Effective management of ESG factors is inherently linked with long-term performance and risk management. In 2020, Carmignac invested in a significant development enabling more uniform and efficient understanding and integration of ESG factors across all the key investable asset classes: equities, corporate and sovereign bonds. START (System for Tracking and Analysis of a Responsible Trajectory) is a systemised platform aggregating multiple sources of raw ESG data for our proprietary scoring systems for companies and also our Sovereign ESG model, Controversy analysis and SDG alignment.
START provides forward-looking ESG analysis that gives our investment teams the insights they need to make appropriate investment decisions, to best serve our clients’ long-term interests.
When assessing a company’s ESG credentials, we start by comparing it against its peers to allow for a fairer and more accurate assessment.
Company stakeholders (employees, customers, suppliers, environment, community, board…) have differing significance depending on sector and geography. We call this their 'materiality', the impact of which is critical to a company's present and future value, depending on how it deals with them.
Once assembled by common ‘materiality', we segregate the companies by region and size,to constitute our own ESG peer groups.
Large quantities of raw data are collected from specialised sources and automatically transferred into the system.
These data points enable the system to create an ESG performance-based profile for each company.
The system then ranks the companies within the ESG peer group, based on financially material ESG metrics – ESG metrics which can significantly impact companies' financial performance.
A score from A to E is automatically calculated for each E, S and G pillar to give us an overall company score.
This gives us a snapshot of how well the company is managing its stakeholders and if it has positive contribution to society and the planet through its revenues.
At this stage, the system has created the strongest possible starting point for the rest of the analysis.
WHY GO FURTHER?
Some information is not quantifiable, some data requires interpretation, some statistics are backward looking; an additional input is needed: the human factor.
Our analysts have in-depth knowledge of companies and industries gained through years of experience, hours of research and daily engagement with management.
This allows for unique insights, which they incorporate in the system through:
What is the company’s ESG strategy and how is it part of its overall corporate philosophy?
Is it aware of its key stakeholders today, and how is it managing them? Has the importance of stakeholders changed through time?
Does it contribute positively to society and the planet? Can it do more?
Is it positioned to deliver on its commitments?
At Carmignac, we strive to identify firms generating positive change based on the Sustainable Development Goals (SDGs) defined by the United Nations.
Alignment is defined for each company by meeting at least one of the following three thresholds:
As part of our sustainable investment journey, Carmignac Gestion uses the United Nations Sustainable Development Goals as illustrations of the company Outcomes Framework. The SDG logos, icons, colour wheel and design rights are and remain the property of the United Nations. Carmignac Gestion is a UN PRI signatory but is in no way affiliated with the United Nations. The United Nations did not endorse the content or data behind the SDG logos, icons and colour wheel. All content and data related to each UN SDG are compiled by Carmignac.
At Carmignac, we think that it is key to integrate ESG criteria in the monitoring of sovereign bonds as these are globally dominant in asset allocation. While external solutions are slowly being developed, we have chosen to build our own proprietary models in order to ensure ESG integration and to provide material information to our investors. Two models have been developed in the last years:
We analyse over 30 specific ESG indicators that we have defined as financially material for around 8,000 companies, to which we add controversy data. START allows our teams to add unique human insight and conduct company engagement surrounding these key indicators:
As an active owner, Carmignac sees value in both direct and collaborative engagement, and it is the combination of both which leads to the most influential and effective stewardship. It is by joining forces that investors can most effectively influence their investee companies on material ESG issues, including market-wide and systemic risks, and ultimately help improve the functioning of markets.
Membership to affiliations provides different levels of collaboration opportunities and involvement. We provide below an exhaustive list of the affiliations we are part of either as a signatory, supporter or participant.
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