DRIVING IMPROVEMENT

SOCIALLY RESPONSIBLE INVESTMENT

NSABLE

Our continuous improvement approach

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The "stock-picking" approach of Financière de l’Echiquier is an investment style based on a deep knowledge of the companies we invest in. Since 2007, we have formalized a methodology which consists of interviewing every company we invest in about ESG - environmental, social and governance - topics. The SRI meeting that fund managers conduct together with the SRI team enable us to understand the initiatives taken by companies on governance, HR and environment related issues. Our analysis gives us a better understanding of the main risks that companies face. It is now part of our investment methodology. Furthermore, we introduced a new initiative in 2013; we are now paying attention to the improvement companies are making on sustainability issues. Indeed, we particularly appreciate companies that commit to ameliorate year after year.

The SRI analysis is part of our investment methodology

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Since 1991, the management quality has been a fundamental criteria that is taken into account for every investment decision. Twenty years of meetings with CEOs have enabled us to build a frame of reference, especially in an subjective area. We refer to this expertise to formulate our SRI approach. Practically, we have rated since 2008 every company in our portfolio based on 6 criteria, including two non- financial criteria: the management quality and the social and environmental responsibility. For 2013, we want to go further by setting up a few key non-financial objectives with companies we invest in.

Our experience in the management quality evaluation has helped us to build a framework of sustainability criteria

A willingness to progress

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At Financière de l’Echiquier, the quality of the corporate social responsibility strategy can have a significant impact on the long term growth perspectives of a company. The criteria we consider to build our opinion are specific. We give credit to companies that provide ESG key performance indicators and accurate figures. However, we are aware that the publication of reliable and accurate information from all companies will take long. We do not appeal to environmental, social and governance rating agencies.

Assessing the quality of management alongside social and environmental challenges enables us to build a better appraisal of the company

Our SRI analysis enhances our knowledge of companies

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Both the fund managers and the SRI team are preparing and doing the SRI meeting. The SRI meeting is crucial. Given that little information on corporate social responsibility has been formalized so far, there is definitely an added value for those which conduct research on the field. Most of the time, we notice a significant gap between the public information and the answers provided during the interview! Those meeting are also a great opportunity to make new contacts such as the HR director, the Environment director and the Head of quality.

The whole investment team is involved in the SRI meetings.

Nothing is better than a meeting

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Financière de l'Echiquier is dedicated to promote companies that commit to improvement, through a continuous dialogue

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We very much appreciate companies that strive to improve on ESG aspects. Our first interview is predominant to understand the specific issues companies are facing. Following the interview, we contact companies to define together two to three key areas where progress need to be made. During the follow-up interviews, we review achievements and progress, based on the commitments made previously.

To go further in our approach, we aim to share an ESG road map with companies

Tracking progress

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A three-step approach:

We aim to define realistic, measurable and controllable targets. Once defined, those targets writen and shared with companies. As shareholder, we want to contribute to a better integration of ESG criteria within companies strategies. Our goal: create financial value as well as non financial value.

Concrete objectives followed by effective results

A shared road map

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The shared definition of ESG targets and the achievements made are now integrated into our Mangement Quality Evaluation. We give credit to companies that accept to set up objectives and commit to improve over time. The follow-up meetings are an opportunity to evaluate progress made by companies. According to the results, we add a bonus or a malus to the global SRI rating.

The progress made are integrated into our SRI evaluation and our SRI rating

The impact on our SRI Rating

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A three-step rating process:

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Initial interview 1

A first interview dedicated to ESG practice will soon take place.

During this meeting, we typically engage with the Sustainability Manager, HR director, CFO, IR or any other person in charge of these topics within the company.

Areas of improvements are defined, based on our discussion.

Our follow-up interview will start with a brief overview of the previous non financial targets set.

We will discuss the progress done since the company made the commitment

REMINDER – NEXT STEPS

Definition of improvable areas 2

Follow up interviews 3

Financière de l’Echiquier

53 avenue d’Iéna - 75116 Paris

Phone number : 01 47 23 90 90

Fax : 01 47 23 91 91