We chose to integrate extra-financial criterias into our investment strategy to participate - at our level - in the fight against global warming and to promote good corporate governance.
Our commitment is based on two observations:
- By reason: we are convinced that taking into account these extra-financial factors is, in today's world, inseparable from the analysis of fundamentals to determine the value of a company.
- By conviction: we consider that as a company, we have a social responsibility.
Consequently, our investment decision necessarily takes into account the environmental performance of companies and the quality of their governance.
In order to materialize our commitment to responsible investment, we have signed the Principles for Responsible Investing promoted by the United Nations Organization..
Our ESG approach
We take into account environmental (E) and good governance (G) criteria from the initial phase of company analysis. Each investment decision is made on the basis of these considerations. Our responsible investment approach is based on a double requirement:
1. Exclusion of companies active in controversial sectors
Monocle AM excludes from its investment universe companies active in the thermal coal sector (fuel used for electricity production), given
the major negative impact of coal on the environment.
Monocle AM won't invest in companies active in the tobacco sector because of the harmful nature of this product for health and the environment.
2. The achievement of a minimum E-G rating by issuers
We have developed our own model to assess the environmental commitment and good governance of issuers.
Each issuer is assigned an overall E-G rating ranging from 0 to 5 based on the assessment of non-financial indicators (e.g. carbon emissions, proportion of renewable energy in the energy mix, proportion of women in management positions, etc.).
We adopt a "selectivity" approach and commit to:
- obtain an average E-G rating for the portfolio above 3;
- not to invest when the issuer obtains a rating below 2.
This double red line approach has been established so that the average ESG rating of the portfolio does not lose its meaning by masking unequal situations between issuers.
In this way, Monocle AM does not allow any compromise towards issuers whose commitment to environmental and good governance issues is insufficient.