THE BASICS

A Decade of ESG

We sat down with Yves Perrier, Chairman of the Board of Directors at Amundi, to talk about the firm’s decade-long stance on ESG and what the future holds.

What role does ESG play at Amundi?

It is the role of the private sector in general to integrate environmental, societal and governance issues. There are four main reasons for this.

Allow me to explain. Reason 1 has to do with the fact that, in a more liberal economy, economic and financial players have a greater responsibility towards society. The second reason deals with the important role we asset managers, as long-term investors, have to play in directing capital towards, for example, projects related to the energy transition.

Thirdly, we have to influence the strategies of companies, especially when we are among their main shareholders. We have to engage with companies to improve their E (environmental)
S (social) and G (governance) principles in their day to day business. The fourth reason is that we have a responsibility to our customers: in the end we have to deliver performance over the long term. And in a world where company valuations are not always based on tangible assets, responsible investment allows investors to base their investment decisions on determining and differentiating issues for the future that we believe will create value over the long term.

Environmental, social and governance (ESG) criteria are at the core of Amundi’s investment philosophy. ESG investing has been a part of our corporate DNA. Today, we manage more than €330bn (£302bn) in responsible assets^[1] and our responsible investment approach has been awarded the top rating by the Principles for Responsible Investment initiative.^[2] We see ourselves at the forefront of the sustainable investment revolution.

In that respect, our sustainable goals within the company cover the following targets: reducing and managing Amundi’s operations’ environmental impact, eliminating discrimination, promoting equal opportunity, ensuring transparency and integrity in its governance, developing a long-term philanthropic policy and encouraging the social involvement of its employees.

What makes Amundi one of the frontrunners of ESG investing?

We aim for 100% ESG integration into our investment process^[3] and voting policies by 2021. This means that all of our actively managed open-ended funds will have to maintain a higher ESG score than their benchmark index by the end of next year and that ESG issues are becoming central in our dialogue with companies and governments and in our voting policy.

We also plan to raise our passive ESG solutions by enhancing our responsible investing ETF and open-ended index funds range, implementing a systematic exclusion of the worst-rated companies in all open-ended funds and developing innovative ESG overlay solutions.

Amundi is one of the largest asset managers in Europe. What impact does size have on how you look at ESG?

It certainly sets the bar high – after all, with size comes responsibility. We want to lead by example, which means we set the highest standards for ourselves. It is not only our responsibility, but also our duty to our customers to comply with ESG standard. We know from experience that ESG-compliant companies are better equipped to outperform in the long run than their non-ESG peers. As a leading asset manager in the sustainable investment space, our goal is to make ESG investing mainstream.

Does investing through an ESG lens really lead to better returns?

Absolutely. Several academic works have been conducted aiming at showing the performance contribution of including ESG into portfolios. Amundi has also contributed to this debate and our research shows that the performance of ESG investing has improved over time and even outperformed in Europe since 2014 [4], be it on the equity or credit markets. We believe that incorporating ESG criteria into the investment process is vital to help generate long-lasting, stable returns.

Doing good and doing well are no longer mutually exclusive. Instead, they are two sides of the same coin. We strongly believe that sustainable investing and financial outperformance go hand in hand.

From an ESG perspective, what do you think are the main challenges we will have to face in the next five years?

Two things come to mind in that regard. The first is energy transition. Businesses need to make sure that they are able to meet the objectives of the Paris Agreement. In our view, Companies must cut down emissions to prevent a dangerous process of destruction and destabilisation from unfolding. That’s why we consider the decarbonisation of portfolios as one of our top priorities.

Another key challenge is the improvement of social cohesion, especially in light of Covid-19. A robust social structure is key to strengthening the resilience of societies and businesses in times of turmoil. Amundi’s investment approach encourages companies to deal with social and governance issues head-on, which in our opinion will ultimately lead to a stronger society.