfli cmpanies, explaining Edmnd de Rthschild Asset Management (France) s apprach as a respnsible sharehlder and inviting cmpanies t engage with ur fund managers n ESGS issues. Our bjective here is t send ut the Vting Plicy n a systematic basis t all cmpanies held in the prtfli and ptentially expressing ur disagreement n a number f reslutins prir t the sharehlder meetings, if necessary. Cntacting Edmnd de Rthschild Triclre Rendement prtfli heavyweights prir t the Sharehlder meetings in the event f a negative vte r an abstentin n reslutins suggested by the cmpany s management. Respnding t cmpanies requests t infrm them f the prtfli managers vting intentins prir t the sharehlder meeting, particularly in the event f negative vtes r abstentins. Cnducting regular meetings with cmpany management in rder t exchange views n strategic, financial and extra-financial issues: these meetings are an ideal venue fr the prtfli managers t bring up sharehlder meeting reslutins and supprt the cmpany as it imprves its practices. EDMOND DE ROTHSCHILD ASSET MANAGEMENT (FRANCE) 6/9

7 Finally, Edmnd de Rthschild Asset Management s Vting and Engagement Cmmittee keeps a clse watch f n-ging sharehlder calitins and assesses whether it wuld be relevant fr the firm t jin Cllabrative Engagement initiatives. 5. MONITORING THE EFFICIENCY OF ENGAGEMENT INITIATIVES Edmnd de Rthschild Asset Management (France) ensures that a cnstructive dialgue is established with the target cmpany, and that this cmpany is receptive t tackling the ESG challenge(s) that have been identified. Furthermre, Edmnd de Rthschild Asset Management (France) ensures it has the means and resurces needed t mnitr its Engagement initiatives: Fr each cmpany, the investment team identifies ESGS issues in sufficient detail t enable regular prgress reprts; We set a target hrizn that is lng enugh t allw cmpanies t make the necessary changes; We have set up a crdinatin and mnitring bdy dedicated t Engagement initiatives: the Vting and Engagement Cmmittee ; We cmmunicate regularly with the cmpanies and the general public (Annual ESG Engagement Reprt fr Edmnd de Rthschild Triclre Rendement, and the 2014 Annual Vting Reprt ). 6. MEASURES TAKEN IF ENGAGEMENT IS UNSUCCESSFUL In the event f Engagement being unsuccessful, Edmnd de Rthschild Asset Management (France) may submit reslutins t the Sharehlder Meeting, r jin sharehlder calitins. If a cmpany shws n tangible imprvement n a given ESG issue, the stck s weighting within the prtfli f Edmnd de Rthschild Triclre Rendement may be reduced, r the psitin even sld. The investment team f Edmnd de Rthschild Triclre Rendement has regularly had t reduce the weight f a stck in the prtfli - fr instance due t uncertainties ver the management s ability t cnduct a restructuring plan - r has remved a stck due t persistent risks n the Grup s reputatin and/r investr appeal. EDMOND DE ROTHSCHILD ASSET MANAGEMENT (FRANCE) 7/9

8 These extreme utcmes will nly be cnsidered as a last resrt, and fllwing Edmnd de Rthschild Asset Management (France) s unsuccessful prmpting f the cmpany cncerned. We believe in establishing a cnstructive and psitive prcess ver the lng-term. 7. COMMUNICATION ON ENGAGEMENT INITIATIVES The Edmnd de Rthschild Triclre Rendement fund launches Engagement initiatives every year. These are described in the fund s Annual ESGS Engagement Reprt and in the glbal summary f the Annual Vting reprt. Bth dcuments are available in the SRI Expertise pages f ur website The Annual ESGS Engagement Reprt fr Edmnd de Rthschild Triclre Rendement 1 can include the fllwing infrmatin fr each new cmpany cncerned: Reasns fr Engagement: cmpany prfile and targeted ESGS issue(s) identified as particularly material and discriminatry n ne r mre ESGS pillars; Expected imprvements; Pririty lever(s) fr imprvement(s); Time frame given fr imprvements; Analytics upn which we base ur engagement; Engagement methdlgy emplyed (dialgue, vting plicy, etc.); Respnse and tangible results delivered by the cmpany; Any changes in the weight f the cmpany within the prtfli f Edmnd de Rthschild Triclre Rendement. This reprt als prvides summary updates n Engagement initiatives that are still n-ging with ther cmpanies. Furthermre, Edmnd de Rthschild Asset Management (France) shall ensure that external cmmunicatin n ur engagement actins des nt upset the relatins f trust we have with the cmpanies and that dialgue and prgress can be sustained ver the lng-term. 1 Please nte that in rder t cmply with ur respnsibilities as asset managers and t preserve the efficiency f n-ging ESGS initiatives currently taking place with cmpanies featuring in the prtfli f Edmnd de Rthschild Triclre Rendement, the infrmatin disclsed in this reprt may nt reveal the name f the cmpany cncerned. EDMOND DE ROTHSCHILD ASSET MANAGEMENT (FRANCE) 8/9

9 Main investment risks: risk f capital lss, equity risk, credit risk, interest rate risk, currency risk. The abve list is nt exhaustive. Accrding t the risk/return scale (frm 1 t 7), the fund is ranked categry 6 - r high risk/return prfile - which reflects its ptential 110% expsure t equity markets. Disclaimer: Published n 01/09/2015. Nn-binding dcument. This dcument is fr infrmatin nly. The data, cmments and analysis in this bulletin reflect the pinin f Edmnd de Rthschild Asset Management (France) and its affiliates with respect t the markets and their trends, their regulatin and tax treatment, n the basis f its wn expertise, ecnmic analysis and infrmatin currently knwn t it. Hwever, they shall nt under any circumstances be cnstrued as cmprising any srt f undertaking r guarantee whatsever n the part f Edmnd de Rthschild Asset Management (France). Ptential investrs shuld cnsult their service prvider r advisr and exercise their wn judgement independently f Edmnd de Rthschild Asset Management (France) n the risks inherent t each investment and its suitability t their wn persnal and financial circumstances. T this end, investrs must acquaint themselves with the key investr infrmatin dcument (KIID) r fund prspectus that is prvided befre any subscriptin and available at r n request frm the head ffice f Edmnd de Rthschild Asset Management (France). Edmnd de Rthschild Asset Management (France), 47, rue du Fauburg Saint-Hnré Paris Cedex 08. Sciété annyme gverned by an executive bard and a supervisry bard with capital f eurs. AMF registratin: GP R.C.S. Paris. EDMOND DE ROTHSCHILD ASSET MANAGEMENT (FRANCE) 9/9