CARMIGNAC’S APPROACH

In line with Carmignac’s entrepreneurial spirit and high conviction approach to the composition of our portfolios, our teams are independent thinkers who take a tailored approach to the assessment of the ESG profile and trajectory of our investments.

Our approach

How we view sustainable investment

Carmignac offers a broad range of sustainable funds which benefit from our independent and active management style to align our investors’ sustainable goals to our own.Explore our funds

OUR ESG THEMES

Our approach to investing sustainably and active ownership is focused on three themes which are consistent with Carmignac’s investment philosophy and long-term views:

Climate

We believe that climate change poses an existential threat and is a source of systemic risk for our economies and the financial markets. We expect every investee company to mitigate their impact on the environment and understand climate change impacts on their activities and operations. We encourage them to contribute to the development of a lower carbon economy in line with the goals of the Paris Agreement.

Empowerment

Companies cannot successfully operate without appropriately balancing the interests of their stakeholders. We expect our investee companies to value their employees whilst providing a supportive, safe and inclusive environment at work. With regards to customers, the appropriate processes and internal controls should be put in place to ensure customer welfare, enhancing their experience and therefore, their loyalty. We also look for companies to ensure, to the best of their ability, strong human rights standards through their supply chain.

Leadership

We believe that a robust leadership underpins the long-term performance and success of any corporation. Whilst there is no one formula to good governance, we expect our investee companies to put in place the appropriate governance structure which will contribute to fostering innovation as well as ensuring strong checks and balances are in place.
Guide to sustainable investing

OUR PROPRIETARY ESG RESEARCH SYSTEM: START

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.

Introducing START
START is an ESG research system which blends third-party data sources with our in-house views, to provide a comprehensive analysis on companies regarding ESG risks and opportunities – analysis which constitutes a cornerstone of our Funds' investment process.
  • Comparing what's comparable
  • Collecting all that's available
  • Sorting it all out
  • Putting the data into perspective

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.
Data include:

  • external ESG ratings,
  • company reported data (employee turnover, energy usage, gender equality, etc.),
  • past and present controversies.

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:

  • A rating – they can override the systematically generated score
  • A written comment – details of their analysis and any information they think is relevant
  • An outlook on the company’s ESG trajectory – is it making effort?

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?

By combining a wide range of data with expert insights, the START system provides a formal, structured and forward-looking ESG analysis of companies, on which our investment team relies on to make appropriate choices in line with the funds’ strategy, and thus for our clients’ capital.Discover our funds

OUR OUTCOMES FRAMEWORK

At Carmignac, we strive to identify firms generating positive change based on the Sustainable Development Goals (SDGs) defined by the United Nations. We have identified nine SDGs as ‘investable’, which means that companies in which our funds can invest are able to support progress towards these goals through their products and services.
In this sense, our funds aim to have a sustainable objective investing more than 50% of the fund’s AUM in companies with over 50% of their revenues derived from goods and services positively aligned with at least one of the nine ‘investable’ SDGs by Carmignac:

(1) No Poverty; (2) No Hunger; (3) Good Health and Well Being; (4) Quality Education; (6) Clean Water; (7) Affordable and Clean Energy; (9) Industry, Innovation and Infrastructure; (11) Sustainable Cities and Communities; and (12) Responsible Consumption and Production.

SDG alignment information at company-level is included in our proprietary ESG research system START.

United Nations Sustainable Development Goals

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.

Sustainable development goals
1 - No poverty
2 - Zero hunger
3 - Good health and well-being
4 - Quality education
6 - Clean water and sanitation
7 - Affordable and clean energy
9 - Industry, innovation and infrastructure
11 - Sustainable cities and communities
12 - Responsible consumption and production
Sustainable Development Goals 9 of 17 SDGs

OUR SOVEREIGN DEBT MODELS

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:

  • A global sovereign ESG risk model, which aims to assess ESG risks faced by developed and emerging countries
  • An Emerging Markets -focused model that aims to identify positive ESG trajectories.

OUR ESG INDICATORS USED IN START

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:

Explore our funds

Environment

  • Carbon Emissions –Direct & First Tier Indirect (tonnes CO2e)
  • Carbon Intensity- Direct & First Tier Indirect (tonnes CO2e/USD mn)
  • Flaring of Natural Gas
  • Total Energy Use/Revenues
  • Renewable Energy Use Ratio
  • Energy Use Total
  • Total Waste/Revenues
  • Waste Recycled/Total Waste
  • Direct and accidental oil spills
  • Water Use/Revenues
  • Water Recycled
  • Fresh Water Withdrawal Total

Social

  • % Employee Satisfaction
  • Employee Turnover
  • Incidence of female manager
  • % Customer Satisfaction
  • Chief Executive Salary Gap
  • % Gender Pay Gap
  • Employee training hours
  • Lost Time Due to Injury Rate
  • Employee Fatalities

GOVERNANCE

  • % Audit Committee Independence
  • Compensation Committee Independence
  • Nomination Committee Involvement
  • Board Size
  • Independent Board Members
  • Highest Remuneration Package
  • Long Term Objective-Linked Executive Compensation
  • Compensation Sustainability Incentives
  • Average board tenure
  • Board gender diversity
The proprietary ESG system START combines and aggregates the data from market leading providers. Given the lack of standardisation and reporting of some ESG indicators by public companies, not all relevant factors can be taken into consideration. START provides a centralised system whereby Carmignac’s proprietary analysis and insights related to each company are expressed, irrespective of the aggregated external data should it be incomplete.

AFFILIATIONS

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.

Affiliations & Memberships

Signature date : 14/06/2012
Signature date : 05/01/2020
Signature date : 27/10/2019
Signature date : 01/12/2019
Signature date : 07/02/2022
Signature date : 02/02/2022

KEY TAKEAWAYS

Our approach

Our approach to ESG is built around the following three following themes: Climate, Empowerment and Leadership.

Our methodologies

We have developed proprietary methodologies to the assessment of the ESG profile and performance of our investments across our equity and fixed income holdings. This includes our research platform START.

Our collaborations

We seek to collaborate with other investors to have more weight and influence in our engagement with investee companies. We also collaborate with essential players of the finance industry with the aim of ultimately improving how markets function.

Carmignac's point of view

Discover our leadership and portfolio management teams introducing our differentiated sustainable approach.
Sustainable investing • 1 September 2020

What we need for energy transition.

Speakers : Michel Wiskirski
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Sustainable investing • 1 September 2020

How to reduce our carbon emissions?

Speakers : Michel Wiskirski
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Sustainable investing • 1 September 2020

How to achieve the Paris Agreement targets?

Speakers : Mark Denham
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