This note summarizes the approach adopted by Sycomore AM regarding environmental issues and the concept of natural capital. It provides a structure as to the duties imposed by article 173 of the French law governing Energy Transition for Green Growth, voted on August, 17th 2015, which enforcement decree, n°2015-1850, was published in the French Official Journal on December, 29th 2015. Indeed, the spirit and intent of the law reinforce institutional investors’ publication requirement first, as to the inclusion of environmental, social and governance (ESG) criteria in their investment policy, and second their policy regarding the contribution to the energy and ecological transition and the fight against global warming.
As an asset manager, Sycomore AM considers the environment to be a key stakeholder. Indeed, it forms a public good that encompasses all public assets providing ecosystem services as defined by the 2005 Millennium Ecosystem Assessment. This public good, which future generations will inherit, is often referred to as natural capital.
Sycomore AM favours a comprehensive approach including each and every environmental issue without initially attempting to rank them. Each pollutant has indeed several impacts. For instance, sulphur dioxide (SO2) is a colourless gas, which is toxic when inhaled and which causes rainwater acidification as well. Chlorofluorocarbons (CFCs) are greenhouse gases that also destroy the ozone layer.
Furthermore, environmental issues are often intertwined: land degradation has an impact on climate change and vice versa, while deforestation amplifies land degradation which in turn weakens forests. Finally, each solution or answer to an environmental issue has its own side effects, potentially leading to pollution transfers. As an illustration, diesel engines show signs of improvement if we focus only on climate change as they emit 10 to 15% less CO2 per kilometre compared with gasoline engines. However, they produce more NOx and fine particles, with an immediate negative impact on air quality in urban areas. Likewise, the development of electric vehicles in a country with a high carbon electricity mix does not help mitigating climate change although it leads to major improvements in urban air quality. Sycomore AM has therefore adopted a multi-issue approach.
Sycomore AM considers the environment to be a key stakeholder. Indeed, it forms a public good that encompasses all public assets providing ecosystem services as defined by the 2005 Millennium Ecosystem Assessment
Believing that companies do not only cause pollution but also provide solutions, Sycomore AM seeks to integrate all positive impacts generated by the companies and their business models.
The approach is therefore:
- Comprehensive: it aims at encompassing all aspects of a company’s business model including the impact of its products and services, based on life cycle analyses (from cradle to grave; for example all “scopes” for carbon footprinting);
- Solution-oriented: it identifies positive impacts (energy savings, avoided emissions, metric tons recycled, etc.);
- Multi-issue: as opposed to mono-metric approaches, such as a carbon-only approach.
Finally, considering the complexity of environmental assessment, which remains non-standardised and for which little information is available, Sycomore AM adopts a pragmatic approach:
- By focusing on the most-commonly known impacts: thus only major positive and negative impacts are analysed;
- By adopting an approach that is proportionate to the issue: thus the level of analysis will be deeper for activities with strong interactions with the environment (positive, negative or both).