Candriam Sustainable Equity Water

ESG Assessment

• a. ESG selection criteria:

  For corporates, the internal analysis of ESG criteria consists in selecting the issuers:
  • that are the best positioned to meet the challenges of sustainable development;
  • that comply with the principles of the United Nations Global Compact (i.e. human rights, labour law, the environment, anti-corruption), and which are therefore less exposed to the risks associated with these themes; and
  • that are not engaged in controversial activities such as armament (securities of a company whose activity consists of manufacturing, the use or possession of anti-personnel mines, cluster bombs and/or depleted uranium weapons), tobacco, thermal coal.

  For sovereign issuers, the internal analysis of ESG criteria consists in selecting:
  • Countries that perform best across our four categories of sustainable development criteria: Human Capital, Natural Capital, Social Capital and Economic Capital;
  • Countries that are not part of our highly Oppressive Regimes or dictatorships, based on the Freedom House Freedom in the World Index and the World Bank Voice & Accountability Index.

• b. Selection methodology:

  The companies selected by the management company are subject to a dual analysis:
  • Analysis of their activity to assess their alignment with the major challenges of sustainable development. For example, regarding the transition to a circular economy, the management company will consider a company producing recycled steel to be more sustainable than a company producing steel exclusively from iron ore; and
  • Analysis of how the company manages players interacting with the company: its employees, its customers, its shareholders, its suppliers and the environment. Here too, the management company will favour companies that adopt the most sustainable practices given their sector. For example, with regard to relations with its clients, the management company will favour pharmaceutical companies with balanced pricing practices and commercial policies. Similarly, with regard to relations with their employees, the management company attaches great importance to the fight against discrimination and compliance with social standards.

  Our sovereign investible universe consists of those countries which perform best across our four categories of sustainable development criteria:
  • Natural Capital: stock of naturel resources managed by the country;
  • Social Capital: trust, norms and institutions which people can rely on to solve common problems and create social cohesion;
  • Human Capital: human productivity to which the country participates through education and other initiatives;
  • Economic Capital: assessing the level of economic activity viability.

• c. A team of ESG analysts is responsible for assessing the selection criteria:

  The analysis and selection of sustainable investments is carried out by a dedicated team of ESG analysts within Candriam. This team is made up of specialists whose mission is to analyse the exposure of companies and governments to the risks and opportunities associated with sustainable development.

  Selection criteria are expected to evolve over time, based on advances in ESG research and changes in company practices.