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Rothschild & Co Asset Management Europe ESG policy

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Page 1: Rothschild & Co Asset Management Europe · 2019-07-22 · Rothschild & Co Asset Management Europe is a subsidiary of Rothschild & Co, a global and family-controlled group. Rothschild

Rothschild & Co Asset Management EuropeESG policy

Page 2: Rothschild & Co Asset Management Europe · 2019-07-22 · Rothschild & Co Asset Management Europe is a subsidiary of Rothschild & Co, a global and family-controlled group. Rothschild
Page 3: Rothschild & Co Asset Management Europe · 2019-07-22 · Rothschild & Co Asset Management Europe is a subsidiary of Rothschild & Co, a global and family-controlled group. Rothschild

Content

1 I Introduction 5

2 I Philosophy and objectives 6

3 I Resources 8

4 I ESG intagration 9

5 I Integration of climate issues 11

6 I Our commitments and initiatives 12

7 I Scope and ESG solutions 14

6 I Investor information 14

Appendix I Investment Processes 15

Page 4: Rothschild & Co Asset Management Europe · 2019-07-22 · Rothschild & Co Asset Management Europe is a subsidiary of Rothschild & Co, a global and family-controlled group. Rothschild
Page 5: Rothschild & Co Asset Management Europe · 2019-07-22 · Rothschild & Co Asset Management Europe is a subsidiary of Rothschild & Co, a global and family-controlled group. Rothschild

June 2019 | ESG policy| Rothschild & Co Asset Management Europe | 5

1 I Introduction

Rothschild & Co Asset Management Europe is a subsidiary of Rothschild & Co, a global and family-controlled group. Rothschild & Co provide M&A, strategy and financing advice, as well as investment and wealth management solutions to large institutions, families, individuals and governments, worldwide.

It is this combination of scale, local knowledge and intellectual capital that allows us to provide a distinct perspective and effective long-term solutions for our partners. We are a group of independently-minded financial services specialists, delivering exceptional advice and creative solutions that meet the individual needs of our clients, worldwide.

Rothschild & Co delivers a unique global perspective across three market-leading business divisions:

• Global advisory

• Private Wealth and Asset Management

• Merchant Banking

Rothschild & Co Asset Management Europe proposes innovative investment solutions created by our independent, long-term approach. Our bespoke asset management and investment advisory services are rooted in a deep understanding of our clients.

As the Asset Management’s division of Rothschild & Co, we deliver bespoke investment solutions and advisory services to institutional clients, financial intermediaries and third party distributors. We aim to develop complementary expertise in active high-conviction management and open architecture investment solutions.

Three management pillars with complementary expertise

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2 I Philosophy and objectives

Rothschild & Co Asset Management Europe is sensitive to environmental, social and governance (ESG) issues :

• As a socially responsible and committed investor, we create an ethical investment framework and build a dialogue with our holdings on these themes,

• As a fiduciary responsible investor, we integrate risks and opportunities related to ESG issues in our investment processes.

Signatory to the United Nations Principles for Responsible Investment

Since 2011, Rothschild & Co Asset Management Europe has been a signatory to the United Nations Principles for Responsible Investment (UN-PRI).

Being a signatory to UN-PRI means:

• Increase the integration of ESG issues into investment analysis and decision-making process,

• And engage with companies on ESG practices to encourage them to improve their processes.

Approach

We have decided to integrate into our investment process a number of ESG issues for several years ahead of the Energy Transition Act:

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June 2019 | ESG policy| Rothschild & Co Asset Management Europe | 7

Exclusion policy

We have set up an exclusion policy which provides an ethical foundation for most of our investment vehicles.

Across our direct investments funds and the external long only funds of our Buy List (excluding ETF providers), we comply with the following regulatory exclusions:

• The Ottawa Convention (1997) on anti-personnel mines,

• and the Oslo Convention (2008) on cluster bombs,

Moreover, on the majority of our direct investments funds, we respect additional exclusions related to a set of fundamental principles.

Dialogue and engagement Policy

Rothschild & Co Asset Management Europe implements a sustained policy of dialogue and engagement, which is preferred to any other systematic exclusion mechanism (e.g. sector exclusion).

Integration methodology

Rothschild & Co Asset Management Europe has decided to integrate ESG criteria into fundamental analysis, which leads to a strengthened company view and contributes to our convexity analysis on a large proportion of our direct management funds.

Our ESG methodology enables us to:

• Benefit from a deeper understanding of risks and therefore to better protect our portfolios,

• Seize opportunities,

• Refine our valuations.

Thanks to our ESG rating tool, we are able to provide ratings to securities and portfolios based on ESG criteria, both for direct investments and external long only selected funds.

Moreover, on the vast majority of our direct investments, we have a common minimum portfolio score objective, regardless of the nature of the underlying financial securities (equity, credit, convertibles, or diversified).

The development of climate indicators

We also calculate specific climate indicators on direct investments portfolios and on our selection of external long only investment funds, in order to further explore the risks and opportunities associated with them. On the vast majority of our direct investments funds, we analyse the commitments and climate ambitions of each issuer through the assessment of the Environment pillar and through an in-depth analysis on the most polluting companies of each portfolio.

Trajectory assessment

In our analysis, we focus on assessing the trajectory of both ESG practices and climate policies.

The integration of ESG criteria is consistent with Rothschild & Co Asset Management Europe’s values. It takes part to our pragmatic and evolving investment approach that enables us to better support our clients in their long-term investment objectives.

In this sense, ESG criteria integration is conducted in accordance with the know-how of our fund managers and our performance drivers. It contributes to our common ambition: The quality of the management expertise proposed to our investors. The existing ESG process and tools allow us to adapt to our clients’ sensitivity to ESG issues.

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3 I Resources

Dedicated teamIn order to improve its responsible approach, Rothschild & Co Asset Management Europe has taken an additional step in 2017 with the establishment of a dedicated ESG team in charge of:

• The improvement and the harmonisation of ESG processes across our domains of expertise,

• The coordination of the ESG research effort,

• And the monitoring of relations with external ESG providers.

The head of sustainable investment can rely on different teams:

• A front-office analyst, who supports the research effort and is actively involved in the development of quantitative tools relating to ESG process and voting policy,

• Equity and credit analysts that integrate ESG criteria into research,

• Investment teams, involved in ESG/SRI themes with the implementation of ESG key entry point within each asset management expertise,

• The reporting team who actively contributes to the development of effective and reliable monitoring tools,

• The Compliance and Risks Departments.

Multi-annual partnership with MSCI ESG ResearchWe have set up a multi-annual partnership with MSCI ESG Research which covers both our direct investments and our long only open architecture funds to ensure consistency and continuity into our ESG integration process.

MSCI ESG Research is a recognised provider of ESG analyses and ratings.

We believe it is important to ensure coherence between our ESG philosophy and our expertise in the analysis and financial assessment of companies.

Following a thorough study of the different ESG data providers, we initiated a partnership in 2017 with MSCI ESG Research, whose philosophy and methodology are consistent with our vision of ESG issues.

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June 2019 | ESG policy| Rothschild & Co Asset Management Europe | 9

4 I ESG Integration

Within Conviction Management (direct investments)The inclusion of ESG criteria has first materialised with the development of an internal rating tool and the management of a minimum rating target among our equity portfolios. We have then adapted this process to the different asset classes managed: bonds, convertible bonds, diversified funds and long-only multi-manager funds (excluding Wealth Management funds for private bank).

General philosophy

We chose to integrate the ESG criteria through:

• A “Bottom-up” approach based on quantitative (through the assignment of a rating to the issuer) and qualitative analysis of companies (strengths/weaknesses study on each ESG pillar) to better understand the risks and opportunities associated with their strategic positioning and choices;

• And a Top-down approach with a common minimum portfolio rating objective.

Methodology

Our approach is based on a number of exclusions

• Regulatory,

• And/or discretionary.

• Our ESG approach is fully integrated into the investment process:

• The assignment of a single rating for each of the companies in our portfolios regardless of the nature of the financial security.

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Our Engagement Policy

Our Engagement Policy (see Chapter 4: commitments) is based on the following main elements:

• Compliance with fundamental principles,

• The exercise of voting rights in line with SRI recommendations,

• Management awareness of ESG issues,

• Contribution to working groups with NGOs.

In the event of a specific ESG issue on one of the companies in the portfolio, which would alter our rating/judgement, we try to contact the management as soon as possible.

We then decide whether we should exclude, reduce or reinforce (in particular an unfounded controversy) the weight of this stock in our portfolios.

We could decide to sell a security if a company’s ESG practices do not change or if a company fails to meet its commitments (e.g., emissions/stop power reduction) over a certain period of time.

Within Open ArchitectureThe Rothschild & Co Asset Management Europe open architecture Team has also established a specific ESG process on its long only fund of funds activity. As part of the due diligence process, research teams include in their analyses: solutions to ESG issues and SRI policies undertaken by third management companies.

In accordance with French AFG corporate code of ethics, we check that the selected management companies for the long-only buy list (excluding ETFs) comply with ethical exclusions (controversial weapons).

Since September 2017, the multi-management team has also been working with MSCI ESG Research.

Thanks to the partnership with MSCI ESG Research, the alternative investment team has the ability to measure the ESG rating and the carbon intensity of the underlying assets of its Long only funds Buy List.

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June 2019 | ESG policy| Rothschild & Co Asset Management Europe | 11

5 I Integration of climate issues

Measuring carbon intensity We chose the “carbon intensity” indicator to measure and monitor the carbon footprint of our direct investments portfolios and our selection of external long only investment funds.

Carbon intensity calculation enables us to measure the carbon exposure of a stocks selection independently of the nature of the financial security held (stock/bond), depending on its weight in a given portfolio and regardless of the size of the portfolio.

• The results are expressed in millions of tons of CO2 per $m (or €m) of sales and compared to the benchmark.

• On the direct investments perimeter, carbon emissions and differences with the index are analysed from a sectoral point of view, and we pay a particular attention to the largest carbon contributors through the analysis of: (i) the carbon risks (transition and regulatory risks), (ii) the solutions and policies implemented to reduce carbon emissions and (iii) the carbon footprint trajectory.

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6 I Our Commitments and initiativesRothschild & Co Asset Management Europe is sensitive to various social issues and is actively involved in research on ESG topics.

Exclusion of cluster munitions and anti-personnel MinesRothschild & Co Asset Management Europe, and more specifically our direct investments and long only open architecture portfolios (excluding ETFs), comply with the principles established by the Ottawa and Oslo Conventions on the prohibition of anti-personnel mines and the elimination of cluster munitions.

Compliance with fundamental ethical principles on a large majority of our direct investments funds

Signature of UN-PRIThe Group, being a signatory to the UN-PRI since 2011, implements the responsible investment principles established by the United Nations.

Carbon Disclosure Project (CDP)Rothschild & Co is a signatory to the Carbon Disclosure Project.

Engagement policyWe have chosen to emphasize on dialogue with companies on ESG issues rather than exclude sectors or companies from our investment universe.

Our engagement policy relies on:

• The exercise of voting rights: our voting policy is designed to follow socially responsible investment principles (SRI) on ESG issues. To this end, we have entrusted the resolutions and recommendations of the specialised company ISS (https://www.issgovernance.com), Institutional Shareholder Services

• Raising management awareness on ESG issues during 1-to-1 meetings and through other dialogue opportunities

• The contribution to working groups with NGOs to raise awareness among stakeholders

Non-governmental OrganisationsWe have begun thinking about the climate path of the ‘core’ funds through collaboration with the NGO 2 °investing Initiative (‘2 ° II’), which helps the Ministry of Environment on different topics. Thus, we want to contribute to the development of indicators and climate performance measurement tools of financial institutions.

We have recently joined the Climate 100+ Initiative, an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.

We also support the Coal Exit List, and we exclude top coal plant developers from our R-Co 4Change Climate funds range.

Social Initiative The Martin Maurel Pierre Capitalisation fund offers a share allowing subscribers to distribute a portion of the Fund’s distributable income with an organization of public utility. The distributable income of this share is half paid annually to the “Fondation des Petits Frères des Pauvres” (public utility Foundation), and half distributed to unit-holders.

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CSR policy (Corporate Social Responsibility)Key elements of the CSR policy (Corporate Social Responsibility) and human resources initiatives of the Rothschild & Co Asset Management Europe entity:

• Action plan for gender equality,

• Partnership with the “Les Petits Chaperons Rouges” nursery network since 2015,

• Conclusion of an action plan regarding the implementation of the generation contract,

• Diversity Charter: Rothschild & Co Asset Management Europe has been a signatory to the Diversity Charter since 2005 and therefore undertakes actions to promote diversity: (i) through the introduction of objectives performance and skills measurement criteria in our recruitment, remuneration and career management tools; (ii) through awareness and training of our management,

• Schools financing through the apprenticeship tax within the ‘Cordées de la réussite’ program (5 schools located in less-favoured areas),

• Handicap:

Payment of a contribution to support hiring of the disabled,

Employment of disabled people,

Service contracts with enterprises employing disabled persons,

Payment of a contribution to the functional re-education centre through the apprenticeship tax,

Financing of CSR projects via the apprenticeship tax.

Environmental initiatives at Rothschild & Co Group levelAware of the climate change potential impacts on companies, ecosystems, resources security and economic markets stability, Rothschild & Co integrates climate change issues within its activities.

Aware of the 2 degrees Celsius target set by the 197 Parties to the 21st session of the Paris Conference in December 2015, Rothschild & Co has adopted a Group environmental policy and is working to reduce the negative impact of its activities. Our approach is based on the following Group environmental vision: “in our operations, products and services, we will focus on creating value for our business and our clients in a socially and environmentally responsible manner to preserve and protect the world’s natural resources.”

As a Group, we take environmental issues very seriously. We understand that our activities may have a negative environmental impact and our responsibility is to limit it. We thus take measures to improve the environmental management of 15 of our offices, which represent 95 per cent of our workforce.

We calculate a set of figures on our resources consumptions and emissions (water, CO2, paper...); they are the results of our annual participation at the Grenelle Environment Forum, which aims at assessing the level of resources consumptions and at developing long-term environmental and sustainable actions.

There are some examples of concrete solutions:

• Constant efforts to reduce our paper consumption,

• Incentives to conduct conference calls

• Installation of LED lightings,

• Partnership with Veolia to optimise paper recycling,

• Recycling of electronic equipments,

• Monitoring of the carbon footprints of our partners (taxi companies, etc.),

• Participation in the ‘Earth Hour’ event.

It is interesting to highlight that some of the Group’s offices have chosen to buy electricity generated from renewable energy sources and can therefore communicate on a zero emission value associated with their electricity consumption.

Rothschild & Co has launched pilot projects for collecting biodegradable wastes, mainly food, in order to reduce the volume of wastes generated. Biodegradable waste collection includes, among other things, coffee and tea wastes, unused food and compostable packagings.

In order to develop a consistent approach and to focus on areas where the environmental impact of the Group’s offices is the most significant, Rothschild & Co has deployed an environmental Action Plan (Environmental Management Action Plan or “EMAP”).

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7 I Scope and ESG solutions

Our ESG process is based on the Rothschild & Co Asset Management Europe’s phi-losophy and values. Some adaptations may be needed to meet the requirements of the different asset classes under management.Developed tools and indicators enable us to adapt to our clients’ sensitivity to ESG and climate issues.

Direct InvestmentsThanks to the existing ESG tools, we can support our clients in their ESG integration process through dedi-cated funds and mandates to adapt to their ESG sensitivity and objectives.

Open ArchitectureLong only management teams can offer different solutions to comply with our clients’ ESG objectives and challenges:

• Implementation of a specifics ESG reading grid,

• Adaptation of the funds selection according to client ESG sensitivity and objectives within dedicated funds and mandates,

• Investment vehicles in line with ESG integration expectations.

8 I Investor informationA transparent and comprehensive ESG communication to our clients is key for us. We want to be sure that they have all the documents they need to fully understand our ESG process:

• The present ESG policy,

• Our voting policy,

• The Procedure concerning the prohibition of the financing of cluster munitions and anti-personnel mines,

• The access to our PRI Questionnaire (https://www.unpri.org/).

• Transparency Code

• Website

• ISR Flyer

Investors can also access:

• Annual reports of funds and/or related reports dealing with ESG policy,

• Reports adapted to their constraints and highlighting ESG information required by the article 173 of the Energy Transition law.

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Appendix : Investment Processes

Co-existence of 3 types of SRI Process within our management expertise:

Complete Process “Direct investments”Scope: Rothschild & Co Asset Management Europe Direct investments, excluding R-co Mines d’Or, and specific wealth management mandates

Process:

- Compliance with exclusions in line with the Oslo and Ottawa Conventions,

- Respect of exclusions in line with certain fundamental principles

- ESG rating monitoring with a minimum portfolio rating objective of BBB (according to Rothschild & Co Asset Management Europe’s methodology),

- Carbon intensity calculation and focus on the 5 largest carbon contributors among the portfolio,

- Engagement through: a voting policy in line with SRI recommendations, dialogue with companies on ESG issues during our meetings with management, involvement in engagement projects.

Light process “Direct investments”Scope: Rothschild & Co Asset Management Europe Direct investments: R-co Mines d’Or, specific wealth management mandates

Process:

- Compliance with exclusions in line with the Oslo and Ottawa Conventions,

- Development of an ESG reporting including the rating of the portfolio and its carbon intensity.

Process “Long-only multi management”Scope: Long-only multi management funds (excluding ETFs)

Process:

- Compliance with exclusions in line with the Oslo and Ottawa Conventions,

- As part of the due diligence process, research teams incorporate in their analyses solutions to ESG issues and the SRI policies,

- Calculation of the ESG rating and carbon intensity of portfolios.

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Avril

201

9

France - United Kingdom

Paris 29, Avenue de Messine 75008 Paris +33 1 40 74 40 74

Switzerland

Geneva Equitas SA Rue de la Corraterie 6 1204 Geneva +41 22 818 59 00

Germany - Austria

Frankfurt Börsenstraße 2 - 4 Frankfurt am Main 60313 +49 69 299 8840

Belgium - Netherlands - Luxembourg

Brussels Avenue Louise 166 1050 Bruxelles +32 2 627 77 30

Italy - Spain

Milano Via Santa Radegonda 8 Milano 20121 +39 02 7244 31

Contacts