Our ambition is to deliver sustainable performance that is shared by all our stakeholders and by the companies in which we invest, amid a demanding and very fast moving environment. This ambition is full of contradictions, as it involves (1) :
- making long-term decisions while managing daily ups and downs on financial markets;
- meeting our clients’ superior performance objectives while sharing the value with all the stakeholders of the companies in which we have invested;
- conducting in-depth qualitative analysis of companies based on a strict research discipline, although
financial analysis is de facto driven by data;
- quantifying these qualitative factors with a view to ranking and separating out the companies;
- conducting this 360° analysis with parsimony, taking into account the issues of time, access and reliability
of data (few extra-financial audits are currently conducted).
It’s all about assessing companies as fully as possible despite relying on imperfect indicators!
How can a responsible investor overcome these contradictions? By refusing to acknowledge them as such! This is not about solving a dilemma and opting for one solution over another, but about overcoming paradoxes that are seemingly contradictory, and to turn them into strengths.
This inspired Sycomore AM to upgrade its analysis model. We have given up on the automatic rating of isolated quantitative criteria – such as turnover and absenteeism rates for instance. Our approach now pays greater attention to combined quantitative indicators and to qualitative criteria, which through their interconnections help us gain meaningful insights into the risks incurred by a given company. We consider this new research methodology to be more in keeping with the paradoxical world in which we live and work.
Value creation is only sustainable if it is shared among all stakeholders.
And it is because the companies we analyse also have to navigate these same conditions that we enhanced our assessment model, drawing on Ed Freeman’s Stakeholder Theory. The new methodology identifies then analyses different stakeholders by switching from an ESG model (Environment, Social, Governance) to the SPICE model, – Society, State & Supplier / People / Investors / Clients / Environment – to measure the quality of the relations that bind them with the company in greater depth.
In this edition, we shall look at how companies manage their different stakeholders using the example of Tarkett, a major global player in flooring solutions, and how as responsible investors, we face paradoxes that need to be managed on a daily basis. Paradoxically, this deep-seated new model aims to be highly interconnected and segmented, so that it can strengthen our ability to push for the development and normalisation of responsible investing. This normalisation should lead to the death of responsible investment as we know it today, in a process of “creative destruction”…
SPICE, our investment process
(1) Source: The challenges of responsible investment mainstreaming: beliefs, tensions and paradoxes. Christel Dumas. 2015.