Geoffroy GOENEN
Head of Fundamental European Equity
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About this fund
Candriam Sustainable Equity Europe Small & Mid Cap (hereinafter the “fund”), a sub-fund of the Candriam Sustainable SICAV, invests in a diversified portfolio of European small and mid-cap stocks with the best ESG scores (in the investment universe), which means they are committed to incorporating environmental, social and governance concerns into their business models and stakeholder management. In addition, equity investments eligible for the portfolio must comply with the ten principles of the United Nations Global Compact and must not be involved in controversial activities such as the armaments industry. The fund’s sustainable investment objective is to reduce greenhouse gas emissions while seeking to have a long-term positive impact on social and environmental aspects. The fund’s sustainable development objective is to contribute to the reduction of greenhouse gases and the objectives of the Paris Agreement. The Sub-Fund is intended for investors who are prepared to accept the risks associated with participating in changes in the equity markets, as well as the level of volatility generally associated therewith. The investment horizon is 6 years. The Fund’s objective is to outperform the index through an active and dynamic investment strategy. For more information on this benchmark and its use, please refer to the fund’s Key information document (KID).
Principal assets traded:
Shares of small and mid caps companies having their registered office and/or their principal activities in Europe (including United Kingdom and Switzerland).
Investment strategy:
The fund seeks to achieve capital growth by investing in the principal assets traded and to outperform the benchmark.
The management team makes discretionary investment choices on the basis of an economic/financial analysis process as well as on a Candriam’s proprietary analysis of Environmental, Social and Governance (ESG) considerations, both indicative of risks and long-term opportunities.
The fund’s sustainable investment objective is to contribute to reducing greenhouse gas emissions through specific targets as well as the integration of climate related indicators in issuer and securities analysis. The fund also aims to have long-term positive impact on environment and social objectives. More specifically the fund aims to achieve overall greenhouse gas emissions at least 30% lower than those of the benchmark.
To achieve these objectives the fund implements a combination of positive selection of the best issuers based on ESG criteria, exclusion of issuers detrimental to these objectives or deemed to prone to controversies.
Issuers are subject to a two-pronged analysis considering how issuers activities contribute to achieving sustainable objectives on the one hand, and how issuers’ operations and policies align with the interests of their key stakeholders on the other hand.
The result of this analysis forms the basis to define the investable universe and guide fund managers in their portfolio construction.
This analysis is enriched by the results of dialogs led with issuers.
This investment approach will cause the fund to avoid certain issuers due to their poor ESG quality or contribution to attaining sustainability objectives. Whilst the manager believes that such issuers are likely to lose out to more sustainable ones over the long term, market volatility and short term market trends could result in such issuers outperforming more sustainable ones over shorter periods.
The fund has not filed for the French SRI Label.
For further information, please refer to Candriam’s website and/or the prospectus.
The fund may use derivative products both for investment and hedging purposes (hedging against unfavourable future financial events).
Benchmark: MSCI Europe Small Caps Index (Net Return).
The fund is actively managed and the investment process implies referring to a benchmark index.
Definition of the index:
The index measures the performance of the small cap segment in the European developed markets.
Use of the index:
- in determining risk levels/risk parameters,
- for the purpose of performance comparisons.
- for performance fees calculation for certain share classes if applicable.
Since the fund is actively managed, it does not have the goal of investing in all components of the index, nor that of investing in the same proportions as the components of this index.In normal market conditions, the expected tracking error of the fund will be significant, i.e. above 4%.This measurement is an estimate of the performance gap between the fund and its benchmark index.The greater the tracking error, the greater the deviations from the benchmark index.The actual tracking error depends in particular on market conditions (volatility and correlations between financial instruments) and may therefore deviate from the tracking error expected.
Shares of small and mid caps companies having their registered office and/or their principal activities in Europe (including United Kingdom and Switzerland).
Investment strategy:
The fund seeks to achieve capital growth by investing in the principal assets traded and to outperform the benchmark.
The management team makes discretionary investment choices on the basis of an economic/financial analysis process as well as on a Candriam’s proprietary analysis of Environmental, Social and Governance (ESG) considerations, both indicative of risks and long-term opportunities.
The fund’s sustainable investment objective is to contribute to reducing greenhouse gas emissions through specific targets as well as the integration of climate related indicators in issuer and securities analysis. The fund also aims to have long-term positive impact on environment and social objectives. More specifically the fund aims to achieve overall greenhouse gas emissions at least 30% lower than those of the benchmark.
To achieve these objectives the fund implements a combination of positive selection of the best issuers based on ESG criteria, exclusion of issuers detrimental to these objectives or deemed to prone to controversies.
Issuers are subject to a two-pronged analysis considering how issuers activities contribute to achieving sustainable objectives on the one hand, and how issuers’ operations and policies align with the interests of their key stakeholders on the other hand.
The result of this analysis forms the basis to define the investable universe and guide fund managers in their portfolio construction.
This analysis is enriched by the results of dialogs led with issuers.
This investment approach will cause the fund to avoid certain issuers due to their poor ESG quality or contribution to attaining sustainability objectives. Whilst the manager believes that such issuers are likely to lose out to more sustainable ones over the long term, market volatility and short term market trends could result in such issuers outperforming more sustainable ones over shorter periods.
The fund has not filed for the French SRI Label.
For further information, please refer to Candriam’s website and/or the prospectus.
The fund may use derivative products both for investment and hedging purposes (hedging against unfavourable future financial events).
Benchmark: MSCI Europe Small Caps Index (Net Return).
The fund is actively managed and the investment process implies referring to a benchmark index.
Definition of the index:
The index measures the performance of the small cap segment in the European developed markets.
Use of the index:
- in determining risk levels/risk parameters,
- for the purpose of performance comparisons.
- for performance fees calculation for certain share classes if applicable.
Since the fund is actively managed, it does not have the goal of investing in all components of the index, nor that of investing in the same proportions as the components of this index.In normal market conditions, the expected tracking error of the fund will be significant, i.e. above 4%.This measurement is an estimate of the performance gap between the fund and its benchmark index.The greater the tracking error, the greater the deviations from the benchmark index.The actual tracking error depends in particular on market conditions (volatility and correlations between financial instruments) and may therefore deviate from the tracking error expected.
Investment Team
Christian SOLÉ
Deputy Head of Fundamental European Equity / Senior Equity Analyst - Financials
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Q&A, Geoffroy Goenen, Christian SoléQuality, Innovation & Sustainability
Geoffroy Goenen, Head of Fundamental European Equity and Christian Solé, Head of Small & Midcaps at Candriam explain why it is useful to invest part of an equity portfolio into European small & midcaps. -
Finland - Communication to stakeholders
In the context of the change of our sicav/fcp, please find here the related communications to Finland professional or private investors. -
Fund Range Information
The Funds Range Information gives you the latest modifications to the Candriam funds range.
Other information
This is a marketing communication. Please refer to the prospectus of the funds and to the key information document before making any investment decision. This marketing communication does not constitute an offer to buy or sell financial instruments, nor does it represent an investment recommendation or confirm any kind of transaction, except where expressly agreed. Although Candriam selects carefully the data and sources within this document, errors or omissions cannot be excluded a priori. Candriam cannot be held liable for any direct or indirect losses as a result of the use of this document. The intellectual property rights of Candriam must be respected at all times, contents of this document may not be reproduced without prior written approval.
Warning: Past performance of a given financial instrument or index or an investment service or strategy, or simulations of past performance, or forecasts of future performance does not predict future returns. Gross performances may be impacted by commissions, fees and other expenses. Performances expressed in a currency other than that of the investor's country of residence are subject to exchange rate fluctuations, with a negative or positive impact on gains. If the present document refers to a specific tax treatment, such information depends on the individual situation of each investor and may change.
In respect to money market funds, please be aware that an investment in a fund is different from an investment in deposits and that the investment’s principal is capable of fluctuation. The fund does not rely on external support for guaranteeing its liquidity or stabilizing its NAV per unit or share. The risk of loss of the principal is borne by the investor.
Candriam consistently recommends investors to consult via our website https://www.candriam.com the key information document, prospectus, and all other relevant information prior to investing in one of our funds, including the net asset value (“NAV) of the funds. Investor rights and complaints procedure, are accessible on Candriam’s dedicated regulatory webpages https://www.candriam.com/en/professional/legal-information/regulatory-information/. This information is available either in English or in local languages for each country where the fund’s marketing is approved.
According to the applicable laws and regulations, Candriam may decide to terminate the arrangements made for the marketing of a relevant fund at any time.
Information on sustainability-related aspects: the information on sustainability-related aspects contained in this communication are available on Candriam webpage https://www.candriam.com/en/professional/sfdr/. The decision to invest in the promoted product should take into account all the characteristics or objectives of the promoted product as described in its prospectus, or in the information documents which are to be disclosed to investors in accordance with the applicable law.
ESG Assessment
The Sub-Fund's investment strategy is to invest mainly in equities issued by small & mid caps companies having their registered office or carrying out their primary economic activity in Europe (including United Kingdom and Switzerland), selected by the portfolio management team on a discretionary basis and based on the stocks fundamental characteristics, as well as on a proprietary analysis of ESG criteria.
The investment strategy is implemented following a well-defined investment process and a strict risk framework.
Respect of these elements are subject to Candriam risk monitoring.
With regard to the environmental and social sustainability aspects of the investment strategy, Candriam's proprietary ESG analysis, leading to ESG rating and scoring, as well as the normsbased controversy assessment and controversial activities exclusion policy are implemented as they enable to define the investable universe for the Sub-Fund.
In addition, Candriam's ESG analysis, comprising an analysis of the business activities of an issuer and of its interactions with its key stakeholders, is integrated into the financial management of the portfolio to enable the fund manager to identify the risks as well as opportunities that arise from the major challenges of sustainable development.
Candriam as a management company has put in place a monitoring framework as described within the sustainability risk policy.
Risk monitoring of the investment strategy of the Sub-Fund aims to ensure that investments are aligned with and take into account the environmental, social and governance indicators and sustainability thresholds as explained above.
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.