As part of a global reflection on the impact of its investments, Chahine Capital has decided to adopt a responsible investment.
It is essential for us at Chahine Capital to align investor interests with the general interests of civil society. We have therefore integrated ESG criteria into our investment process, so that the notion of long-term investment is in line with respect for the future generations.
Chahine Capital is a UNPRI signatory since 2019 and is committed to its 6 principles.
The fund Digital Stars Eurozone follows a more stringent ESG investment policy than the other Digital Stars funds. This document covers the whole ESG investment policy applied to Digital Stars Eurozone, included the parts shared with the other Digital Stars funds.
1 – Governance
Chahine Capital’s management committee, composed of its CEO, CIO and Head of Risk and Compliance, defines the ESG policy. It is implemented by the investment team and integrated into quantitative models in order to be applied to all “Digital Stars” portfolios. The Risk management team monitors on a daily basis the compliance of the funds with the responsible investment policy.
2 – Exclusion
a) Norm-based exclusions
We exclude companies that manufacture or distribute anti-personnel mines from all of our portfolios according to the Ottawa Treaty (enforced in 1999).
We exclude companies that manufacture or distribute cluster munitions from all of our portfolios in accordance with the Convention on Cluster Munitions (enforced in 2010).
We exclude companies that do not comply with fundamental ethical standards (UN Global Compact), such as violation of individual rights, non-respect of human rights, major environmental damage, etc.
We exclude companies domiciled in controversial “Call to Action” jurisdictions (e.g. Iran and North Korea) identified by the Financial Action Task Force.
b) Sector exclusions
We have decided to exclude some sectors and practices from our entire fund range, and not to invest in companies facing one of the following cases:
– The company is active in the production, sales and distribution of non-conventional weapons. It involves cluster bombs, anti-personnel mines, biological, chemical or depleted uranium weapons, as well as white
phosphorus and nuclear weapons;
– Production, sale or distribution of conventional weapons (war material) represents more than 5% of revenues;
– The revenue from coal mining activities (thermal coal, metallurgical coal, coke) exceeds 10% of total turnover or its production exceeds 20 million tons per year;
– The coal-fired electricity generation represents more than 10% of turnover, or the generation capacity exceeds 10,000 MW;
– Production, sale or distribution of nuclear-based power generation exceeds 5% of turnover. This includes uranium extraction, uranium concentration, refining, conversion and enrichment, the production of nuclear fuel structures, construction and use of nuclear reactors. It also includes treatment of spent nuclear fuel, nuclear decommissioning and radioactive waste management.
– If the sum of activities related to unconventional oil and gas, such as oil sands extraction, shale oil, shale gas and Artic drilling represents more than 5% of revenues.
– The production of traditional tobacco or related tobacco (such as e-cigarettes, new generation tobacco/nicotine products) exceeds 5% of sales;
– Tobacco sale or distribution represents more than 5% of total turnover;
– The production of pesticides, palm oil or genetically modified organisms (GMOs) represents more than 5% of turnover;
– Income from activities related to:
• gambling exceeds 5% of sales;
• alcohol represents more than 20% of the turnover;
• non-medicinal drugs exceeds 5% of the turnover;
• adult entertainment (pornography) represents more than 5% of turnover
c) ESG controversies monitoring and risk control
We have supplemented our existing daily-risk policy with criteria related to ESG reputational risks. Indeed, business conduct risks related to human rights, labour, environment and corruption can result in risks to a
company’s reputation and finances, and therefore in a risk for the end investor.
3 – SRI voting policy
Chahine Capital has set up an SRI voting policy with ISS as a partner. We therefore vote at all shareholders’ meetings of the companies held in the Digital Funds and apply by default the SRI voting recommendations provided by ISS research.
4 – Engagement policy
As quantitative investment managers, data access is crucial for Chahine Capital, in particular for our all-cap and small-cap funds. With that in mind, we are seeking to improve the availability of ESG data, especially for small and mid-capitalisation companies. For stocks not covered by Sustainalytics and RepRisk databases, Chahine Capital seeks to approach these data providers and also companies concerned to encourage them to disclose the necessary information.
5 – Objectives
Chahine Capital has set ambitious ESG objectives and wants to contribute to the UN Sustainable Development Goals.
The ESG process previously described is expected to have an impact on the achievement of 7 of them:
6 – Reporting – Transparency
An ESG activity report is produced every quarter and contains:
– the list of excluded companies and the detailed reasons for their exclusion.
– the average RRI of each fund and each benchmark, for comparison. The RRI (RepRisk Index) is a quantitative
measure that dynamically captures a company’s reputational risk related to ESG issues.
– the distribution of RepRisk ratings of each fund and each benchmark, for comparison.
This report is available below.
A report on the exercise of voting rights is produced every quarter as well.
This report is also available below.
This responsible investment policy is specific to four of our funds: Digital Stars Europe, Digital Stars Ex-UK, Digital Stars Smaller companies and Digital Stars US Equities. A specific policy for our Digital Stars Eurozone fund is available below.