Our philosophy is based on the observation that intangible value has become a significant consideration for investment decisions. Therefore, an enhanced analytic approach is required. We have developed this by integrating non-financial metrics and secular trend exposure with financial criteria throughout the investment process.
Inflection Point provides analysis and insight to La Française’s portfolio managers across equity, fixed income and multi-asset classes. The sustainability research offers an additional layer of analysis to inform and facilitate the investment managers’ decisions, with a view to delivering superior risk-adjusted returns.
The investment process of LFAM for equities deeply integrates financial and non-financial analysis through a shared research platform and close team interaction. By combining financial analysis, strategic analysis and ESG performance data as well as thematic exposure, Inflection Point’s research approach supports securities selection across sectors and geographies.
The 5-Factor Model
We start with the idea that companies need to continuously adapt their capabilities to compete successfully in today’s complex and dynamic environment. Attributes including responsiveness and innovation capacity will increasingly influence corporate performance and valuations.
Similarly, operational and financial performance are likely to be influenced by the strategic positioning of companies in relation to risks and opportunities from environmental, social and governance factors, and the ability of management to navigate these challenges.
Inflection Point’s proprietary 5-Factor model assesses the following critical elements of sustainable investing:
These five factors are weighted differently by sector. Each factor is comprised of risk- and value-drivers that organise the underlying key performance indicators. KPIs are selected according to their financial materiality within each sector.
Inflection Point analyses the exposure of companies to secular trends that are heavily influencing corporate performance over the medium to long term. These megatrends include, for example, the rise of the world’s emerging markets, increasing natural resource demand, the growing political will to address climate change, changing consumer preference toward responsible consumption, digitalisation of business models across sectors and demand for smart and sustainable infrastructure.
For example, the changing nature of labour markets and the respective implications for employees are at the core of the investment policy of LFAM’s Sustainable Employment strategy (Emploi Durable). This is a discretionary strategy managed on behalf of an institutional investor.
Impact investing is a small but fast-growing category within responsible investment. It is generally defined as investments made into companies, organisations and funds with the intention to generate tangible social and environmental impact alongside a financial return.
The Carbon Impact strategy is an example of impact investing as it offers an investment solution with positive impact on climate change coupled with financial returns. Inflection Point measures the environmental impact of the respective portfolio by calculating both induced carbon emissions and avoided carbon emissions. The investment team applies these metrics to optimise the portfolio composition towards a neutral carbon impact.