The rise of the Social "S" in ESG
Current events have highlighted the increasing awareness of climate change issues among financial players. The energy transition, low-carbon investments and "Net Zero Emissions" commitments are the themes that come up the most in asset managers' communications. Thus, for these players, the "E" in ESG ("Environment, Social, Governance") seems to have taken on a central role. But what about social, "S", at a time of health crisis? On this question, we offer you the crossed view of two managers of SG29 Haussmann, Clotilde Jacob-Mattera, manager of the SRI equity funds 29 Haussmann Sélection Monde and 29 Haussmann Sélection Europe, and Géraldine Carminatti Marchand, manager specialized in SRI (Socially Responsible Investment).
Claire Douchy: Clotilde , how do you see companies taking social issues into account at a time when markets around the world are suspended at the pace of release of containment measures?
Clotilde Jacob-Mattera : With the health crisis, companies have had to face unprecedented social challenges such as maintaining employment during periods of sudden cessation of activity and maintaining social cohesion, while remote work has become widespread. Forced to adapt their organisations rapidly in March 2020, they have entered an economy of adaptation. As managers, we have been particularly attentive to the answers that the companies which constitute our investments have given to these questions.
Let's take as an example Microsoft, which we hold both in the 29 Haussmann Sélection Monde fund and in our SRI portfolios. When the Covid-19 pandemic broke out, Microsoft was a pioneer in announcing widespread remote working to protect its employees, starting in March 2020. Other US giants followed, although this was still far from becoming the norm. More generally, in terms of social cohesion, Microsoft's role has proved to be essential, going well beyond the company's boundaries. In education, through its free software for schools, colleges and universities, Microsoft Teams for Education, the group has enabled more than 180,000 institutions in 175 countries around the world, to continue classes at distance(1). It has also supported health professionals through teleconsultations, and in companies, videoconferencing via its software has helped maintain a crucial social cohesion in this terrible context. We can therefore say that in this crisis, Microsoft has gone beyond its immediate financial interests.
Claire Douchy: Géraldine, have you changed your extra-financial criteria during this period? And if so, what are the points of attention that you have identified?
Géraldine Carminatti Marchand: Our SRI management approach is multi-sectoral and generalist; we have not focused on just one of the ESG pillars from the outset: we look at how issuers take into account environmental, social and governance issues. It is true, however, that social issues have taken on particular resonance in this period of health crisis. In the field of health, large and small companies are increasingly considered as public health actors: they have distributed masks, set up psychological support measures, and participate, for the largest of them, in vaccination campaigns, or even provide incentives, as in the United States. The company is increasingly seen by employees as a place of protection.
In the coming weeks, with the end of the containment measures, we anticipate that companies will be keen to mobilize their teams in order to best prepare for the rebound in activity. Without abandoning all of the ESG criteria that we study, we will be particularly vigilant in identifying the "champions" of social policy, such as the quality of social dialogue, quality of life at work and gender diversity, which are the "S" criteria. We are particularly vigilant on the issue of gender diversity within companies. Numerous studies suggest that greater gender diversity in management bodies leads to better operational performance, higher returns and greater profitability. Increasing gender diversity is a factor in both financial and societal performance. In our interviews with companies, we therefore focus on the number of women in the overall workforce as well as in management and executive bodies. In particular, we pay close attention to the percentage of women on boards of directors. The challenge for companies is to guarantee women a career progression that will allow them to reach management positions.
Claire Douchy: In what way is this "rise of the Social" perceptible in your management orientations?
Géraldine Carminatti Marchand: We attach increasing importance to non-financial criteria. For example, Hologic, an American company, is a world leader in the field of women's health and diagnostics. It develops, manufactures and markets diagnostic products, medical imaging systems and surgical products (the Dimensions 3D mammogram, the ThinPrep Pap test for cervical cancer screening). On the subject of gender diversity, we find that Hologic is ahead of its peers in talent management, with strong programmes for skills development, employee engagement and the diversity of the manpower(2).
Another aspect of the "S" pillar that is important to us is the consideration of the social dimension throughout the value chain. Let's take the example of L'Oréal, a company we hold in our portfolios. In 2014, L'Oréal launched the Solidarity Sourcing project to purchase shea butter with suppliers and NGOs in Burkina Faso. The purchase contracts ensure pre-financing of the crops, a fair price, access to training and the establishment of community projects for women working in producer groups. The harvesting and processing of shea nuts plays a crucial role in the financial independence of women. The Solidarity Sourcing project has financially empowered nearly 39,100 women beneficiaries in 2020(3). In the area of subcontracting, L'Oréal is committed to selecting suppliers certified by the Women's Business Enterprise National Council (WBENC). In 2020, the company used 635 women-owned businesses in 10 countries around the world(3).
Clotilde Jacob-Mattera: Beyond the purely sanitary aspects and the direct consequences of the health crisis on the choice of issuers, this period has made us aware that global social issues must be taken into account as a priority as much as environmental issues. At SG29 Haussmann, we also realised that we also had our own responsibility as a management company. And so, at the end of 2020, we collectively decided to initiate a solidarity initiative within our company on the theme of youth, and in particular, access to education and the fight against dropping out. For example, we have chosen two associations: L'Ecole à l'Hôpital, which brings in teachers to work with young people in hospital so that they can continue their education, and Like ton Job, which aims to give meaning to the future path of secondary school students by bringing in professionals who are passionate about their jobs. This solidarity initiative is important for employees, who thus discover in their work stakeholders working for the general interest. It also gives them a sense of pride.
(1) Source: Microsoft
(2) MSCI data, internal methodology
(3) Source: L’Oréal
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