"Determining the carbon footprint of our portfolio has given us a lot, especially in terms of risk management, and we lacked the equivalent for the social aspect", explained Aurélie Baudhuin, Director of SRI Research at Meeschaert Asset Management.
Last summer, the management company decided to create a tool to determine the social footprint of its investments. This innovation was first tested by the Meeschaert research department on a single equity fund but has now been extended to all funds under management, including equity and debt. This social footprint makes it possible to focus on the ‘S’ in ESG (Environment, Social and Governance) analysis, which is often a risk factor less identified by investors.
The task was by no means certain. "We had to face many obstacles," said Baudhuin. It was first necessary to determine the most relevant indicators and then to assess the comparability of these indicators. "For the carbon footprint, a tonne of CO2 is equivalent whether it is issued in the United States, France or India,” she noted. “An employment contract, it is very different depending on the country...".
A tool for investors
Seven indicators for the social footprint were determined: accident frequency at work, employee turnover rate, absenteeism, disability, parity, social controversy, and the contribution to the Sustainable Development Goals (SDGs). The management company then compares the performance of these indicators with public statistics, where they exist, or with other private repositories where appropriate in order to establish its social footprint.
"This gives new insight into the reality of our portfolio,” suggests Baudhuin. “The good news is that it is going in the right direction!" This social footprint displays the investment’s impact in a very visual and quantifiable way. This is an advantage for Meeschaert's clients, whether they are institutional investors, foundations, associations or individuals. "It's much more concrete, they become directly aware of their impact on employees," said Baudhuin.
Identifying risk points
For the management company, this social footprint makes it possible to identify the risk factors in its portfolio and scrutinize companies that weigh negatively on these indicators. "It can go as far as excluding the company, if they cannot justify this discrepancy. But this is a last resort; there is no automatic mechanism," said Baudhuin.
Calculating the social footprint, however, is still to be refined, according to Meeschaert who remains one of the only management companies to have taken this initiative. Data on company social impact rests fragmented, difficult to compare and requires a meticulous amount of work that needs to be collected across several documents (annual report, sustainable development report, social report, etc.).
This has caused Meeschaert to even begin thinking about launching a "Social Disclosure Project", in the same manner as the Carbon Disclosure Project (CDP). "There is real interest from local organisations," says Baudhuin, "It's gathering momentum, and both management companies and institutional investors are in demand for this data."
Arnaud Dumas @ADumas5