TBLI, 15/11/07 1

Overview of CSR performance within small and midcaps in

France 

TBLI, 15/11/07 2

Who are we ?

independent CSR research agency since 2003

tailor-made ESG research for asset managers (criteria, methodology, database)

strong experience in European small & midcaps

flexible & user-friendly on-line database

bespoke CSR rating system on countries (Global Risk Rating) launched last June

TBLI, 15/11/07 3

Does CSR grow with size ?

large companies are more likely to adopt responsible business practices than smaller companies

  Most SRI funds are invested in large caps, few in MidCaps

SRI Indexes & CSR agencies seldom cover caps < €3bn

Hurdles to CSR development within SME

Less pressure from institutional investors

Lack of resource to allocate vs expected returns

Culture based on “said” rather than “written”

Irrelevance of some CSR criteria to their operations size

TBLI, 15/11/07 4

Why are all MidCaps going to catch up ?

ESGRegulations

InvestorsSRI + PRI

ClientsDemand

SocietyNGO

TBLI, 15/11/07 5

Our findings on CSR performance of French MidCaps

Scope of our research:- 150 companies listed on A, B & C & Alternext- €20M < market cap < €2000M

33%

8%

59%capi < 150 M€

150 M€ < capi < 1 Md€

capi > 1 Md€

1% 5%

24%

21%9%12%

3%

25%Energie

Matériaux

Industrie

Consommation discretionnaire

Bien de consommation de base

Santé

Finance

Systèmes d'information

12%

43%45%

flottant < 33%

33%<flottant<66%

flottant>66%

activity sectors

TBLI, 15/11/07 6

Rating methodology:- From criteria definition & weightings to assessment

Development of ESGcriteria table

Analysis of published information

Dialoguewith

corporates

from

Jan

uary

to M

arch

07

Identify

Analyse – step1

Analyse – step2

Compare

Interview stakeholders

Rating

Annual reports, websites & media

And adapt ESG criteria

Over 60%Contact rate

We have had to adapt our research approach

TBLI, 15/11/07 7

data consolidation & reporting scope

quantitative performance measurement

qualitative performance analysis

4 main topics split into 150 criteria

Board structure & perf Risk management Rel. with Shareholders

Supply chain Mgt Products liability Rel. with society

policy & objectives EMS Sector specifics

Social risks Environmental risksCorp. governance other stakeholders

HR policy & Mangt Health & safety Human rights

4 sets of ESG criteria

We have weighted each topic evenly : - 25%for each of the four topics- 33% e.g. for each category within Corp Governance topic- etc…

TBLI, 15/11/07 8

With an average EthiFinance score of 42 points out of 100 (which is quite good when CAC40 scores on average just 50), this demonstrates that SME are managing some CSR issues better than others :

The variances within each topic are far greater than within the Large Caps. This is especially true on environmental issues;

When a company scores well, this is usually true across ESG and vice versa (although “E” suffers more than “S” and “G”);

Other stakeholders : better integration of quality and security issues towards their customers than towards their suppliers…

Topic Score Weight

Governance 58 25%

Social 40 25%

Environment 22 25%

Other SH 47 25%

GLOBAL 42

General findings

TBLI, 15/11/07 9

The global score of 58 points (vs 52 points in 2005) highlights the fact that Midcaps are reviewing & improving their governance

Répartition des notes "Gouvernance"

0

5

10

15

20

25

30

35

Moins de 30points

Entre 30 et39 points

Entre 40 et49 points

Entre 50 et59 points

Entre 60 et69 points

>= 70 points

No

mb

re d

'en

trep

rise

s

Focus on Corporate Governance

TBLI, 15/11/07 10

Best governance scores are in software and health sectors Clear link between floating rate and good governance No clear link between market cap and good governance

-3

+3

IndustryConsumer goodsservices

-4

+12

flottant < 33%entre 33% & 66%flottant > 66%

-4150M€ < capi < 1Md€

Average of 52 points

150M€ < capi

capi > 1Md€+2

Seen from different angles

TBLI, 15/11/07 11

86%

MidCaps Boards are made up from 3 up to 16 members as follows :

The Board structure

58%PDG

42% have split rolesBetween Chairman and CEO

40%

Have a Board Charter

42%

49% Have at least one woman

Have at least one « external » member

Have a staff representative (8%)

TBLI, 15/11/07 12

54% have an Audit Committee. Information on their achievements is still limited.

50% also have another Committee: more frequently a remuneration committee (40%), followed by a nomination committee (12%) and Strategy committees.

Other practices

Two thirds publish the presence rate of their Board members.

One in four does not pay any fees to its Directors. For those who do, details are published in 85% of cases.

Nearly all companies publish the Executive directors. However, bonus criteria are rarely explained.

TBLI, 15/11/07 13

Extra Financial Risk Management

95% of companies recognise the increasing importance of extra financial risk management: this is however more strongly felt in bigger companies and in sectors more exposed to them.

Very little information is provided to explain how extra financial risk is identified and managed…

38% (more than CAC40 percentage) have totally separated their audit and consulting services providers.

15% only have defined their values and 30% have published a Code of Conduct

7% only have clearly outlined their procedures to prevent corruption

Ethical issues

TBLI, 15/11/07 14

95% publish some information about their AGM on their website.

25% also publish their results.

Relationship with shareholders

70% of MidCaps grant a double voting right for those shareholders who have been identified as being loyal shareholders for 2, 3 or 4 years.

When interviewed, all of them intend to improve their relationship with its shareholders…

TBLI, 15/11/07 15

Conclusion

MidCaps talk less than they do…

but they often walk their talk (better than others)

rating criteria must be adapted to their operations size

good assessment might require on site visits

now time to invest & demand more from them

thank you

EthiFinanceEmmanuel de La Ville

TBLI, 15/11/07 16

Thank you…For more information