Sustainability

The need for transparent and intelligible ESG information

In accordance with the requirements set out in the Sustainable Finance Disclosure Regulation “SFDR” (2019/2088), and in order to best meet the needs of our clients, we provide them with in-depth ESG reporting. The objective is to ensure corporate transparency on Environmental, Social and Governance aspects in order to better assess the management of these risks. The monthly reporting produced by ODDO BHF Asset Management provides our clients with a quantified assessment of the portfolio in terms of ESG criteria on the following aspects:

• The average ESG rating of the portfolio, compared to that of the benchmark index
• The carbon footprint of the portfolio and its benchmark (measured in tons of CO ₂ emitted per million euros of revenue)
• The main ESG positions
• ESG ratings in detail
• ESG characteristics
• Beyond the regulatory and non-regulatory imperative (Article 173 of the Law on Energy Transition for Green Growth in France / French decree 29)

Illustration of ESG characteristics for one of our funds incorporating ESG criteria.

	Portfolio			Benchmark			UN SDGs
	Feb 2021	Feb 2020	Coverage	Feb 2021	Feb 2020	Coverage
Environment
Fossil fuel exposure	-	-	99.5%	0.0%	0.0%	96.1%
Carbon solution exposure "green part"	35.5%	30.4%	99.5%	29.6%	29.0%	96.1%
Social
5Y Employee growth (%)	3.2%	2.5%	90.7%	2.8%	2.5%	80.6%
Female Executives	17.3%	15.5%	87.4%	15.2%	15.5%	83.0%
Governance
UN Global Compact signatory	69.1%	75.8%	64.4%	73.1%	74.0%	66.8%
Board members' independence	71.8%	73.7%	86.7%	72.4%	72.1%	78.6%
Human Rights
Implementation of Human rights policy	99.0%	99.4%	65.0%	98.7%	98.8%	68.0%

Climate reporting has become an essential part of an ESG integration investment strategy. Beyond the regulatory and non-regulatory imperative (Article 173 of the Law on Energy Transition for Green Growth in France, French decree 29), developing relevant indicators and quality reporting also helps to raise awareness among management teams of the financial risks of climate change and also encourages them to allocate more investment flows toward the sectors and companies that contribute positively to the transition to a low-carbon economy.

Labels: a guarantee of transparency

Today, there is a wide range of funds that incorporate ESG criteria, and it is sometimes difficult to compare them. To offer some guidance, there are several independent ESG labels, each of which meets strict requirements and provides objective standards, credibility and transparency for investors looking for ESG solutions.
At ODDO BHF AM, more and more funds meet the high requirements of leading independent ESG labels. We favour 4 independent labels. The awarding of labels recognizes our funds’ ability to achieve true ESG integration in their investment process. For these funds, an external auditor conducts regular audits to ensure compliance with these objectives.

Label Name	Created in	Country	Key features
ISR	2016	France	ESG assessment of at least 90% of issuers in the fund portfolio. At least 20% reduction of the investable universe based on ESG criteria, or average ESG rating of the portfolio higher than that of the starting universe. Inclusion of ESG criteria in the investment process.
FNG-Siegel	2015	Germany	ESG assessment of 100% of the portfolio. Sector exclusions. Points system leading to 3 levels of responsible investment, expressed in stars. Violations against UN Global Compact.
GreenFin	2016	France	Investments in "green" themes related to ecological transition. Sector exclusions. At least 75% of Green bonds in portfolio, green bonds must respect the list of green activities of the label, controversy monitoring.
Towards Sustainability (Febelfin)	2019	Belgium	ESG assessment of 100% of securities, with temporary derogations. Sector exclusions with evolving thresholds. Lowering of thresholds in alignment with the Paris Agreement.