WHY NOW – THE WORLD AROUND US

How to get started in ESG investing?

How the power of investing can affect and improve social and environmental issues?

The basic aims of ESG investing are clear: to fight climate change and a range of other pressing environmental and social problems, while seeking the same or potentially better returns than might be found via traditional investing methods.

But there’s still a big question for many investors: ‘It sounds great in theory, but how do I put this into action?’ We spoke to Jean-Jacques Barberis, Head of the Institutional and Corporate Clients Division & ESG at Amundi, and asked him to take us through some practical steps.

The science is clear: climate change is a reality, and the newspapers constantly highlight the effects of other social issues such as inequality. These are huge global problems. Can an individual investor really make a difference?

First of all, I’d say: governments have to take the lead on these huge crises that affect the future of humanity. But once that’s understood, yes, we can all make a tangible difference – whether that’s as a citizen, worker or individual investor.

So, how can someone begin to invest in a more ESG-friendly way?

There are two options that might be a good starting point. First: if you’ve identified an issue you feel strongly about, climate change for example, you can invest in ways to finance solutions to the problem.

A good example is a green bond. These are debt instruments issued by a company or a government looking for cash to finance projects that help with energy transition. A very useful feature is that many are able to report directly on the impact they’re having – right down to the nearest tonne of carbon emission that’s been saved. It’s a very clear way to see the effects your investments are having.

A second option is to build a low-carbon portfolio. That means, to invest in funds that have the same financial profile as a traditional investment fund, but which select companies with a lower carbon footprint.

How do you go about doing that?

At Amundi, we are constantly seeking ways to help investors achieve these goals. And at the same time, we are always looking to further integrate a climate dimension into our portfolios. For example, a new initiative is our partnership with the CDP (former Carbon Disclosure Project) about a methodology of temperature scoring of companies. This will give us a way to see clearly how much the companies held in our funds contribute to global warming. You can think of it as a thermometer. This tool will be very useful to help build an investment portfolio that is aligned with the Paris Agreement target of limiting global warming to 1.5 degrees.

What other areas is Amundi targeting via ESG investing?

There are lots of areas ESG can target, and we emphasise two areas in particular: climate change, and social inequality. These two themes are bound up with each other. We believe that the transition to a lower carbon world will have profound effects on society. It’s not enough just to think about the environment, you also have to consider how the shift might create social unrest and amplify inequality, which is a huge problem around the world.

The approach of our social impact fund is based on five pillars: labour and income; health and education; diversity; taxation; and human rights/access to basic needs. We invest in companies that specifically address these areas.

Regarding labour and income, do you think the crisis has changed public perception of companies? Will people favour those companies that treat workers fairly, above those that don’t?

I believe this was already a powerful wave before Covid-19, but it has now gathered even more momentum. Companies’ decisions affecting workers (in particular, the health and social protection of employees, telework or unemployment policies, as well as providing production chains to produce medical equipment) have become increasingly important. The Covid-19 crisis has moved social considerations back to the forefront of ESG.