Developing responsible finance
A well-structured analysis combined with an engagement policy
Extra-financial analysis forms the substance of responsible finance, assessing the quality of issuers' environmental, social and governance (ESG) policy. Underlying this approach is the conviction that the association of financial and general interest criteria can consolidate value creation. By taking into account the interests of all the stakeholders, it generates the confidence that is a prerequisite for success while limiting risks.
Extra-financial analysis is highly pragmatic: rather than judging any business sector, it analyses how, within a given sector, companies handle ESG opportunities and risks. Only the most advanced companies are selected: this is best-in-class analysis.
In order to round out this approach and encourage companies to adopt best practices, we have implemented an engagement policy. While voting at shareholders' General Meetings remains our main path of action, fostering dialogue “for influence” with companies on a regular basis is essential.
When spurred by structured extra-financial analysis and a stronger engagement policy, competition among the best companies can become a source of progress.
We rely on significant resources:
- 15 analysts dedicated to ESG issues (extra-financial analysis, quantitative research, corporate governance). The analysts meet with companies, contribute to defining Amundi Group's voting policy at General Meetings, initiate dialogue with companies and draft research protocols to assess the impact of ESG criteria on fund performance;
- The analyses of partners:
- ESG rating agencies, European and American, with a global reach
- Entities specialising in given themes
- Data providers on controversies
- 1 distribution interface, available in real time in the fund managers' tools, giving them access to corporate and government issuers' extra-financial ratings alongside financial ratings;
We have perfected our own extra-financial analysis methodology. It is based on texts with a universal scope, like the United Nations Global Compact, the OECD's guiding principles on corporate governance, the International Labour Organization (ILO), etc.
We refer not only to companies' sector context, but also to their regional and legislative environment. Our analysis also factors in major issues such as climate change, child labour and transparency in business conduct.
Our internal reference values are comprised of 36 criteria:
- 15 generic criteria, common to all companies whatever their business sector, for instance environmental strategy, human rights, transparent governance policy;
- 21 sector-specific criteria, for instance access to drugs for the pharmaceuticals industry, responsible marketing for banks, green vehicles for the automotive sector.
Criteria are weighted according to the business sector. The greater the risk associated to a criterion, the greater the weight attributed to this criterion.
Our extra-financial analysis covers more than 11,000* issuers. The analysis results in a global extra-financial rating for the issuer on a scale from A (highest score) to G (lowest score).
*Data Amundi as of 31/12/2019
Our engagement policy is multifaceted: engagement for influence, collecting information for rating purposes, voting at general meetings and pre-meeting dialogue.
- We conduct an engagement policy for influence on specific themes so as to encourage companies to adopt better practices.
- In order to fine-tune the extra-financial ratings, analysts regularly stage meetings with companies that are important in our portfolios or in benchmark indices.
- As early as 1996, Amundi implemented its own voting policy, updated every year, which includes environmental and social criteria. Pre-meeting dialogue consists in obtaining greater insight into issues submitted to the general meeting. It is a good way for Amundi to obtain additional commitments from companies, changes in practices or even the definitive rejection of certain types of resolutions.
We also support international collective shareholder initiatives* to induce public authorities to adopt incentive measures and encourage companies to improve their practices.
*Some international shareholder initiatives: Institutional Investors’ Group on Climate Change (IIGCC), Carbon Disclosure Project (CDP), Forest Footprint Disclosure Project, Water Disclosure Project, Access to Medicine Index, Access to Nutrition Index, UN Global Compact engagement on leaders & laggards, Extractive Industries Transparency Initiative (EITI).
Proactive ESG integration
We became a signatory of the UN Principles for Responsible Investment (PRI) when they were created in 2006. The PRI recommend that financial players build environmental, social and corporate governance (ESG) issues into their analysis processes and investment decisions.
At Amundi, the implementation of these principles notably includes:
A distribution interface for ESG ratings, available to all the fund managers
Issuers' extra-financial ratings (both companies and countries) are circulated in real time to all our management teams and financial analysts. At any time, fund managers can consult the financial and extra-financial ratings of the stocks in their portfolios and benchmark indexes.
Exclusion of the most controversial issuers
Amundi applies strict rules for integrating ESG criteria across its active management activities (excluding index-linked UCITS and ETFs, which are constrained by their benchmark indexes):
- no direct investments in companies involved in the production or sale of anti-personnel mines and cluster bombs, prohibited by the Ottawa and Oslo conventions
- exclusion of companies involved in the production or sale of chemical, biological and depleted uranium weapons
- exclusion of companies that violate, repeatedly and seriously, one or more of the ten principles of the Global Compact
- exclusion of countries that systematically and willfully violate human rights and make themselves guilty of the worst crimes: war crimes and crimes against humanity
- exclusion of companies whose coal extraction activity exceeds 30% of their turnover or, after a qualitative and prospective analysis, companies producing 100 million tons and more of coal per year
- exclusion of tobacco companies from all open SRI funds
Solutions for all types of clients
Amundi’s expertise and size allow us to implement a wide range of responsible investment strategies as well as tailor-made ESG solutions adapted to your needs:
- in all asset classes (including index management) and all geographic areas
- according to specific customer’s reference values
- With the possibility to implement a dedicated engagement and voting policy
Rigorous socially responsible investments (SRI)
We develop a broad Socially Responsible Investment (SRI) methodology to create greater incentives. Our method is based on a best-in-class approach, selecting the companies that best comply with ESG criteria in each sector.
Amundi SRI's management
We manage our SRI portfolios in compliance with strict, transparent rules and permanent control, independent of the operational departments.
We regularly publish transparent, up-to-date information on extra-financial analysis, our SRI approach and the management of our SRI portfolios.
The French Asset Management Association (AFG) has prescribed as mandatory the publication of a Code of Transparency for all SRI funds. This document will provide investors with information on product characteristics. Its purpose? To enable investors to make decisions based on objective criteria: fund's SRI philosophy, ESG analysis process, investment policy and the management company's engagement and voting policies.
Supporting investors reduce the carbon footprint of their portfolios
Amundi, co-founder of the “Portfolio Decarbonization Coalition” launched 2014
- 29 signatory investors committed to reducing the carbon footprint of their portfolios
- Representing over US$32 trillion of assets under management
- Committed to align over US$600 billion of assets with a low carbon economy by publishing their carbon footprint and implementing strategies seeking to exclude most carbon-intensive companies
Our partnership with the International Finance Corporation (IFC)
By entering into a strategy partnership with IFC, member of the World Bank Group, Amundi follows a number of key objectives :
- Accelerating the development of the green bond market in emerging countries
- Bringing together and encouraging local financial institutional to issue green bonds aligned with the Green Bond Principles (GBP)
- Encourage high quality impact reporting in emerging countries
Financing the energy transition through an innovative partnership
- A joint-venture with EDF and Amundi for a diversity of opportunities
- Financing renewable energy and energy efficiency projects
- Complementing Amundi’s range of listed green solutions with an investment program in non-listed infrastructure benefiting from an optimized Solvency II treatment*
* European directive instauring a new regulatory framework concerning the gestion of risks for insurance society
Multi-thematic impact investing
Because we are an economic players of today and of the future, we finance social businesses. The goal is to generate quantifiable social impact for our clients, over and above the search for financial return.
We contribute to driving local development by supporting innovative projects. These projects typically include business start-up assistance for populations excluded from the labour market, support to dependent people, financing the construction of eco-friendly homes for housing impoverished families and helping innovative SMEs in the environmental field.
We focus on five areas: employment (education, training, reinsertion), housing, health, education, services for associations, over-indebtedness the environment and international solidarity.
Our investment decisions are validated by a special ratings committee.
We offer an innovative range of impact investing funds, combining the search for financial return* and a social impact, with solutions tailored to each type of client:
- a “pure” impact investing fund, with up to 80% of investments in social businesses;
- a fund range open to all categories of investors, comprised of:
- impact investing funds invested up to 10% in social businesses, with some funds offering aprofit-sharingoption benefiting a charity or a humanitarian organisation and offering a tax advantage,
- development aid funds.
These funds are built into our employee savings schemes and into a socially-committed life insurance policy.
Our funds have all been awarded the Finansol label. This organisation guarantees their social commitment and transparency.
* Our funds do not offer a capital or performance guarantee. Investors can lose all or part of their investment.
Our impact investing is based on a charter of 3 engagements:
- Supporting companies over the long term by offering investment methods tailored to their growth needs to build a lasting partnership.
- Publishing transparent, concrete information, notably through a social impact report specific to each of our impact investing funds.
- Diversifying our selection of social players, not only through our 5 themes and throughout the national territory, but also based on their size, length of existence and legal status.We have developed a proprietary methodology based on a triple analysis:
- financial to ensure that the company is robust and sustainable;
- extra-financial to assess the ESG (Environmental, Social and Governance) criteria;
- social commitment to measure the social impact based on 15 criteria: the cause defended, track record and experience, geographic scope of intervention, results obtained in terms of job creation, etc.
For profit-sharing funds, the document is illustrated with the latest news, projects and stories of the receiving charity.