CCP considers that sustainability integration and its ongoing measurement positively contribute to a manager investment activities. CCP monitors closely how managers address, implement and keep on improving on their Responsible Investing (RI) duties and the incorporation framework building across their investment strategies to appropriately identify, assess and take action on environmental, social and governance (ESG) aspects in their investment process.
At CCP, we systematically assess investment managers and strategies to gauge how they incorporate ESG criteria in their approach, stewardship and engagement. This way, CCP clients can benefit from a strong visibility, consistency and comparability on the extent to which ESG factors are integrated by investment managers to the overall investment process and governance, and whether this fits their investment requirements.
As a firm policy, CCP particularly values managers able and willing to allocate capital to sustainable investments and express commitment to transparency. CCP believes that adopting this type of approach is part of key factors to a manager success in executing successful business plans and matching investor expectations. In addition, CCP highly values managers who keep on making ESG progress, including updating their view, improving their integration framework implementation and making wide-ranging efforts around sustainability and diversity.
CCP closely monitors manager progress on key ESG initiatives.
Manager transparency in communications on these topics (soft and hard items) with our clients is paramount in preserving the trust of capital allocators. CCP is particularly vigilant about the notion of greenwashing and analyses managers culture and processes in details to check that they are actually in line with communicated guidelines.
Overall, CCP European funds under due diligence and monitoring are increasingly classified as Article 8 under the Sustainable Finance Disclosure Regulation (SFDR), meaning they promote environmental and/or social characteristics, or Article 9, meaning they have sustainable investment as an objective. However, we carefully review the elements that a manager took into consideration to classify their fund as Article 8 for instance, and we form our own opinion on the matter.
Climate and climate-related topics are a particular focus for CCP. As a result, CCP welcomes Boards of asset management groups to exhibit sound climate policy and risk governance as follows:
First, a strong oversight with climate-competence demonstrating awareness of climate risks as well a healthy ability to foster healthy debate on climate topics, challenging management assumptions and making thoughtful and informed decisions regarding those risks.
Second, putting in place a robust risk oversight and mitigation measures, including setting targets, such as science-based targets approved by SBTi, resulting in net zero greenhouse gas (GHG) emissions across operations and investments by 2050, aligned with the goal of the Paris Agreement and integrating climate risk considerations into strategic business planning and capital allocation decisions. As well, manager initiative and contribution to an industry-wide drive to achieve net zero GHG emissions, represents a strong sign of mature and responsible ESG approach.
Finally, an effective and comprehensive disclosure policy, both qualitative and quantitative, to show progress over time, preferably written in accordance with the framework of the Task force on Climate-related Financial disclosures (TCFD).
Diversity, Equity and Inclusion (DEI)
DEI has become another essential focal point for all investor types. Investigating about the ethnic, gender and racial diversity of fund managers and integrating a DEI filter across their investment allocations has been an increasingly widespread approach by our investor base.
Interestingly, DEI filter integration into our due diligence process may result in various types of solutions depending on the preferred focus: whether our clients are looking to primarily collect information on asset management firms ownership by minorities and diverse representation throughout the entire company, or on specific diversity at the portfolio management team level, or on the extent to which a portfolio company DEI policies are assessed and evaluated in the asset management firm’s investment process, or a combination thereof, we can propose tailor-made thorough research built around those requirements.
Beyond data on representation, we believe that it is important to gather additional information to help assess how deeply integrated to the corporate culture DEI initiatives are. This may include for instance affordable housing finance, healthcare and parental leave benefits, minority pay gap monitoring, financial inclusion practices, human rights policies and practices, and community relations, among others.
CCP focus on sustainability has increased substantially since the beginning of the decade and we anticipate it will continue to grow. CCP firmly believes that long-term financial performance of managers goes hand in hand with the long-term ESG impact embedded in their actions.