SOCIALLY RESPONSIBLE INVESTING

 

LYXOR puts SRI at the heart of its investment solutions. In creating solutions that account for Environmental, Social and Governance factors, we address the challenges of the future at the core of our clien’s concerns.

We are a signatory to the Principles for Responsible Investment set out by the United Nations (www.unpri.org). We are committed to adhering to these principles:

  • Incorporate ESG               
  • PRI promotion
  • Collaboration
  • Active ownership
  • Transparency
  • ESG reporting


By integrating the ESG criteria our main objectives are to:

  • Invest according to a certain philosophy and respecting certain values.
  • Take into account the risks and opportunities arising from extra-financial analyzes of companies.
  • Invest in aiming for a favorable impact on the social, environmental, and governance aspect
  • Influence companies to move towards more sustainable practices.

INVESTMENT CRITERIA AND PRACTICES

SRI is a core investment issue for our clients. Taking extra-financial criteria into consideration plays a key role in the growth of our business.

Our SRI Policy includes the following key areas:

  • A SRI approach in line with our Commitments. In compliance with the Environmental & Social Policies and sector specific Policies, LYXOR applies exclusions of the firms associated with serious and repeated violations of regulatory requirements related to controversial sectors and products
  • Shareholder Engagement: Engagement activities and active ownership through voting of shares and engagement with companies.
  • UN PRI: Lyxor is a signatory of the UN Principles for Responsible Investment since 2014

Application of Exclusion Lists: Lyxor does not invest in companies identified as being in breach of exclusion criteria of the policies and therefore noted in an internal E&S exclusion list

1. Exclusion Defence

Lyxor strives not to invest in companies identified as being involved in activities link to prohibited and controversial weapons.

Since 2007, Lyxor has implemented an “E&S exclusion list” based on the Defence Sector Policy[1] as a filter to its swap based ETFs its Absolute Return funds, Risk Based and Solutions businesses as well as SRI Managed Account Platform wherever legally possible and independently enforceable by Lyxor[2]. At the date of the publication of this policy, within the context of the definition of the framework of application of the E&S exclusion list, the following weapons are considered to be prohibited or controversial weapons:

  • Anti-personnel mines, cluster bombs, or their key components.
  • Depleted uranium munitions, as well as biological, chemical, nuclear or radiological weapons.

For the businesses where it is not yet possible to apply the E&S exclusion list, Lyxor will carefully monitor the percentage of detention of assets which are present in the E&S Exclusion list.

2. Custom Exclusion Policies  

Lyxor offers the possibility to implement tailor-made multi-criteria exclusions which are in line with our convictions and institutional clients' SRI concerns, such as those in breach of the Global Compact’s principles, or companies involved in particular activities or sectors.

Agricultural- based funds and investment products

Lyxor refrains from creating funds which may participate to the inflation of prices of agricultural commodities.

Lyxor does not proactively market products primarily invested in agricultural commodities.

For any new product which may have an exposure to agricultural commodities, a specific analysis is undertaken by Lyxor in order to make sure that this new fund or investment products complies with the  Agriculture, Fisheries and Food Sector Policy[3] criteria.

Lyxor strives to implement this Responsible Investment Policy in the best interest of its clients and operate at arms’ length from Societe Generale Group. 

Shareholder engagement

A variety of engagement strategies can be distinguished to influence corporate and managerial behavior. At present Lyxor’s engagement activities includes the following key areas:

  • Proxy voting at annual general meetings (AGMs)
  • Class-action Lawsuits after evaluation of the process and benefits in the best interest of its clients
  • Thematic engagements on a sector level

The corporate governance landscape is continually evolving and shareholder engagement is a key means to integrate ESG factors. Lyxor adapts its policies and practices to reflect the changing environment. Since 2016 Lyxor has implemented a process to exercise its voting rights for a scope of the funds under its management.

Lyxor Voting Policy is revised on a yearly basis. Policies & Voting reports are available at the following links:

Voting Policy For Lyxor Asset Management

2017 Annual Voting Report for Lyxor Asset Management SAS

Voting Policy for  Lyxor International Asset Management SAS

2017 Annual Voting Report for Lyxor International Asset Management SAS

LYXOR ‘ESG approaches in unlisted companies (Small and Medium-sized Enterprises)

We believe that a stewardship mindset is an essential component of a strong approach to responsible investment. Lyxor has decided to implement a comprehensive ESG strategy, in its investments in Small and a Medium-sized Enterprise. This strategy is in line with our values and able us to tackle the growing theme of ESG accountability in SMEs finance.

Lyxor is committed to promoting responsible business practices in its investment in SMEs in order to create a true partnership with companies to allow them to expand. As an active investor, Lyxor monitors the ESG practices of SMEs by a tailored-analysis taking into account the company ‘sector specificities. Lyxor looks for areas of improvement and risk reduction within the SME’s ESG approach, by integrating ESG issues throughout the lifetime of the investment in order to have a positive impact on the SMEs practices and to invest for the best interests of our clients

2017 Reporting on integration of environmental, social and governance (ESG) criteria -Article 173 (D 533-16) of the French Law on the Energy Transition for Green Growth

IMPLEMENTATION

Capitalizing on our financial engineering expertise and ability to innovate, we are already creating solutions for our clients that wish either to have a positive impact on their investments or to restrict or refrain from investing in companies with a major ESG risk profile.

LYXOR SRI Team

Lyxor has a dedicated SRI team, in charge of SRI development as well as developing and implementing the Responsible Investment Policy. The team centralizes all ESG/SRI-related matters and represents LYXOR in the diligence process in support of the Fund Management, Sales, Marketing and RFP teams.

Lyxor is using a variety of external information sources, including the following extra-financial rating agencies: MSCI-ESG Research, Vigeo-Eiris, ISS Ethix and Sustainalytics. Each partnership has been put in place following a rigorous selection based on request for proposals and due diligence processes addressing specific topics.

Description of LYXOR ‘ESG approaches

Lyxor proposes a range of Open-Ended funds with ESG integration & Tailor-Made ESG Solutions.These solutions must be the result of listening carefully the specific expectations of each client and developing an in-depth understanding of the environment and its challenges.

  • Funds that apply exclusion lists

To restrict or refrain from investing in companies with a major ESG risk profile, our clients can benefit both from applying our exclusion lists and from implementing dedicated online lists with their own concerns.

  • Themed Investment Funds 

Sustainability themed investments inherently contribute to addressing social and/or environmental challenges such as climate change, eco-efficiency and health.

  • Funds with  ESG selection

This approach involves the selection or weighting of the best performing or most improved companies or assets as identified by ESG analysis, within a defined investment universe. This approach includes Best-in-Class, best-in-universe, and best-effort.

  • Funds with ESG integration

The explicit inclusion of ESG risks and opportunities into traditional financial analysis and investment decisions based on a systematic process and appropriate research sources. The integration process focuses on the potential impact of ESG issues on company financials (positive and negative), which in turn may affect the investment decision

  • Shareholder engagement

Our clients also benefit from our involvement as a shareholder in certain vehicles managed by Lyxor. This stake lets us motivate companies to improve their ESG practices in the long term. 

By developing these solutions at Lyxor and leveraging on our fund selection expertise, we will be able to advise our clients on how to successfully transition their investments towards greater transparency and environmental and social responsibility.

As of December 31st 2016, 49% of Lyxor’s Assets under Management is covered by an ESG approach. 

Lyxor reserves the right to modify this Responsible Investment Policy at any time in order to reflect the evolution of Responsible Investments standards and market practices. The Responsible Investment Policy is publicly available on Lyxor’s website. This document cannot be interpreted as a contractual commitment.


[1] Defence Policy is available on Societe Generale’s website www.societegenerale.com, where the E&S General Guidelines and all published Cross-sectorial and Sectorial Policies can also be consulted under http://www.societegenerale.com/en/measuring-our-performance/csr/responsible-finance

[2] The E&S exclusion list is applied to the basket of assets held by the funds. These funds might be exposed to market indexes which could have some underlying components included into the E&S exclusion list. 

[3] Agriculture, Fisheries and Food Sector Policy is available on Societe Generale’s website www.societegenerale.com, where the E&S General Guidelines and all published Cross-sectorial and Sectorial Policies can also be consulted under http://www.societegenerale.com/en/measuring-our-performance/csr/responsible-finance

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