At Candriam, we took the lead in developing SRI investments in 1996 and, ever since, have continued to develop and improve our Best-in-Class approach to help investors benefit from both sustainable and financial added value:
- carefully adding sustainable criteria to properly diversified portfolios;
- investing in an in-house team of SRI analysts with a firm grasp of sector-specific challenges to ensure a sector-relevant weighting of sustainability themes;
- resulting in an in-depth, holistic SRI analysis procedure designed to select companies that have good stakeholder management and business models capable of coping with global sustainability trends, all the while respecting universally accepted norms.
Candriam’s SRI evaluation of companies thus includes a micro analysis of the companies’ stakeholder relations. It also includes the main macro trends in its SRI analysis.
The inclusion of global sustainability challenges in its SRI analysis is one of the innovative specificities of Candriam’s Best-in-Class approach. It enables the SRI analysts to take into account the main challenges with which companies are confronted, such as scarcity of resources.
Candriam’s comprehensive analysis is also unique in its in-depth knowledge of the stakes and challenges specific to each sector. This is where the appropriate weighting of each SRI criterion by sector becomes so important.
These thorough analyses make it possible to determine how companies will be able to meet sustainable development challenges and to systematically pick the companies with the best SRI profiles in each sector.
Best-in-Class country screening
In line with its company analysis, Candriam has also developed a Best-in-Class methodology for evaluating a country’s attitude toward sustainable development issues. More concretely, we examine a country’s ability to manage its human, natural and social capital in such a way as to maintain its present welfare without compromising the ability of future generations to ensure their own welfare, including their economic prosperity.Our SRI analysis procedure assesses this capability through two different assessments:
- Compliance with recognised international norms and regulations. This reviews countries’ participation in international conventions that promote sustainable development and essential human and labour rights. We check whether the country has signed and ratified each of the 18 international conventions we selected. Compliance with the Freedom House Index is also checked in order to ensure that the level of democracy and political freedom is satisfactory.
- Considering this is not sufficient to have a complete assessment of a country’s pattern of development, this compliance check is completed by –again- the best-in-class approach, whereby countries are assessed on their capital, the latter broadly defined as “any resource that can generate a stream of benefits over time”
The main challenge when comparing countries’ sustainability lies in taking into account countries’ specificities: population, territories, amount of resources available, size of their land, etc. In order to avoid these biases, we use context indicators. For each of these, we look at each country’s exposure and available resources. This two-step assessment identifies the SRI investable universe for countries.