IR Conference
Total Page:16
File Type:pdf, Size:1020Kb
SRI AND ESG: TURNING CONSTRAINTS INTO A COMPETITIVE ADVANTAGE Nuria Trio Deputy CEO, Amundi Iberia This material is solely for the attention of "professional” investors (see more details and definitions at the back). A growing interest in the current context Seven of the top 10 most concerning global risks are ESG-related according 1 to professional investors 1 ESG criteria are related to the fiduciary responsibility of asset owners and 2 asset managers. CSR policies lie at the core of companies’ business models A rapidly changing world and a greater focus on the concept of the common 3 good Initiatives led by worldwide and local public authorities (Climate Change 4 conference/ COP 21, SRI label…) 5 Private investors are looking for more meaningful investments 2 1 Source : World Economic Forum 2014 Amundi SRI 1 2 Sources: Etude BETC « Nouvelle donne, nouveaux rapport à l’argent » Novembre 2012 ; Enquête Ipsos – Logica – Business Consulting pour Finansol et «La Croix», Mars 2012 ; Pour une économie positive Fin 2013 SRI: $ 21,400 Bn AUM worldwide A growth of 61% between 2012 and 2014 SRI Market breakdown Canada Australia 4% 1% Asia $ 945 bn 0,2% Canada +60% $ 13,608 bn $ 6,572 bn Europe +55% United USA +76% $ 53 bn States Asia +32% 31% Europe 64% $ 180 bn Australia +34% Source: GSIA; Global Sustainable Investment Review, 2014 Amundi SRI 2 SRI strategies: the example of Europe SRI strategies are growing faster than total European AUM +21% € 16,800 bn 2011 2013 in € Bn Average growth of SRI strategies: 78% Average growth of EU industry: 21% +91% +65% € 6,854 bn +70% € 5,232 bn +86% € 3,634 bn € 3,276 bn +25% +23% € 354 bn € 59 bn SustainabilitySustainability Best-in-ClassBest-in-ClassEngagement Engagement and Norms-basedNorms-based IntegrationIntegrationExclusions Exclusions EuropeEurope Industry themed voting screening themed and voting screening Industry Source: Eurosif European SRI study 2014 Amundi SRI 3 Addressing climate change issues Amundi is a Member of the multiparty initiative launched by the United Nations and large institutional investors to decarbonise portfolios: the Portfolio Decarbonisation Coalition Amundi has launched initiatives to address climate change: SRI Solutions Low Carbon Partnership with EDF Tailor-made solutions ETF Renewable energies Thematic funds Index funds Energy savings Amundi SRI 4 ESG issues: turning constraints into a competitive advantage 1 Strengthen long-term financial performance 2 Comply with fiduciary and regulatory requirements 3 Control risks: reputational, operational and financial risks Amundi SRI 5 A 360°view of companies Financial Analysis Better appreciation of risks and opportunities Solvability Liquidity Reputational Operational Regulation Efficiency Selection of suppliers with the best ESG practices … Profitability Independence of the board… ESG Analysis Administrators Suppliers Governance Environment Employees Clients Financial Health Working conditions, career Social management Respect of clients needs Amundi SRI 6 Amundi, one of the biggest SRI asset manager wordlwide € 74 bn in SRI assets under management Significant ressources: – 20 analysts specialised in SRI and ESG Signatory to the PRI since 2006 – 1 proprietary expert software-tool – 35 SRI fund managers Demanding and transparent SRI investment principles More than 4,500 issuers rated in respect of ESG criteria SRI process officially certified (AFNOR) Dialogue with more than 300 companies A dedicated governance (4 committees) Data: Amundi Group as of 30 June 2015 Amundi SRI 7 Complementary policies 1 ESG scoring and « Best-in-Class » approach 2 Norm-based screening 3 Engagement Amundi SRI 8 Amundi ESG analysis: a standardized and pragmatic approach Amundi rates more than 4,500 issuers in respect of ESG criteria Our internal reference values are comprised of 37 criteria , of which 15 are generic-criteria and 22 are sector-specific criteria. ENVIRONMENT SOCIAL GOVERNANCE - Employment conditions - Board independance - Emissions Examples among 15 - Health & security - Audit and control - Energy consumption - Local communities and human - Remuneration generic criteria - Biodiversity and pollution rights - Shareholders' rights - Access to medicine Examples among 22 - Green cars (Automobile) - Digital device specific criteria - Green financing (Banks) - Responsible marketing (banking, pharmaceutical industry) Amundi SRI 9 Performance oriented: ESG criteria Weights and Value Drivers ■ Criteria are weighted according to sector Weight of environmental criteria in the car industry ESG Automobile 38% 34% 28% Bank 26% 33% 41% Pharmaceuticals 28% 42% 30% ■ Each analyst must define for a given criteria and a given value driver: - The probability that an event linked to the criteria has an impact on a value driver (on a 1 to 5 scale) - The impact of this value driver on the value of the firm (on a 1 to 5 scale) ■ This methodology allows to define: - The weight of a criteria in a given dimension - The weight of E, S & G dimension in the ESG note in a given sector - The ESG intensity of a given sector Probability Impact Criteria Value driver Score (1 to 5) (1 to 5) 2 Reputation 5 10 Car safety 0 Operational Efficiency 0 0 2 Regulations 4 8 18 Amundi SRI 10 Example of analysis of the Water criteria in the « Utilities » sector The sector is divided into homogeneous subsectors Water Utilities Electric Utilities Grid operators The “water” criteria is divided into risk KPIs and risk management KPIs Management of ESG Risks ESG Risks INVESTMENTS FOR AVERAGE Score INFRASTRUCTURE CONSUMPTION RENOVATION 0 Score % GRID UPGRADED PRESENCE IN i SINCE 2008 WATER STRESS 10 0 ZONE OBJECTIVE FOR i LEAKAGE RATE 10 Water Utilities Water LEAKAGE RATE Link between financial and extra-financial performance – Reduction of operational losses – Mitigation of environmental risks Amundi SRI 11 Example: the water issue in the Utilities sector Risk Management 10,00 A UK Company 9,00 8,00 7,00 B US Company 6,00 Global Company 1 5,00 Global Company 2 4,00 C 3,00 2,00 DEFG 1,00 0,00 0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00 8,00 9,00 10,00 Low exposure High exposure Risk exposure Source : Amundi SRI Analysis Amundi SRI 12 Transparency and traceability S G E Amundi SRI 13 Strict and transparent rules Amundi’s four SRI principles 1 90% minimum of issuers in portfolio are ESG marked NNNormsNormsorms----basedbased screeningscreening: G-rated 2 Exclusion of E, F, G scores companies are excluded from Amundi’s active portfolio management processes ESG score of SRI 3 ≥ A C D portfolio Average ESG score of SRI 4 ≥ ESG score of benchmark portfolio Amundi SRI 14 The « Best-in-Class » approach SRI Best-in-Class All industries Sector exclusions Sustainability themed Select in each industry, the Exclude some industries for Invest in companies active in companies best dealing with moral, ethic or religious sustainable development: their ESG risks and reasons. - renewable energies, opportunities For instance: - water, - armament, - health, - gambling, - or population aging. - tobacco, - alcohol Amundi SRI 15 A formalized engagement policy Amundi’s engagement with companies on 3 axis Engagement for influence Data collection for rating purposes Voting at General Shareholders’ meetings and pre-meeting dialogue Data Amundi as of 31/12/2014, annual basis Amundi SRI 16 Voting policy A voting policy, defined in collaboration with portfolio management teams, financial and extra-financial teams, and corporate governance teams. ▪ Voting policy and engagement aims at sensitizing companies to sustainable development and good practices. ▪ Since 1996, Amundi has developed its own voting policy, which is updated annually in order to integrate best practises. Since 2003, Amundi’s voting policy has taken into account environmental and social criteria as well as governance issues. ▪ Amundi also engages in constructive “pre-AGM” discussions with companies and alerts them to any agenda items that it may vote against. Amundi SRI 17 Amundi’s engagement reporting DIALOGUE WITH SELECTION OF COMPANIES & RECOMMENDATIONS ENGAGEMENT ENGAGEMENT THEMES IDENTIFICATION OF & P UBLICATION REPORT 2013 REPORT 2014 BEST PRACTICES 35 BIG COMPANIES 90% OF 4 THEMES MET COMPANIES 80 MEASURE OF 7 SECTORS ACCEPTED A FULL RECOMMENDATIONS PROGRESS TRANSPARENCY Themes initiated in 2014 ° Responsible and compliant sourcing from conflict zones Minerals ° Responsible lobbying Pharmaceuticals companies and Automotive industry Themes initiated in 2013 ° Respect for Human Rights Oil & Mining Extractive Industries ° Fight against malnutrition and food waste Food & Food Retail Sectors Amundi SRI 18 Exemple: Respect for Human Rights in Oil & Mining OIL & M INING EXTRACTIVE INDUSTRIES SUPPLY CHAIN SECURITY TRAINING & H UMAN RIGHTS RESPECT FOR HUMAN KPI & EXTERNAL RIGHTS GRIEVANCE AUDITS POLICY & CONTRO - DUE VERSY DILIGENCE Amundi SRI 19 Performance of the ESG signal: Equities - In terms of outperformance, in our historical backtests, we do not find any significant added value to ESG crietroa filter, neither positive nor negative. - Being SRI has no significant cost in terms of risk - For Europe or the world, the tracking error that results from the constraints that are used to SRI-ize a portfolio remains very limited compared to that of active management. -Furthermore, some SRI factors are likely to become more important in the future, with differences in corporate practices having considerable impacts on profitability. SRI management can therefore be a relatively cost- free way to benefit from this evolution