Responsible value investing
An approach fully integrated into the investment process
We pursue a multi-sector Best-in-Class/Best Effort approach to SRI that encourages companies to make improvements in three key extra-financial areas: environment, social and governance.
Our SRI approach is in phase with our Value management style, aimed at breaking free of short-termism to generate long-term outperformance.
Our academic collaboration with Université Clermont Auvergne paves the way for developing a long-term response to the dichotomy between corporate social responsibility and valuation.
This collaboration was enhanced with the launch in 2012 of the "Value and Corporate Social Responsibility" Research Chair. METROPOLE Gestion is a founding partner of the new Chair with Michelin and Caisse d'Epargne d'Auvergne et Limousin, and la Maif.
The Responsible Value investing process
- A rating specific to METROPOLE Gestion developed with the University of Clermont Auvergne
- Definition of an investable universe
- Value investing applied to this investable universe
Selection of undervalued stocks compared to their industrial value within a stock picking framework
Filter of the European universe using for each business type the same valuation metrics as corporations do in their relevant sector. These metrics are referenced in our proprietary database of past mergers and acquisitions transactions.
Filter of the resulting universe according to our proprietary Best-in-class / Best effort ESG rating taking into account our exclusion policy.
Calculation of industrial value, analysis of the balance sheet strength, consideration of extra-financial controversies followed by meeting with management.
A 360° analysis of the company taking into account three aspects: extra-financial analysis, financial analysis, balance sheet analysis.
Meeting with management regarding these 3 aspects.
Choosing an appropriate valuation ratio for each type of business. Evaluation of ESG risks.
Anticipation of changes in market status for the security selected , likely to reduce any undervaluation relative to their industrial value.
Identifying financial or extra-financial catalysts, new controversies or changes in extra-financial ratings.
Entry based on a collegial decision and weighting of each security according to its discount and catalysts
Portfolio with stocks discounted against their industrial value, with strong balance sheet and ESG qualities,
Concentrated portfolios with 30 to 40 stocks.
Strict sell discipline
When the valuation target is reached;
When identified catalysts do not materialise;
In the event of a sharp downgrade in extra-financial ratings;
In the event of significant controversy.
A 360° analytical approach to the company, taking into account three aspects: extra-financial analysis, financial analysis, balance sheet analysis
- Choice of securities:
- discounted against their industrial value,
- in sound financial health commensurate with their activity and the economic cycle,
- demonstrating strong extra-financial conviction: companies rated above or equal to BBB- (Investment grade) may be selected with no Best effort condition; companies rated below or equal to BB+ may be selected subject to a minimum +++ Best effort rating; companies rated in the CCC bucket are ruled out.
- Adjusted according to:
- financial catalysts,
- extra-financial catalysts: new controversies or changes in extra-financial rating.
- Exit from the portfolio or lower the weighting in the event of:
- downgrading of the extra-financial analysis (significant controversies or rating downgrade),
- disappearance of catalysts,
- decrease in financial discount.
Responsible Value management policy
METROPOLE Gestion includes the practise of responsible investment among its founding values, evaluating companies holistically.
SRI value investments represent 84.8% of total assets managed by METROPOLE Gestion at 31/12/19.
Our Responsible Value management policy is available to investors.
METROPOLE Gestion excludes any companies directly or indirectly linked to the financing of controversial weapons, as provided for by international conventions. Are also excluded mining companies that generate more than 30% of their revenue through coal production, energy-producing companies more than 30% of whose production comes from coal, companies linked to tobacco production and companies linked to pornography.
Our exclusion policy is available to investors.
Incorporating ESG criteria into risk management and internal control processes
Our policy regarding Incorporating ESG criteria into risk management and internal control processes is available to investors.