Powering change through innovation
Finance has a vital role to play in tackling the most pressing issues of today's world. Find out how Amundi, the leading European asset manager [1], is leading the way through innovation.
Building a better tomorrow together
A journey into why ESG matters, how investors can help to change the world for good and the Amundi advantage in making this happen.
As COP 26 has highlighted, the energy transition is more vital than ever- but must be managed in a socially acceptable way, according to Valerie Baudson, CEO of Amundi.
The looming risk of climate emergency remains more pressing than ever: according to Nasa [1], last year was the hottest ever on record, a fact marked by huge hurricanes and raging wildfires.
Baudson explains. ‘I am a pragmatist, totally committed to the idea of transition. But on one fundamental condition: the transition can only happen if it is fair to everyone’ she says.
‘The responsibility of investors is to finance an energy transition that can only be viable if it is done with fairness. This is the biggest challenge for the future,’ she emphasises.
This is why Amundi, Europe’s largest asset manager [2], made ESG one of its four founding pillars in 2010, and why it has now committed to introducing ESG research into 100% of its active open funds by the end of 2021.
‘As a world leader, we have a responsibility towards society, and Amundi will honour it,’ she says.
At the same time, Amundi is committed to working as an innovator within financial markets to help finance the transition to a low-carbon economy across all geographies, with an emphasis on areas where it is most needed.
In 2018, Amundi launched the world’s largest green bond fund focused on developing markets. This is significantly increasing the scale and pace of climate finance in the developing world, by bringing in capital from a network of institutional investors across Europe and the Middle East.
It's not only climate change that’s being targeted, however. During 2020, many institutions and governments launched social bonds, often as a way of raising capital to address problems caused by the pandemic: one example is the EU’s social bond to help member states finance support for people whose employment was hit by lockdowns. Amundi launched a social bond fund in December 2020 to help support this rapidly-growing area of finance.
Another game-changing initiative during 2020 was Amundi’s partnership with the Asian Infrastructure Investment Bank to launch the Climate Change Investment Framework in order to drive Asia’s green recovery and transition.
The framework takes a holistic approach and will equip investors with a new tool to assess climate change risks and opportunities in line with the three objectives of the Paris Agreement.
Most recently, in the beginning on 2021, Amundi launched the just transition for climate fund. The fund seek to provide investors with a unique solution to measure and integrate the financial risks associated with climate change and support a transition to a low-carbon economy that is socially inclusive.
Financial markets and asset managers have a vital role to play, and investors are waking up to this fact
INNOVATION AT AMUNDI
Fighting humanity’s many challenges
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 31 August 2021. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 30 September 2021
Doc ID# 1849836
Sources:
[1] https://www.theguardian.com/environment/2021/jan/14/2020-hottest-year-on-record-nasa
[2] IPE "Top 500 asset managers” published in June 2021 and based on AUM as of December 2020
- Amundi Asset Management as at 31 August 2021.
- https://www.theguardian.com/environment/2021/jan/14/2020-hottest-year-on-record-nasa
- https://www.theguardian.com/sustainable-business/2017/jul/10/100-fossil-fuel-companies-investors-responsible-71-global-emissions-cdp-study-climate-change
As COP 26 has highlighted, the energy transition is more vital than ever- but must be managed in a socially acceptable way, according to Valerie Baudson, CEO of Amundi.
The looming risk of climate emergency remains more pressing than ever: according to Nasa [1], last year was the hottest ever on record, a fact marked by huge hurricanes and raging wildfires.
Baudson explains. ‘I am a pragmatist, totally committed to the idea of transition. But on one fundamental condition: the transition can only happen if it is fair to everyone’ she says.
‘The responsibility of investors is to finance an energy transition that can only be viable if it is done with fairness. This is the biggest challenge for the future,’ she emphasises.
This is why Amundi, Europe’s largest asset manager [2], made ESG one of its four founding pillars in 2010, and why it has now committed to introducing ESG research into 100% of its active open funds by the end of 2021.
‘As a world leader, we have a responsibility towards society, and Amundi will honour it,’ she says.
At the same time, Amundi is committed to working as an innovator within financial markets to help finance the transition to a low-carbon economy across all geographies, with an emphasis on areas where it is most needed.
In 2018, Amundi launched the world’s largest green bond fund focused on developing markets. This is significantly increasing the scale and pace of climate finance in the developing world, by bringing in capital from a network of institutional investors across Europe and the Middle East.
It's not only climate change that’s being targeted, however. During 2020, many institutions and governments launched social bonds, often as a way of raising capital to address problems caused by the pandemic: one example is the EU’s social bond to help member states finance support for people whose employment was hit by lockdowns. Amundi launched a social bond fund in December 2020 to help support this rapidly-growing area of finance.
Another game-changing initiative during 2020 was Amundi’s partnership with the Asian Infrastructure Investment Bank to launch the Climate Change Investment Framework in order to drive Asia’s green recovery and transition.
The framework takes a holistic approach and will equip investors with a new tool to assess climate change risks and opportunities in line with the three objectives of the Paris Agreement.
Most recently, in the beginning on 2021, Amundi launched the just transition for climate fund. The fund seek to provide investors with a unique solution to measure and integrate the financial risks associated with climate change and support a transition to a low-carbon economy that is socially inclusive.
INNOVATION AT AMUNDI
Fighting humanity’s many challenges
Valérie Baudson,
CEO, Amundi
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 31 August 2021. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 30 September 2021
Doc ID# 1849836
Sources:
[1] https://www.theguardian.com/environment/2021/jan/14/2020-hottest-year-on-record-nasa
[2] IPE "Top 500 asset managers” published in June 2021 and based on AUM as of December 2020
- Amundi Asset Management as at 31 August 2021.
- https://www.theguardian.com/environment/2021/jan/14/2020-hottest-year-on-record-nasa
- https://www.theguardian.com/sustainable-business/2017/jul/10/100-fossil-fuel-companies-investors-responsible-71-global-emissions-cdp-study-climate-change
Collaboration has helped to find a vaccine for Covid-19, but the underlying challenges remain
Collaboration has helped to find a vaccine for Covid-19, but the underlying challenges remain
The inclusion of Environmental, social and governance (ESG) criteria are making waves among investors. An increasing number of people are becoming aware of the power their investments can have. Amundi, Europe’s largest asset manager, [1] wants to do more than ‘just’ support businesses that already comply with ESG practices.
The firm, which is one of the pioneers in the sustainable investment space, makes the case for so-called ESG improvers. Those companies haven’t reached their full ESG potential yet, but Amundi believes they are on the way to doing so.
Put differently, the asset manager aims to identify and extract value from businesses on what we believe is an upward ESG trajectory. Amundi’s head of equities, Kasper Elmgreen, argues that investors may benefit from allocating money to businesses where the ESG premium is not priced in fully yet.
As more and more investors are flocking to ESG companies that already provide good ESG credentials, the ESG impact of those investments is reduced - you’re essentially preaching to the choir.
INNOVATION AT AMUNDI
ESG winners of tomorrow
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 31 August 2021. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 17 September 2021
Doc ID# #1821058
Sources:
[1] IPE "Top 500 asset managers” published in June 2021 and based on AUM as of December 2020
[2] Amundi Asset Management, as at 31 August 2021
[3] https://research-center.amundi.com/page/Article/Insights-Paper/2020/09/Looking-for-hidden-ESG-gems-a-new-frontier-for-responsible-investing-with-improvers?search=true
[4] S&P Global Market Intelligence analysed 17 exchange-traded and mutual ESG funds, 14 of which outperformed the broader market through 31 July 2020. S&P Global Market Intelligence:
https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/esg-funds-outperform-s-p-500-amid-covid-19-helped-by-tech-stock-boom-59850808
The inclusion of Environmental, social and governance (ESG) criteria are making waves among investors. An increasing number of people are becoming aware of the power their investments can have. Amundi, Europe’s largest asset manager, [1] wants to do more than ‘just’ support businesses that already comply with ESG practices.
The firm, which is one of the pioneers in the sustainable investment space, makes the case for so-called ESG improvers. Those companies haven’t reached their full ESG potential yet, but Amundi believes they are on the way to doing so.
Put differently, the asset manager aims to identify and extract value from businesses on what we believe is an upward ESG trajectory. Amundi’s head of equities, Kasper Elmgreen, argues that investors may benefit from allocating money to businesses where the ESG premium is not priced in fully yet.
INNOVATION AT AMUNDI
ESG winners of tomorrow
Kasper Elmgreen,
head of equities, Amundi
‘As more and more investors are flocking to ESG companies that already provide good ESG credentials, the ESG impact of those investments is reduced - you’re essentially preaching to the choir,’ Elmgreen says.
‘We step away from the traditional best-in-class approach and focus on companies that sit in the middle of the valuation curve, so businesses that are neither great nor terrible. We’re looking for opportunities in other places than the standard best-in-class investor.’
Thinking outside the box
The link between ESG and valuation
According to Elmgreen, ESG improvers enable investors to tap into trends well before they materialise and may help increase the return potential of portfolios.
That’s one of the reasons why Amundi, in line with its philosophy of helping firms meet their sustainability goals, set out to accompany businesses in their ESG journey. ‘We are actively supporting companies seeking to improve in ESG areas in which they are currently underperforming,’ Elmgreen states.
Amundi’s search for ESG improvers follows a dynamic and forward-looking approach, which ensures that each company’s ESG potential is assessed on an individual basis.
1
Buy Low, Sell High
We extend this common investment philosophy to the realm of ESG and believe that this will increasingly get rewarded by the market.
Best In Class
Seeking ESG improvers through an all-inclusive approach across all sectors.
2
Fundamental Approach
Our analysis goes beyond static ESG ratings, we include forward looking qualitative assessments.
3
Materiality
ESG improvement must be tangible and relevant, therefore we focus on financially material factors.
4
Improvers & Leaders
The return potential of the improvers combined with the quality of the leaders may enhance the risk-adjusted return profile.
5
From Elmgreen’s perspective, Europe is particularly interesting for ESG investors, both in terms of established and up-and-coming players. It’s not only home to many global ESG leaders, but also has the most advanced ESG framework in the world. [3]
Covid-19 and the resulting market turmoil have confirmed the increasing relevance of integrating ESG criteria into investment decisions, with ESG funds weathering the crisis better than their traditional counterparts. [4]
‘The whole ESG arena is booming,’ Elmgreen points out. ‘When we ask investors what matters to them, ESG consistently comes up as one of their top priorities. That’s great news, but, as I said, as more people are joining the ESG space, we just have to accept that the output gets less. Our ESG improvers concept enables us to find opportunities off the beaten track.’
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 31 August 2021. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 17 September 2021
Doc ID# #1821058
Sources:
[1] IPE "Top 500 asset managers” published in June 2021 and based on AUM as of December 2020
[2] Amundi Asset Management, as at 31 August 2021
[3] https://research-center.amundi.com/page/Article/Insights-Paper/2020/09/Looking-for-hidden-ESG-gems-a-new-frontier-for-responsible-investing-with-improvers?search=true
[4] S&P Global Market Intelligence analysed 17 exchange-traded and mutual ESG funds, 14 of which outperformed the broader market through 31 July 2020. S&P Global Market Intelligence:
https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/esg-funds-outperform-s-p-500-amid-covid-19-helped-by-tech-stock-boom-59850808
Amundi’s five guiding principles for ESG Improvers [2]
‘As more and more investors are flocking to ESG companies that already provide good ESG credentials, the ESG impact of those investments is reduced - you’re essentially preaching to the choir,’ Elmgreen says.
‘We step away from the traditional best-in-class approach and focus on companies that sit in the middle of the valuation curve, so businesses that are neither great nor terrible. We’re looking for opportunities in other places than the standard best-in-class investor.’
Thinking outside the box
The link between ESG and valuation
Sources:
Amundi (https://research-center.amundi.com/page/Article/Insights-Paper/2020/09/Looking-for-hidden-ESG-gems-a-new-frontier-for-responsible-investing-with-improvers?search=true). As of September 2020.
Source:
Amundi (https://research-center.amundi.com/page/Article/Insights-Paper/2020/09/Looking-for-hidden-ESG-gems-a-new-frontier-for-responsible-investing-with-improvers?search=true). As of September 2020.
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 20 September 2021. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results.
Date of first use:
Doc ID#1838632
Sources:
[1] IPCC, Climate Change 2021: the Physical Science Basis, 9 August 2021
[2] BCG, Global Asset Management 2021: The $100 Trillion Machine, July 2021
[3] BCG, Global Asset Management 2021: The $100 Trillion Machine, July 2021
[4] Bloomberg, ESG assets may hit $53 trillion by 2025, a third of global AUM, 21 February 2021
[5] Amundi/ Bloomberg, December 2020
[6] MSCI indices referenced are MSCI World Climate Change Index, MSCI Europe Climate Change Index and MSCI EM Climate Change Index, net returns in USD. As at 31 July 2021
[7] European Commission https://ec.europa.eu/info/publications/sustainable-finance-renewed-strategy_en, March 2018
While the Covid-19 crisis had a devastating effect on society and global economies, it had a positive effect on global carbon dioxide emissions which fell by 6.4% during 2020. However emissions have rebounded as economic activity has begun to recover.
Amundi is deeply committed to meeting investors’ investment objectives while contributing positively to addressing society’s key global challenges.
INNOVATION AT AMUNDI
Index investing and the climate emergency
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 20 September 2021. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results.
Date of first use:
Doc ID#1838632
Sources:
[1] IPCC, Climate Change 2021: the Physical Science Basis, 9 August 2021
[2] BCG, Global Asset Management 2021: The $100 Trillion Machine, July 2021
[3] BCG, Global Asset Management 2021: The $100 Trillion Machine, July 2021
[4] Bloomberg, ESG assets may hit $53 trillion by 2025, a third of global AUM, 21 February 2021
[5] Amundi/ Bloomberg, December 2020
[6] MSCI indices referenced are MSCI World Climate Change Index, MSCI Europe Climate Change Index and MSCI EM Climate Change Index, net returns in USD. As at 31 July 2021
[7] European Commission https://ec.europa.eu/info/publications/sustainable-finance-renewed-strategy_en, March 2018
While the Covid-19 crisis had a devastating effect on society and global economies, it had a positive effect on global carbon dioxide emissions which fell by 6.4% during 2020. However emissions have rebounded as economic activity has begun to recover.
INNOVATION AT AMUNDI
Index investing and the climate emergency
The past five years have been the hottest recorded since 1850; [1] climate change has become an emergency. For investors committed to a sustainable future, we believe index investing presents opportunities for positive climate impact.
Source:
https://carbonmonitor.org/
The colours in the bar chart above correspond to the colours for each sectos shown in the second graphic.
The percentage for each sector shows the contribution of this sector to the total change in emissions. The percentages in blue boxes show the sector change in 2020 vs 2019.
Expectations are high for investors to act with urgency in tackling climate change. But just how can the investment industry play its part? The sector proved resilient in 2020: global assets grew 11% ending the year on $103 trillion, [2] while assets in passive strategies totalled $22 trillion in 2020. [3] These volumes represent a major opportunity to drive sustainable change.
Environmental, social and governance (ESG) investing became truly mainstream in 2020. Bloomberg [4] now predicts global ESG assets reaching $53 trillion by 2025, and ESG represented 51% of all assets allocated to ETFs in 2020 [5]. This growth stems from both investor demand and from regulation.
Why climate matters to investors
The increasing urgency of climate change has become a key concern for investors. Firstly, it has become recognised as an investment risk. Secondly, investment opportunities arising from the energy transition could outweigh climate-related risks over time. Thirdly, we are increasingly seeing investors seeking to reflect their sustainability values in their asset allocation. This desire from investors has been facilitated by climate investing as proven by MSCI climate indices, which have shown consistent outperformance vs. their parent index over the last five years [6].
The regulatory landscape is also evolving and driving change. The European Commission Action Plan of 2018 [7] introduced initiatives for standardisation and transparency of disclosure for ESG and climate issues. In July 2021, the EC set out its intention to achieve climate neutrality across the EU by 2050. This incorporates at least 55% net reduction in greenhouse gas emissions by 2030. Specifically this means the phase-out of coal, curtailing deforestation, accelerating the transition to electric vehicles, and investment in renewables. Developed countries and international financial institutions are expected to play a key role.
Historically climate investing focused on impact investing strategies or active investment. However indexing and climate investing are compatible. Amundi was at the forefront of climate index innovations, co-developing the MSCI Low Carbon Leaders index series with French and Swedish pension funds in 2014.
Today, improvements in the quality and availability of ESG data have led to a new generation of climate indices. These consider indirect emissions and future climate commitments in addition to historical data. The Climate Transition Benchmark and Paris-Aligned Benchmark are two new comprehensive pan-European climate index labels enabling passive investors to incorporate climate goals into their portfolios in alignment with their individual objectives. They are the first such pan-European sustainable indices.
In addition to choosing a suitable climate index, selection of an asset manager with a robust engagement and voting strategy is essential to achieving climate and investment goals. Exclusions, divestment and engagement are all possible with passive investing. In fact tangible change achieved across a range of sectors in recent years has demonstrated the importance of selecting a manager that “walks the talk” on engagement issues targeting climate change.
Climate & Index investing
Amundi is deeply committed to meeting investors’ investment objectives while contributing positively to addressing society’s key global challenges. Against this backdrop, our range of climate ETFs seek to enable you to play your part in responding to the climate emergency.
Find out more at www.amundietf.com
Climate Investing with Amundi ETF
Amundi is deeply committed to meeting investors’ investment objectives while contributing positively to addressing society’s key global challenges. Against this backdrop, our range of climate ETFs seek to enable you to play your part in responding to the climate emergency.
Find out more at www.amundietf.com
Climate Investing with Amundi ETF
The past five years have been the hottest recorded since 1850; [1] climate change has become an emergency. For investors committed to a sustainable future, we believe index investing presents opportunities for positive climate impact.
IMPORTANT INFORMATION
This document contains information about Amundi Planet Emerging Green One fund. The management company of the Fund is Amundi Luxembourg SA, 5 allée Scheffer, L-2520 Luxembourg.
This material is for information purposes only, is not a recommendation, financial analysis or advice, and does not constitute a solicitation, invitation or offer to purchase or sell the Fund in any jurisdiction where such offer, solicitation or invitation would be unlawful. This information is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities or services in the United States or in any of its territories or possessions subject to its jurisdiction to or for the benefit of any U.S. Person (as defined in the prospectus of the Funds). The Funds have not been registered in the United States under the Investment Company Act of 1940 and units of the Funds are not registered in the United States under the Securities Act of 1933. Accordingly, this material is for distribution or to be used solely in jurisdictions where it is permitted and to persons who may receive it without breaching applicable legal or regulatory requirements, or that would require the registration of Amundi or its affiliates in these countries.
Investment involves risk. Past performance is not a guarantee or indication of future results. Investment return and the principal value of an investment in the Fund may go up or down and may result in the loss of the amount originally invested. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability. It is the responsibility of investors to read the legal documents in force in particular the current prospectus of the Fund. Subscriptions in the Fund will only be accepted on the basis of their latest prospectus available in English or in the local language of EU registration, and/or the Key Investor Information Document (“KIID” available in local language in EU countries of registration) which together with the latest annual and semi-annual reports may be obtained, free of charge, at the registered office of the management company of the Fund, or at www.amundi.lu. A summary of information about investors rights and collective redress mechanisms can be found in English on the regulatory page at https://about.amundi.com.
Please note that the management company may de-notify arrangements made for marketing as regards units or shares of the Fund in a Member State of the EU in respect of which it has made a notification.
The information in this document is as at 31 August 2021 except where otherwise stated. This material is based on sources that Amundi considers to be reliable at the time of publication. Data, opinions and analysis may be changed without notice. Amundi accepts no liability whatsoever, whether direct or indirect, that may arise from the use of information contained in this material. Amundi can in no way be held responsible for any decision or investment made on the basis of information contained in this material.
The information contained shall not be copied, reproduced, modified, translated or distributed without the prior written approval of Amundi.
Date of publication: 17 September 2021
Doc ID: 1821074
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Amundi Asset Management
A French simplified joint stock company (société par actions simplifiée), a portfolio management company approved by the “Autorité des marchés financiers” or “AMF” under the number GP 04000036 whose registered office is located 90 boulevard Pasteur, 75015 Paris – France –, under the Paris trade register number 437 574 452 RCS.
In compliance with Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on free movement of such data (“GDPR”) and as applicable, investors can exercise the right to access, rectify or ask for deletion of the personal data the Amundi Group holds on them. To enforce this right, please contact dpo@amundi.com.
Yerlan Syzdykov, Amundi’s global head of emerging markets & co-head of emerging markets fixed income, has a big task on his hands. He and his team are responsible for convincing companies and governments in emerging markets to become more sustainable.
Often this means asking for changes to policy, business models and supply chains to be made, at significant upfront cost.
So, how does Syzdykov get emerging market companies to engage on matters of sustainability, and how is he able to convince the business owners and leaders in these societies to invest in the collective future of our planet?
It begins with sharing his enthusiasm on the scale of the opportunity. With 80% of people in the world now living in emerging markets, Syzdykov believes it is here where the biggest impact will be felt.
‘I think the scope for ESG investing in emerging markets over the next 100 years is huge, it is certainly the focus of the future for us.’
With all eyes on the opportunity, there is a lot of work to do to create the processes and systems needed to win hearts and minds on the ground, as Syzdykov explains.
In practice, the shift to a new level means moving away from an investment strategy based simply on exclusion criteria, to having a much bigger impact.
‘We cannot change the world by just passively not investing in some of the companies or governments that are not in line with our ESG policies,’ Syzdykov argues.
Instead, he and his team are taking a much more activist role, engaging with companies, and governments to gradually walk them through the process of transition.
‘We see a lot of opportunities for engagement because through our existing relationships, companies and governments are telling us they are willing to change, but of course, we need to educate and inform them of what that entails.’
The beauty of ESG, he says, is that everyone has an interest in it. The most challenging part however is to explain that at the end of the journey there is a benefit for all parties involved.
Syzdykov argues that if companies or countries perceive sustainability to be a bureaucratic straight jacket, with costs associated, it will be harder for them to recognise the long-term benefits.
However, once the large organisations that control capital such as asset owners, and asset managers all move in the same direction, suddenly, it will be clear to the companies and the countries involved that this is a long-term, irreversible transition. Add international bodies such as the World Bank and the IMF to the mix and the sustainability drive really gains momentum.
Getting these international bodies involved at an early stage was something Syzdykov and his team believed would pay dividends. Indeed, Amundi was the first and largest investor in emerging market green bonds.
In March 2018, together with the IFC (a member of the World Bank Group), Amundi launched the Amundi Planet Emerging Green One fund (AP EGO). Green bonds are, put simply, a way for companies, NGOs and even governments to raise finance for environmental projects. Since each bond has a defined end goal, and green bond selection is aligned with the guidelines from internationally recognised green bond frameworks, investors know that their money is being put to work to build a greener future.
At $1.5bn, AP EGO was the world’s largest targeted green bond fund launch focused on emerging markets. This was followed by a second version of the fund with an expanded remit.
Amundi realised the most efficient way to implement ESG policies around the world, was to cajole international institutions and governments to act on a regulatory basis.
‘A lot of countries would hide behind the sovereignty clause, saying “we’re sovereign, therefore, you guys cannot tell us what to do” so that’s where we needed the IMF or the World Bank or the United Nations to come and say “this is not an invasion into your private life, this is a serious issue for the whole planet”’.
The message is clear: shifting to a greener future will require massive investment, and while the costs might seem large, they have to be met to avert worse global warming scenarios and the consequent economic and social problems. This is where, Syzdykov says, the controversy and intellectual difficulty comes when implementing ESG principles in emerging markets.
However, large asset managers such as Amundi, he believes, are at an advantage as they have significant financial resources to build teams for ESG analysis and engagement, as well as investment.
‘Only a few investors around the world can say this because not a lot of emerging market investors have an integrated model like we do.’
That, however, does not come at the expense of industry collaboration, and Syzdykov believes this is a vital ingredient to the successful implementation of ESG in emerging markets.
Citing an example of when he invited other asset managers to join his discussions with the Argentinian and Ecuadorian governments, Syzdykov was pleasantly surprised by how many of his peers expressed interest in talking through the issues.
‘While it is important for us to popularise our ideas and principles, we also have to gain consensus and convince others to join us on this journey. For Amundi the purpose of the exercise is to effect a real change and that will only be possible if we have enough like-minded investors pushing along with us.’
INNOVATION AT AMUNDI
Bringing ESG to emerging markets
IMPORTANT INFORMATION
This document contains information about Amundi Planet Emerging Green One fund. The management company of the Fund is Amundi Luxembourg SA, 5 allée Scheffer, L-2520 Luxembourg.
This material is for information purposes only, is not a recommendation, financial analysis or advice, and does not constitute a solicitation, invitation or offer to purchase or sell the Fund in any jurisdiction where such offer, solicitation or invitation would be unlawful. This information is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities or services in the United States or in any of its territories or possessions subject to its jurisdiction to or for the benefit of any U.S. Person (as defined in the prospectus of the Funds). The Funds have not been registered in the United States under the Investment Company Act of 1940 and units of the Funds are not registered in the United States under the Securities Act of 1933. Accordingly, this material is for distribution or to be used solely in jurisdictions where it is permitted and to persons who may receive it without breaching applicable legal or regulatory requirements, or that would require the registration of Amundi or its affiliates in these countries.
Investment involves risk. Past performance is not a guarantee or indication of future results. Investment return and the principal value of an investment in the Fund may go up or down and may result in the loss of the amount originally invested. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability. It is the responsibility of investors to read the legal documents in force in particular the current prospectus of the Fund. Subscriptions in the Fund will only be accepted on the basis of their latest prospectus available in English or in the local language of EU registration, and/or the Key Investor Information Document (“KIID” available in local language in EU countries of registration) which together with the latest annual and semi-annual reports may be obtained, free of charge, at the registered office of the management company of the Fund, or at www.amundi.lu. A summary of information about investors rights and collective redress mechanisms can be found in English on the regulatory page at https://about.amundi.com.
Please note that the management company may de-notify arrangements made for marketing as regards units or shares of the Fund in a Member State of the EU in respect of which it has made a notification.
The information in this document is as at 31 August 2021 except where otherwise stated. This material is based on sources that Amundi considers to be reliable at the time of publication. Data, opinions and analysis may be changed without notice. Amundi accepts no liability whatsoever, whether direct or indirect, that may arise from the use of information contained in this material. Amundi can in no way be held responsible for any decision or investment made on the basis of information contained in this material.
The information contained shall not be copied, reproduced, modified, translated or distributed without the prior written approval of Amundi.
Date of publication: 17 September 2021
Doc ID: 1821074
---
Amundi Asset Management
A French simplified joint stock company (société par actions simplifiée), a portfolio management company approved by the “Autorité des marchés financiers” or “AMF” under the number GP 04000036 whose registered office is located 90 boulevard Pasteur, 75015 Paris – France –, under the Paris trade register number 437 574 452 RCS.
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Yerlan Syzdykov, Amundi’s global head of emerging markets & co-head of emerging markets fixed income, has a big task on his hands. He and his team are responsible for convincing companies and governments in emerging markets to become more sustainable.
Often this means asking for changes to policy, business models and supply chains to be made, at significant upfront cost.
So, how does Syzdykov get emerging market companies to engage on matters of sustainability, and how is he able to convince the business owners and leaders in these societies to invest in the collective future of our planet?
It begins with sharing his enthusiasm on the scale of the opportunity. With 80% of people in the world now living in emerging markets, Syzdykov believes it is here where the biggest impact will be felt.
‘I think the scope for ESG investing in emerging markets over the next 100 years is huge, it is certainly the focus of the future for us.’
With all eyes on the opportunity, there is a lot of work to do to create the processes and systems needed to win hearts and minds on the ground, as Syzdykov explains.
In practice, the shift to a new level means moving away from an investment strategy based simply on exclusion criteria, to having a much bigger impact.
‘We cannot change the world by just passively not investing in some of the companies or governments that are not in line with our ESG policies,’ Syzdykov argues.
Instead, he and his team are taking a much more activist role, engaging with companies, and governments to gradually walk them through the process of transition.
‘We see a lot of opportunities for engagement because through our existing relationships, companies and governments are telling us they are willing to change, but of course, we need to educate and inform them of what that entails.’
The beauty of ESG, he says, is that everyone has an interest in it. The most challenging part however is to explain that at the end of the journey there is a benefit for all parties involved. Syzdykov argues that if companies or countries perceive sustainability to be a bureaucratic straight jacket, with costs associated, it will be harder for them to recognise the long-term benefits.
However, once the large organisations that control capital such as asset owners, and asset managers all move in the same direction, suddenly, it will be clear to the companies and the countries involved that this is a long-term, irreversible transition. Add international bodies such as the World Bank and the IMF to the mix and the sustainability drive really gains momentum.
Getting these international bodies involved at an early stage was something Syzdykov and his team believed would pay dividends. Indeed, Amundi was the first and largest investor in emerging market green bonds.
In March 2018, together with the IFC (a member of the World Bank Group), Amundi launched the Amundi Planet Emerging Green One fund (AP EGO). Green bonds are, put simply, a way for companies, NGOs and even governments to raise finance for environmental projects. Since each bond has a defined end goal, and green bond selection is aligned with the guidelines from internationally recognised green bond frameworks, investors know that their money is being put to work to build a greener future.
At $1.5bn, AP EGO was the world’s largest targeted green bond fund launch focused on emerging markets. This was followed by a second version of the fund with an expanded remit. Amundi realised the most efficient way to implement ESG policies around the world, was to cajole international institutions and governments to act on a regulatory basis.
‘A lot of countries would hide behind the sovereignty clause, saying “we’re sovereign, therefore, you guys cannot tell us what to do” so that’s where we needed the IMF or the World Bank or the United Nations to come and say “this is not an invasion into your private life, this is a serious issue for the whole planet”’.
The message is clear: shifting to a greener future will require massive investment, and while the costs might seem large, they have to be met to avert worse global warming scenarios and the consequent economic and social problems. This is where, Syzdykov says, the controversy and intellectual difficulty comes when implementing ESG principles in emerging markets.
However, large asset managers such as Amundi, he believes, are at an advantage as they have significant financial resources to build teams for ESG analysis and engagement, as well as investment.
‘Only a few investors around the world can say this because not a lot of emerging market investors have an integrated model like we do.’
That, however, does not come at the expense of industry collaboration, and Syzdykov believes this is a vital ingredient to the successful implementation of ESG in emerging markets.
Citing an example of when he invited other asset managers to join his discussions with the Argentinian and Ecuadorian governments, Syzdykov was pleasantly surprised by how many of his peers expressed interest in talking through the issues.
‘While it is important for us to popularise our ideas and principles, we also have to gain consensus and convince others to join us on this journey. For Amundi the purpose of the exercise is to effect a real change and that will only be possible if we have enough like-minded investors pushing along with us.’
INNOVATION AT AMUNDI
Bringing ESG to emerging markets
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 31 August 2021. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 17 September 2021
Doc ID#
Sources:
[1] IPE "Top 500 asset managers” published in June 2021 and based on AUM as of December 2020
How effective can your savings be in addressing the big issues facing our planet?
As Europe’s largest asset manager [1], Amundi engages with companies on issues such as climate change, supporting them on the pathway to reducing emissions.
‘We have two ways of engaging with companies,’ says Caroline Le Meaux, head of ESG research, engagement and voting policy at Amundi. The first is on a case by case basis: when assessing a company’s ESG credentials, which is part of the fundamental research Amundi performs on all the companies it holds or might hold. ‘During the research process, we might well have a conversation about ESG quality, and cover, for example, any risks or controversies we have uncovered. We are always looking to help the company improve its overall ESG quality.’
The second approach is more thematic and begins by considering big macro-economic themes, of which climate change is an obvious example. ‘We want to make sure that companies are reducing their emissions. We have specific engagement streams around, for example, phasing out fossil fuels; or around the Science Based Target Initiative, which aims to provide companies with a clearly-defined path to reduce emissions in line with the Paris Agreement goals.’
While climate change is hugely important, Amundi’s ESG engagement covers a host of different areas, Le Meaux points out. Other engagement streams within the ‘E - Enviornment’ of ESG revolve around ‘natural capital preservation’, which covers biodiversity, water scarcity and pollution, as well as deforestation.
Within the social pillar of ESG, a particular area of concern is the wellbeing of employees.
‘Inequality is another very important issue for us, so we have engagement streams around a living wage. The aim is to choose companies we think are very exposed to these areas - big manufacturers for example - and check that they are offering a living wage to their employees, both direct employees and their suppliers,’ Le Meaux says.
Within the governance pillar, issues such as gender diversity are covered, as well as the levels of tax that companies pay.
‘It’s important that companies pay their fair share of tax, which can be used to support infrastructure and social cohesion. Applying this type of pressure is a relatively new theme within ESG investing, but it is gathering momentum, particularly in Europe, with some of the largest pension and state funds getting involved. The idea is also gaining a lot of traction in Asia. We expect to see this area develop over the coming years,’ she says.
The Covid crisis has provided an example of how Amundi has been able to engage as a shareholder, voting at Annual General Meetings to ensure companies kept appropriate levels of cash rather than paying out to shareholders. ‘We want companies to act fairly and to think about the long-term welfare of all stakeholders. During 2020, in the case of those companies that put employees onto the government support schemes, we voted against their paying out dividends to shareholders, because it seemed unfair for the companies and their shareholders to benefit from state support in those circumstances.’
It’s important that companies pay their fair share of tax, which can be used to support infrastructure and social cohesion. Applying this type of pressure is a relatively new theme within ESG investing, but it is gathering momentum, particularly in Europe
INNOVATION AT AMUNDI
How Amundi helps companies hit ESG targets
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 31 August 2021. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 17 September 2021
Doc ID#
Sources:
[1] IPE "Top 500 asset managers” published in June 2021 and based on AUM as of December 2020
How effective can your savings be in addressing the big issues facing our planet?
As Europe’s largest asset manager [1], Amundi engages with companies on issues such as climate change, supporting them on the pathway to reducing emissions.
‘We have two ways of engaging with companies,’ says Caroline Le Meaux, head of ESG research, engagement and voting policy at Amundi. The first is on a case by case basis: when assessing a company’s ESG credentials, which is part of the fundamental research Amundi performs on all the companies it holds or might hold. ‘During the research process, we might well have a conversation about ESG quality, and cover, for example, any risks or controversies we have uncovered. We are always looking to help the company improve its overall ESG quality.’
The second approach is more thematic and begins by considering big macro-economic themes, of which climate change is an obvious example. ‘We want to make sure that companies are reducing their emissions. We have specific engagement streams around, for example, phasing out fossil fuels; or around the Science Based Target Initiative, which aims to provide companies with a clearly-defined path to reduce emissions in line with the Paris Agreement goals.’
While climate change is hugely important, Amundi’s ESG engagement covers a host of different areas, Le Meaux points out. Other engagement streams within the ‘E - Enviornment’ of ESG revolve around ‘natural capital preservation’, which covers biodiversity, water scarcity and pollution, as well as deforestation.
Within the social pillar of ESG, a particular area of concern is the wellbeing of employees.
‘Inequality is another very important issue for us, so we have engagement streams around a living wage. The aim is to choose companies we think are very exposed to these areas - big manufacturers for example - and check that they are offering a living wage to their employees, both direct employees and their suppliers,’ Le Meaux says.
Within the governance pillar, issues such as gender diversity are covered, as well as the levels of tax that companies pay.
‘It’s important that companies pay their fair share of tax, which can be used to support infrastructure and social cohesion. Applying this type of pressure is a relatively new theme within ESG investing, but it is gathering momentum, particularly in Europe, with some of the largest pension and state funds getting involved. The idea is also gaining a lot of traction in Asia. We expect to see this area develop over the coming years,’ she says.
The Covid crisis has provided an example of how Amundi has been able to engage as a shareholder, voting at Annual General Meetings to ensure companies kept appropriate levels of cash rather than paying out to shareholders. ‘We want companies to act fairly and to think about the long-term welfare of all stakeholders. During 2020, in the case of those companies that put employees onto the government support schemes, we voted against their paying out dividends to shareholders, because it seemed unfair for the companies and their shareholders to benefit from state support in those circumstances.’
INNOVATION AT AMUNDI
How Amundi helps companies hit ESG targets
Caroline Le Meaux,
head of ESG research, voting and engagement at Amundi
Amundi, an investment partner that is constantly looking ahead at the challenges and opportunities as we move
into a new era.
We believe in investing for a socially-inclusive transition to a 2 degree world. By showing investors the carbon intensity and global warming effect of their portfolio, measured on a monthly basis against key benchmarks.
A power company has committed to reducing direct greenhouse gas emissions by
by 2030
80%
It is also committed to reducing the negative effects of this transition on
workers, local communities and consumers
Amundi also has a clear policy of engaging with companies in the portfolio as a responsible investor, ensuring a dialogue that helps to make sure the
two degree scenario is met while also considering fairness to employees and other social factors.
The company scores an A on Amundi’s Just Transition rating scale
This will mean repurposing existing structures and infrastructure, such as power plants, mining areas
and coal facilities, with involvement of local stakeholders, to create value for local communities via job creation and economic growth
Amundi wants to help bring about the transition to a more carbon neutral world …
… but also seek to manage it in a just and fair manner …
… while aiming to benefit from the opportunities transition may bring.
We advocate for a
Just Transition approach.
We believe that forward thinking and innovative techniques are vital to managing energy transition as it re-shapes our world.
Electric vehicles are likely to lead a smaller workforce to assemble, and less maintenance.
This could potentially mean people losing jobs, an increase in inequality and social unrest.
Similarly, other companies may be forced to move location – which could also have potential negative effects for employees.
could be lost in Germany over the next decade as its auto industry shifts towards electric vehiclest [7]
More than
400,000 jobs
These changes will bring opportunities for innovation, but may also have huge social consequences, not always positive.
The Paris agreement pledges to keep global warming
– preferably 1.5
well below 2°C
On current plans the world is expected to breach the 1.5 degree ceiling within 12 years or less [1]
Are we on track?
The pharmaceutical industry currently has an emissions profile 55% greater than the automotive sector! [4]
could be lost in Germany over the next decade as its auto industry shifts towards electric vehiclest [7]
More than
400,000 jobs
Globally, food loss and waste have a combined carbon footprint of
[2]
metric tons of CO2.
70–91%
The power sector needs to reduce emissions by
between 2020-2035 [2]
The aviation sector is required to reduce average carbon intensity by
between 2019-2035 [3]
35–40%
sold globally would need to be electric by 2030 [5]
of new cars
64%
The fashion industry would need to cut its emissions by around
by 2030 [6]
50%
Energy and car companies are obvious examples of those that will have to restructure – but nearly all companies in the world will face some challenges.
We believe that if the world has any hope of meeting the necessary Paris targets, huge changes will be required at company level.
click to find
out more
CO2
CO2
CO2
CO2
managing the disruption stemming from a net zero pathway
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 30 August 2021. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results.
Date of first use: 17 September 2021
Sources:
[1] https://www.bbc.co.uk/news/science-environment-55498657
[2] https://sciencebasedtargets.org/resources/legacy/2020/06/SBTi-Power-Sector-15C-guide-FINAL.pdf
[3] https://sciencebasedtargets.org/resources/files/SBTi_AviationGuidanceAug2021.pdf
[4] https://theconversation.com/big-pharma-emits-more-greenhouse-gases-than-the-automotive-industry-115285
[5] https://www.scientificamerican.com/article/ninety-percent-of-u-s-cars-must-be-electric-by-2050-to-meet-climate-goals/
[6] https://www.mckinsey.com/industries/retail/our-insights/fashion-on-climate
[7] https://www.plattform-zukunft-mobilitaet.de/wp-content/uploads/2020/03/NPM-AG-4-1-Zwischenbericht-zur-strategischen-Personalplanung-und-Entwicklung-im-Mobilit%C3%A4tssektor.pdf
Image of melting iceberg that eventually lets the water overflow the water from the edges of the pedestal
Car manufacturing line showing the transition to electric cars with less people and more robots
Another gate opening with a moving van and boxes in front of it
Amundi showing investors their portfolio analysis and strategies
Amundi people in dialoge with companies looking together at a high end
e-car charing point (e.g. tesla)
potentially escalators moving between different pedestals to connect them and give a tech look and feel
Amundi people in dialoge with companies and their employees (e.g. technician)
Employees being trained from technicians to electricians
Zoom out - illustration of someone ticking all the boxes for the Just Transition Strategy.
A door from the main pedestal opens and people walking out
bold
0.0bn
1/3
[2]
Crossheader 17 / 30 / 27
Boxout Headline 12 / 30 / 18
Boxout copy 12 / 30 / 18
HEADER 12 / 30 / 22
Call outs
35/30/45
Intro 18 / 30 / 24
Body copy 15 / 30 / 24
CO2
CO2
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 31 January 2022. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 10 February 2022
ESG can be a broad spectrum. What does it mean when asset managers say they incorporate ESG into their investment processes? And what are the benefits to society?
The Innovation Journey
How to engage with the ESG laggards
Sources:
[1] https://about.amundi.com/A-committed-player/Developing-responsible-finance
ESG as part of the way we do business: an interview with Jean-Jacques Barberis, director of the institutional and corporate clients division & ESG, Amundi
It means that when taking the decision to buy into a company, through either equities or bonds, the investor will take into account not only financial objectives such as earnings, valuation and so on, the way environmental, social or governance factors can impact these objectives, and also the many and varied externalities that the company has regarding society at large.
For example, just looking at the ‘E’ of ESG, they could look at the carbon intensity of its industrial processes. They could consider this on a relative basis against its peers, and ultimately aim to invest in a company that is less carbon intensive than others in the same sector.
The direct impact of ESG integration is that everything else being equal, the investor will favour those companies that have the best ESG practices in comparison to others.
Of course, people also need to generate returns from their investments. Can ESG integration help with that?
It is a complicated question because ESG factors are so varied. But there are certain elements of ESG analysis that have a clear correlation with the share price performance of a company. For example, the ‘G’ element: it’s intuitive to understand that a company with inadequate governance, which might mean a corrupt board or administrative structure, is likely to penalise the profits and therefore the valuation of that company.
It’s also important to consider how the market treats companies with a better ESG rating. There’s now data stretching back almost six years that indicates a company with a better ESG profile than its peers will outperform. From an empirical perspective, measured against peer groups, it’s a proven fact that ESG has helped performance.
So ESG involves favouring those companies with best practices in these areas. But to turn that around, how can managers deal with companies with a poor ESG profile?
It’s a relative concept. By which I mean, that companies with a poorer ESG profile might well be under-invested but complete exclusion is not always the best way to deal with the situation. In Amundi’s case, some companies are entirely excluded because it is one of the ways we express our values or our investment views. For example, we have relatively strong exclusions regarding tobacco companies or for those sectors that face huge long-term challenges, such as coal companies. In the latter case we are not penalising coal companies per se, we are simply noting that limiting climate change will involve a change of energy mix across the world, and this will mean that reliance on coal has to be reduced. Ultimately, I believe that it’s not for the financial industry to say what’s good or bad. That is the role of elected governments.
I think it’s fair and logical for the financial industry, along with the rest of society, to align with the Paris agreement because that is something that has been decided collectively by the international community. It is our job to help make the policies that are decided by elected bodies into reality.
The Innovation Journey
How to engage with the ESG laggards
NB: This article was written before the Russian invasion of Ukraine. Events are still moving fast and things may have changed by the time you're reading this.
ESG as part of the way we do business: an interview with Jean-Jacques Barberis, director of the institutional and corporate clients division & ESG, Amundi
NB: This article was written before the Russian invasion of Ukraine. Events are still moving fast and things may have changed by the time you're reading this.
NB: This article was written before the Russian invasion of Ukraine. Events are still moving fast and things may have changed by the time you're reading this.
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 31 January 2022. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 10 February 2022
An increasing number of investors want to know much more about the products they are buying. They want to ensure that the choices they are making are not harming the environment or contributing to inequality in society.
That’s one of the reasons why Amundi, as one of the pioneers in the ESG space, made a commitment in 2018 to ensure all products across its actively managed open-ended fund range were sustainable by the end of this year and to increase its assets dedicated to specific initiatives promoting the energy transition or social cohesion to reach more than €20bn.
Making this commitment a reality in just three years has required a huge amount of collaboration. As Amundi’s head of ESG development & advocacy, Timothée Jaulin has played a major role in establishing the meaningful collaborations that will help Amundi fulfil its goal.
Jaulin and his team have partnered with a range of companies and institutions, from university giants like Cambridge’s Clare College and Oxford’s Corpus Christi College to multilateral development banks such as the World Bank Group or the European Investment Bank.
‘It’s about moving from a concept to a concrete solution, to a concrete product and sometimes a concrete programme,’ Jaulin points out. From his perspective, there is no standard recipe for a successful partnership, ‘it’s more a state of mind geared towards development’.
Amundi and its partners have focused on three key areas: innovation and development, championing and mainstreaming.
The Innovation Journey
The power of partnerships
Amundi’s three-year ESG Action Plan is bold and ambitious. Making it a reality requires collaboration with carefully chosen partners, explains Timothée Jaulin, the group’s head of ESG development & advocacy.
Innovation and development
To foster ESG innovation and development, Jaulin has focused on establishing partnerships that can help to create positive investment solutions with a measurable benefit to society.
Recounting the example of a seminal partnership with the World Bank Group’s IFC, Jaulin explained that Amundi forged this partnership to seek to implement an holistic market development program to support Green Bonds issuance from emerging countries.
Championing
The lessons learned were then built into the second partnership focus: ESG championing. ESG championing includes the promotion of ESG advisory and ESG services, which include partnerships centred and built around clients.
‘Through these partnerships we aim to help our clients implement ambitious ESG strategies or simply accompany them on their ESG journey,’ Jaulin explains. ‘It’s about policy design, it’s about working with them and supporting them in their implementation plan. (...) It’s about knowledge sharing, training and content sharing.’
Mainstreaming
ESG, or climate investing and green finance mainstreaming involves developing what Amundi defines as an ‘ecosystem’. This means seeking to ensureing the targeted ESG related issues are on the agenda when fund managers have to vote at company shareholder meetings and investment products’ availability is not an issue anymore.
Just after launching the first low carbon indices, before the Paris Agreement. Amundi was approached by the UN who was looking for climate champions from the civil society.
‘We developed a partnership with the United Nations Environment Program to promote climate-risk integration to all investors globally,’ Jaulin says. ‘We were convinced that this made sense in terms of meeting client fiduciary duties and clients’ objectives, but it also made sense from a responsible investing standpoint.’
‘It’s much more influential and instrumental in terms of fostering change if there are other actors who do so as well,’ says Jaulin. That is why partnerships with other asset managers and international bodies within the ecosystem are so deemed important.
He believes the opportunity to learn from these partnerships has enabled Amundi to become a better investment manager - a win-win situation for the firm and its clients. Amundi’s strong belief in collaboration has served the company and its clients well. The asset manager has recently announced it reached its goal of becoming 100% ESG-compliant by 2021 and largely exceeded its €20bn target to reach €32bn.
Quite a journey. Are you ready to get on board?
The Innovation Journey
The power of partnerships
Amundi’s three-year ESG Action Plan is bold and ambitious. Making it a reality requires collaboration with carefully chosen partners, explains Timothée Jaulin, the group’s head of ESG development & advocacy.
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 30 November 2021. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 31 January 2022
Data are Tegwen Le Berthe’s daily bread and butter. According to the motto ‘knowledge is power’, Amundi’s Head of ESG Scoring and Methodology selects and evaluates information that is vital for the firm’s ESG investment process.
‘Our job is to work with the other teams, portfolio managers, sales, marketing, reporting, IT…. We help the different investment platforms integrate ESG data into their investment process, to enhance the data with, for example, ESG ratings, carbon metrics and temperature scores,’ Le Berthe says.
Amundi’s ESG ratings range from A to G - with A being the best score - and assess a company’s performance on environmental, social and governance factors. Carbon metrics, on the other hand, reveal a portfolio’s carbon exposure by factoring in the amount of greenhouse gases associated with the companies held in the investment portfolio.
Temperature scores go one-step further and check if and how much a fund contributes to the rise in global temperatures. For example, a portfolio that is heavily invested in fossil fuel companies that do not have credible carbon transition plans have a higher temperature score than one that focuses on windfarms and hydropower plants. The worst rating companies are excluded from Amundi’s portfolios.
Le Berthe sources the majority of data he uses as a basis for the various ratings and scores from external providers like MSCI and ISS. ‘We are rating more than 13,000 companies [1]. To achieve that we cannot rely on internal data alone. It is important to combine it with external information,’ he explains.
According to Le Berthe, there are two ways to leverage that information: ‘Either we use it directly by plugging it into the systems or investment processes, or we transform the data into something else, derived data and analytics.’
But what does that mean exactly? Amundi’s ESG ratings combine quantitative and qualitative elements. Based on an internal ESG framework that determines what the data from a specific provider is used for and how it is weighted, a calculation tool assesses all the information on a monthly basis and creates an automated rating for each company.
The score, however, is not set in stone. As Le Berthe points out, the ESG analysis team has the final say. ‘If an automated rating was good, but they think it has to be bad because, for example, they met with a company or a non-governmental organisation that has external information, they can change it.’ For Le Berthe, that control process represents a way to get the best of both worlds.
The combination of automated processes and tailor-made solutions also means that Amundi can take the different demands of its portfolio managers into account. ‘Obviously, they do not have the same constraints and objectives, so you have to deal with a diversity of needs,’ Le Berthe says. That diversity also applies to ESG standards - or rather the lack thereof.
‘Ultimately, you end up with funds that are either compliant with all constraints - and there are many - or you launch different versions of the same fund, so you have a French version, a Belgian one, a German one and so on.’ In other words, a gallimaufry that is costly in both time and nerves.
As Le Berthe puts it: ‘A common framework that works on an EU-wide level would make our lives a lot easier.’
A common framework that works on an EU-wide level would make our lives a lot easier
The Innovation Journey
Just another day at the office: Behind the scenes of Amundi’s ESG team
Tegwen Le Berthe,
head of ESG scoring and methodology, Amundi
Sources:
[1] Source: Amundi Asset Management as at end December 2021.
The Innovation Journey
Just another day at the office: Behind the scenes of Amundi’s ESG team
Data are Tegwen Le Berthe’s daily bread and butter. According to the motto ‘knowledge is power’, Amundi’s Head of ESG Scoring and Methodology selects and evaluates information that is vital for the firm’s ESG investment process.
‘Our job is to work with the other teams, portfolio managers, sales, marketing, reporting, IT…. We help the different investment platforms integrate ESG data into their investment process, to enhance the data with, for example, ESG ratings, carbon metrics and temperature scores,’ Le Berthe says.
Amundi’s ESG ratings range from A to G - with A being the best score - and assess a company’s performance on environmental, social and governance factors. Carbon metrics, on the other hand, reveal a portfolio’s carbon exposure by factoring in the amount of greenhouse gases associated with the companies held in the investment portfolio.
Temperature scores go one-step further and check if and how much a fund contributes to the rise in global temperatures. For example, a portfolio that is heavily invested in fossil fuel companies that do not have credible carbon transition plans have a higher temperature score than one that focuses on windfarms and hydropower plants. The worst rating companies are excluded from Amundi’s portfolios.
A common framework that works on an EU-wide level would make our lives a lot easier
Tegwen Le Berthe
head of ESG scoring and methodology, Amundi
Le Berthe sources the majority of data he uses as a basis for the various ratings and scores from external providers like MSCI and ISS. ‘We are rating more than 13,000 companies [1]. To achieve that we cannot rely on internal data alone. It is important to combine it with external information,’ he explains.
According to Le Berthe, there are two ways to leverage that information: ‘Either we use it directly by plugging it into the systems or investment processes, or we transform the data into something else, derived data and analytics.’
But what does that mean exactly? Amundi’s ESG ratings combine quantitative and qualitative elements. Based on an internal ESG framework that determines what the data from a specific provider is used for and how it is weighted, a calculation tool assesses all the information on a monthly basis and creates an automated rating for each company.
The score, however, is not set in stone. As Le Berthe points out, the ESG analysis team has the final say. ‘If an automated rating was good, but they think it has to be bad because, for example, they met with a company or a non-governmental organisation that has external information, they can change it.’ For Le Berthe, that control process represents a way to get the best of both worlds.
The combination of automated processes and tailor-made solutions also means that Amundi can take the different demands of its portfolio managers into account. ‘Obviously, they do not have the same constraints and objectives, so you have to deal with a diversity of needs,’ Le Berthe says. That diversity also applies to ESG standards - or rather the lack thereof.
‘Ultimately, you end up with funds that are either compliant with all constraints - and there are many - or you launch different versions of the same fund, so you have a French version, a Belgian one, a German one and so on.’ In other words, a gallimaufry that is costly in both time and nerves.
As Le Berthe puts it: ‘A common framework that works on an EU-wide level would make our lives a lot easier.’
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 30 November 2021. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 31 January 2022
Climate change and social inequalities are not restricted to a specific area of our lives. They affect everyone and everything.
That is why we believe it is time for investors to take a company’s full picture into account. Looking beyond purely financial aspects to also consider ESG factors can enable them to gain a deeper understanding of a business and its profitability.
As Elodie Laugel points out, ‘the financial ecosystem is not living on a separate planet or in a parallel world’. Amundi’s Chief Responsible Investment Officer makes the case that the integration of ESG criteria in the investment process is now fundamental, from both an opportunity and a risk perspective.
‘Those sustainability issues are very tangible,’ Laugel warns and adds that the rising number of regulations is ‘triggering a transition risk’ for companies. ‘They are either able to adapt or they could be out of business.’
Laugel believes that asset managers have an important role to play to facilitate the transition. She sees them as intermediaries between end savers and companies. While the former are increasingly turning toward investment products that take climate and social issues into account, the financing needs of businesses that need to manage the energy transition are increasing.
‘You have the demand, you have the supply, and, in the middle, you have the investors,’ Laugel says.
We need to keep pushing the frontiers.
The Innovation Journey
Companies must ‘adapt or they could be out of business’
Amundi takes its responsibility for society and the environment seriously and offers a range of investment products that seek to tackle social and climate issues. Clients can choose from an array of investment solutions that provide the possibility to do well and good.
‘Our green solutions put capital to work to finance either the energy transition or specific projects that will help drive the transition. On the social aspect, it’s the same. We have developed social bond solutions where we finance projects that have the objective to generate a positive social impact, for example in the form of access to health, job creation or access to education,’ Laugel explains.
When they don’t prioritise the E, S or G component, the firm’s investment solutions generally incorporate all three elements in equal measure. Or, as Laugel puts it: ‘Even if you invest in something that is not precisely financing a green project but more about investing in the global market (...), all the investment decisions that are taken in the portfolio are integrating the ESG dimension of the company.’ In other words, ESG is front and centre at Amundi.
Transparency is key in that regard. If a company is unable to provide sufficient information to enable investors to assess its ESG practices, Amundi does not shy away from negative votes. [1]
The voting process enables Amundi to put pressure on companies that do not fully adhere to ESG practices. Thus, the firm has made extensive use of its voting rights in 2020 and voted for 89% of high-profile resolutions on climate change and social matters. [2]
‘Engagement is a powerful tool,’ Laugel says. Another option to accompany businesses on their transformation journey consists of providing sustainable finance in underserved markets, she argues.
‘That’s why we have partnered with the IFC, a member of the World Bank Group, to source green projects in emerging markets. This is why we have also partnered with the European Investment Bank, to finance green projects from companies that are not listed. (...) And these are just two of our many third-party partners. We need to keep pushing the frontiers.’
The question isn’t ‘why’ - it’s ‘why not’
Sources:
[1] Amundi Voting Policy 2020
[2] https://shareaction.org/research-resources/voting-matters-2020/
Elodie LaugeL,
chief responsible investment officer
The Innovation Journey
Companies must ‘adapt or they could be out of business’
Climate change and social inequalities are not restricted to a specific area of our lives. They affect everyone and everything.
That is why we believe it is time for investors to take a company’s full picture into account. Looking beyond purely financial aspects to also consider ESG factors can enable them to gain a deeper understanding of a business and its profitability.
As Elodie Laugel points out, ‘the financial ecosystem is not living on a separate planet or in a parallel world’. Amundi’s Chief Responsible Investment Officer makes the case that the integration of ESG criteria in the investment process is now fundamental, from both an opportunity and a risk perspective.
‘Those sustainability issues are very tangible,’ Laugel warns and adds that the rising number of regulations is ‘triggering a transition risk’ for companies. ‘They are either able to adapt or they could be out of business.’
Laugel believes that asset managers have an important role to play to facilitate the transition. She sees them as intermediaries between end savers and companies. While the former are increasingly turning toward investment products that take climate and social issues into account, the financing needs of businesses that need to manage the energy transition are increasing.
‘You have the demand, you have the supply, and, in the middle, you have the investors,’ Laugel says.
We need to keep pushing the frontiers.
Elodie LaugeL
chief responsible investment officer
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 30 November 2021. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 31 January 2022
Green and social bonds, which finance projects that aim for positive environmental or social impact, are one of the fastest-growing areas seeking to make a defined difference via their investments.
As the world looks to transition to more renewable energy forms, and to address specific problems such as the fallout of the pandemic, huge amounts of capital will be needed. Green and social bonds can be one way for companies, multilateral development banks and even governments to raise the funding they need, while allowing to fund a range of positive causes from renewable energy and access to education to clean and affordable transport.
The green bond market already boasts almost $1tn of assets, having grown by over $222bn in 2020 [1]. But recent months have also seen the rapid rise of the social bond market. Issuance is small by comparison at $164bn in 2020, but that nevertheless represents a near ten-fold on the previous year [2].
Coronavirus-related issuance has propelled its recent growth, with issuers embracing the social bond format to meet their financing needs. Examples of social bonds that seek to alleviate the effects of the pandemic include those that aim to increase capacity and efficiency in the provision of healthcare services and equipment.
‘The pandemic has boosted this market,’ says Isabelle Vic-Philippe, head of euro aggregate at Amundi, which offers trailblazing access to social and green bond markets for retail investors.
Vic-Philippe expects the pace of growth to continue, not least because of ongoing efforts globally to support employment. For example, between October 2020 and May 2021 the European Commission issued a total of €89.64 billion [3] of social bonds as part of its SURE [4] scheme, designed to help member states mitigate the negative economic and social consequences of Covid. SURE is now the world's largest social bond scheme.
‘On top of that, the banking sector is providing finance or loans to small and medium companies and this is something that is eligible [for social bond status] because it allows them to keep their employees. So, it’s really a support of employment theme, which is a social one.’
One key advantage of green and social bonds is transparency. Both aim to raise money for a defined end-goal, which should give investors the ability to know exactly how their investment is being used.
The rapidly evolving market is also giving rise to new questions that need to be tackled. For example, while the impact of green bonds can be assessed via relatively clear metrics, such as reductions in emissions, social impact is often done in terms of the number of beneficiaries – not an ideal measure. This is, however, being addressed, says Vic-Philippe.
‘Market participants are working with the ICMA [International Capital Market Association] to find a way to develop standards with metrics that are common [across the sector],’ she says.
‘We would like to see something that is a more explicit in terms of how beneficial a company is in terms of fighting inequalities and promoting social alignment.’
Green and social bonds could provide diversification [5] through a platform that seeks to engage with issuers to increase their activities in environmentally or socially impactful products and services.
‘One of the benefits in terms of a holder of these thematic bonds is that we have a closer relationship and closer connection with issuers,’ adds Vic-Philippe.
The Innovation Journey
Assessing the impact of green and social bonds
Sources:
[1] https://www.climatebonds.net/2020/12/1trillion-mark-reached-global-cumulative-green-issuance-climate-bonds-data-intelligence
[2] https://www.refinitiv.com/perspectives/market-insights/sustainable-finance-surges-in-2020/
[3] https://ec.europa.eu/info/strategy/eu-budget/eu-borrower-investor-relations/sure-social-bonds_en
[4] Support to mitigate Unemployment Risks in an Emergency’s
[5] Diversification does not guarantee a profit or protect against a loss
Seeking to make impact investing more easily quantifiable
We would like to see something that is a more explicit in terms of how beneficial a company is in terms of fighting inequalities and promoting social alignment.
Isabelle Vic-Philippe,
Deputy Head of Aggregate and Head of Euro Aggregate Strategies, Amundi
The Innovation Journey
Assessing the impact of green and social bonds
Green and social bonds, which finance projects that aim for positive environmental or social impact, are one of the fastest-growing areas seeking to make a defined difference via their investments.
As the world looks to transition to more renewable energy forms, and to address specific problems such as the fallout of the pandemic, huge amounts of capital will be needed. Green and social bonds can be one way for companies, multilateral development banks and even governments to raise the funding they need, while allowing to fund a range of positive causes from renewable energy and access to education to clean and affordable transport.
The green bond market already boasts almost $1tn of assets, having grown by over $222bn in 2020 [1]. But recent months have also seen the rapid rise of the social bond market. Issuance is small by comparison at $164bn in 2020, but that nevertheless represents a near ten-fold on the previous year [2].
Coronavirus-related issuance has propelled its recent growth, with issuers embracing the social bond format to meet their financing needs. Examples of social bonds that seek to alleviate the effects of the pandemic include those that aim to increase capacity and efficiency in the provision of healthcare services and equipment.
‘The pandemic has boosted this market,’ says Isabelle Vic-Philippe, head of euro aggregate at Amundi, which offers trailblazing access to social and green bond markets for retail investors.
Seeking to make impact investing more easily quantifiable
We would like to see something that is a more explicit in terms of how beneficial a company is in terms of fighting inequalities and promoting social alignment.
Isabelle Vic-Philippe
Deputy Head of Aggregate and Head of Euro Aggregate Strategies, Amundi
Vic-Philippe expects the pace of growth to continue, not least because of ongoing efforts globally to support employment. For example, between October 2020 and May 2021 the European Commission issued a total of €89.64 billion [3] of social bonds as part of its SURE [4] scheme, designed to help member states mitigate the negative economic and social consequences of Covid. SURE is now the world's largest social bond scheme.
‘On top of that, the banking sector is providing finance or loans to small and medium companies and this is something that is eligible [for social bond status] because it allows them to keep their employees. So, it’s really a support of employment theme, which is a social one.’
One key advantage of green and social bonds is transparency. Both aim to raise money for a defined end-goal, which should give investors the ability to know exactly how their investment is being used.
The rapidly evolving market is also giving rise to new questions that need to be tackled. For example, while the impact of green bonds can be assessed via relatively clear metrics, such as reductions in emissions, social impact is often done in terms of the number of beneficiaries – not an ideal measure. This is, however, being addressed, says Vic-Philippe.
‘Market participants are working with the ICMA [International Capital Market Association] to find a way to develop standards with metrics that are common [across the sector],’ she says.
‘We would like to see something that is a more explicit in terms of how beneficial a company is in terms of fighting inequalities and promoting social alignment.’
Green and social bonds could provide diversification [5] through a platform that seeks to engage with issuers to increase their activities in environmentally or socially impactful products and services.
‘One of the benefits in terms of a holder of these thematic bonds is that we have a closer relationship and closer connection with issuers,’ adds Vic-Philippe.
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 4 April 2022. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 10 May 2022
In March 2018, millions in Cape Town were awaiting catastrophe. Low rainfall, population growth and climate change meant that ‘Day Zero’ – when the taps would run dry and chaos would take over – seemed inevitable [1].
The crisis was eventually averted, but it is an example which illustrates how essential water is to the survival not just of humans but all life on our planet- while also being a finite resource in a world where demand is rapidly expanding.
A recent United Nations report signalled that by 2050, around 5 billion people could be living in areas of water scarcity [2]. And the UN has made tackling the issue one of its key Sustainable Development Goals: Goal 6 is specifically focused on clean water and sanitation for all.
The problem is particularly evident in developing areas of the globe.
‘As the global population grows, it is also becoming more industrialised and urbanised, with an increasing middle class. As a result, water is becoming scarcer, and often it is not present where it’s most needed: Asia has two thirds of the world’s population but only one third of the water supply,’ says Catherine Cahill, portfolio manager at KBI Global Investors, a subsidiary of Amundi.
The effects of climate change are only adding to the problem, she points out: ‘At its most simplistic, this results in either too much or too little water: floods, rising sea levels or droughts due to rising average temperatures in various places around the world. This is all weighing on the supply/demand imbalance,’ she says.
Another compounding factor, even in developed nations, is the relatively poor state of water infrastructure. ‘Unlike infrastructure for railways or airports, water infrastructure is mostly underground, and easily overlooked. As a result, it has suffered from long term under-investment,’ she points out.
All of this adds to ongoing problems on the supply side of the water equation. And at the same time, demand is growing rapidly.
‘We broadly categorise three main forms of water use,’ Cahill notes. ‘Around 10% of demand comes from domestic use: showers, dishwashers, drinking water and so on.’ Industry accounts for around 20% of total demand: the water footprint of some products, Cahill points out, can seem staggering – it takes 20,000 litres of water just to make one pair of jeans and one t-shirt [3].
The biggest culprit in terms of water usage is agriculture, which accounts for 70% of total usage. ‘Global diets are shifting from grains to becoming more protein-based, as the middle class grows especially in the developing world, and this makes water use much more intensive,’ she says.
In this environment, attitudes to water usage need to shift across the board. A key area of focus for Cahill is water usage within industry. ‘This is definitely an area where water savings can be made: water is everywhere in the industrial process and how companies manage their usage is key. At present, only about 5% of the world’s water supply is re-used so there is a huge opportunity to do better.’
An important way forward for many is ‘smart water’, overlaying Artificial Intelligence (AI) and data analytics onto water infrastructure so that asset performance can be optimised, with less downtime, better reliability for the end user and greater resilience in the face of extreme weather events.
The water theme provides huge opportunity for growth, whether it involves encouraging companies to improve their water footprint to avoid wastage or backing companies developing cutting edge technologies to solve critical water-related problems, , Cahill stresses. ‘There are five indisputable factors when it comes to water: finite supply; increasing demand; growing regulation; the need for infrastructure build-out; and need for technology investment.
These factors have only been emphasised by the pandemic and the fact that the developing world in particular needs better sanitation. The change is tangible: Brazil has come out with a universal sanitation bill, while India has very aggressive spending targets such as the Jal Jeevan Mission Project, which aims to ensure access to piped water for all households in rural India by 2024. All of this is providing a huge tailwind to companies providing solutions,’ she says.
As climate change continues to worsen, the effects will contribute to amplified imbalances in the water supply, she notes. ‘Climate change manifests itself very obviously either in the form of too much or too little water. Coming out of the pandemic crisis, policy-makers are valuing the health and safety of society more than ever, and a water crisis could easily upset the balance. So beyond the long-term factors, there’s a real step up in commitment to better water and sanitation all around the world,’ she says.
All of these factors mean that water will be a long term structural growth theme for investors, as well as ensuring a fairer distribution of the world’s most precious resource.
Quotes taken from an interview with Catherine Cahill, 15 March 2021.
Investing in Real-Life ESG
The Hidden Costs of Water Waste
Sources:
[1] https://www.bbc.co.uk/news/av/world-africa-42866178
[2] http://www.unesco.org/new/en/natural-sciences/environment/water/wwap/wwdr/2018-nature-based-
[3] https://oxfamapps.org.uk/shop-blog/sustainable-fashion/post-about-sustainable-fashion/
Water is a sparse resource for too many – and the problem is getting worse
Risk to clean water supply is set to make it a top structural growth theme for investors
Key takeaways:
Regulation, technology and infrastructure are all areas requiring innovation
It should be bundled with sustainable use to reduce the global water footprint and alleviate future risks
Investing in Real-Life ESG
The Hidden Costs of Water Waste
Water is a sparse resource for too many – and the problem is getting worse
At present, only about 5% of the world’s water supply is re-used so there is a huge opportunity to do better
Catherine Cahill,
portfolio manager at KBI Global Investors
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 4 April 2022. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 10 May 2022
Literacy rates are rising, but there are still 773 million illiterate adults around the world. [1] Things have to change if we are to reach Sustainable Development Goal 4 by 2030 – ensuring inclusive and equitable quality education and promoting lifelong learning opportunities for all.
Guillaume Uettwiller, thematic portfolio manager at CPR AM, identifies several contributors to the global learning crisis, especially in emerging markets. ‘The main issues in most of these low-income countries are overcrowding, low-quality teaching and poor infrastructure, including non-existent school buildings. That’s why a large number of schools, mostly in Africa, Latin America and Southeast Asia, have insufficient resources to deliver a decent education.’
According to Uettwiller, Africa is the region with the lowest education expenditure per capita, not least due to the large number of young people on the continent: ‘The median age in African countries is roughly 20 years. So, even if governments earmark a considerable amount of their budget for education, the amount of money that is actually spent on one student is comparatively low.’
Another major problem, he says, is inequalities in educational opportunities. More often than not, external circumstances play a disproportionately large role and determine the kind of access children have to education. And it’s not just students in emerging economies that suffer from a lack of opportunities – some developed countries have a lot of catching up to do as well.
The US, for example, grapples with huge inequalities in its education system. ‘Racial and economic segregation are very high,’ Uettwiller points out. ‘In many cases, the future of children hinges on their socioeconomic background and whether they are from white, Hispanic or black communities.’ [2]
Covid exacerbated educational inequality. In England, for example, the gulf between disadvantaged and better-off pupils at English state schools has widened by 46%, according to the National Foundation for Educational Research. [3]
In other parts of the world, however, many children don’t even get the opportunity to go to school due to poverty, security or cultural reasons. From Uettwiller’s perspective, that’s where policymakers need to step in: ‘Governments need to encourage parents to send their children to school, for example by providing financial incentives for tuition fees, school meals or transport costs.’
Top of class at all costs
At the opposite extreme, pupils in countries like South Korea, Singapore and China are facing a level of stress that is taking its toll on their mental health. ‘Especially in Asia, students have to be among the top 10 or 15% to get into a top tier university. Those kids are just really stressed,’ Uettwiller says.
Some economies have already taken steps to prevent over-schooling and reduce the pressure on minors, for instance by limiting the maximum duration of one class to 45 minutes and making sure students do not take more than a certain number of courses, Uettwiller explains.
‘We are putting capital into high-quality and sustainable education companies worldwide, including schools and universities with reasonable employability ratios,’ Uettwiller continues. ‘Additionally, we are also investing in educational technology. That includes small and mid-cap companies that are trying to modernise our education systems, for example by providing customised learning to all children.’
Quotes taken from an interview with Guillaume Uettwiller.
Investing in Real-Life ESG
Members only: Access to knowledge is still restricted
Sources:
[1] http://uis.unesco.org/en/topic/literacy
[2] Transcript
[3] https://www.nfer.ac.uk/media/4119/schools_responses_to_covid_19_the_challenges_
facing_schools_and_pupils_in_
september_2020.pdf
A large number of schools... have insufficient resources to deliver a decent education
Guillaume Uettwiller,
thematic equity portfolio manager at CPR Asset Management
The introduction of private capital could ease global educational shortfalls that were exasperated during the Covid-19 pandemic
A sufficient regulatory framework is required to go with this
Governments need to ease the financial burdens on households which result in children being excluded from education
Key takeaways:
Investing in Real-Life ESG
Members only: Access to knowledge is still restricted
A large number of schools... have insufficient resources to deliver a decent education
IMPORTANT INFORMATION
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 4 April 2022. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
Date of first use: 10 May 2022
Covid-19 awakened us to the effects climate change can and will have on our lives. This brutal collision between what we imagined to be a distant future and our reality has led us to question our economic model – more specifically, its lack of sustainability. And its salience has caused global warming to quickly become the number one task on every government’s agenda.
The climate escape game
Temperature variation is not new. And yet, it is clear that current climatic deregulation is a direct consequence of human activities. It is also no secret that it has direct and immediate consequences – including fire, droughts and hurricanes to name a few. [1] Antonio Guterres, UN Secretary General, has already called the seemingly unstoppable rise of world temperatures ‘a matter of life and death’, saying the world is ‘nowhere near where it needs to be’ on the transition to a low-carbon future. [2]
But despite widespread consensus – and a definitive set of goals we should aim for (the well-publicised 2°C) – administrative action is lagging. Though commitments have been made to reach net-zero economies, how we get there still remains rather unclear.
Power of choice
In addition to political and public action, investors have a major role to play in supporting the fight against climate change and overseeing the transition to a sustainable economic model –that is both environmentally and socially relevant/pertinent. Investing is not a neutral action; it is a choice that has consequences and impact.
Yet many investors don’t realise how powerful their investment decisions can be and the impact they can have. Climate change needs to be tackled on all levels, and investors must play their part. It’s not that they are unwilling to do so - many of them just don’t know where or even how to begin.
Being able to assess a company’s alignment with the well below 2°C warming scenario is a good start. This is why Amundi has introduced temperature scorings as one of the climate metrics used to analyse portfolios. The ratings translate corporate commitments into a global warming trajectory and cover all relevant emissions in a company’s value chain. In other words, they help investors gauge the temperature pathway of their portfolios.
The ratings show how the warming scenario aligns with a portfolio or stock. Tegwen Le Berthe, Head of ESG Method and Solutions at Amundi, acknowledges that it’s still early days, but he is convinced the methodology has strong potential. In other words, it has the potential to become a powerful tool in the fight against global warming.
Engagement, the tried and trusted tool
Engaging with companies is a powerful way of acting against global warming. Through dialogue and vote, fund managers are able to help the companies they invest in improve their ESG practices and work on a credible climate strategy.
That’s why selecting the right manager is so important. Investors don’t need someone who just pays lip service to ESG but doesn’t actually back the concept. What they need is a fund manager who uses their influence to push companies toward becoming better versions of themselves.
Investing in Real-Life ESG
How hot is your portfolio?
Sources:
[1] https://ec.europa.eu/clima/climate-change/causes-climate-change_en
[2] https://www.sbs.com.au/news/article/un-chief-climate-change-a-matter-of-life-and-death/nwbwny4tj
Many don’t realise how powerful their investment decisions can be and the impact they can have
Tegwen Le Berthe,
Head of ESG Method and Solutions, Amundi
Mainstreaming ESG is a new solution to old problems
Measuring the impact of investments is a complex matter
The pandemic has served as a wake-up call
Key takeaways:
Investing in Real-Life ESG
How hot is your portfolio?
