Amundi, a European asset manager, has launched a new investment strategy within the Amundi Responsible Investing; Just Transition for Climate (the Fund). The Fund is an actively managed European fixed income portfolio with a quantifiable objective to support the energy transition while meeting criteria that consider social cohesion.
The Paris Agreement sets out a framework for investors wishing to respond to climate change. Amundi, a pioneer in the development of responsible investment, is fully committed towards a fair green transition which takes into account social criteria.
The Just Transition for Climate fund is the first fund to be:
- Fully aligned with the energy transition, incorporating an objective to reduce the carbon footprint
- Socially inclusive, by integrating a “Just Transition” score incorporating the different social aspects involved in the transition to a low-carbon economy: impact on employees, consumers, local communities and society at large
- Dynamic and forward-looking, through its tailor-made engagement policy to support issuers in their transition in line with the environmental and social objectives of the strategy.
The Just Transition for Climate fund was originally called the Amundi Responsible Investing– Green Bonds, and was launched in 2015 in the wake of the COP21, whose objective was to fight global warming. Transforming the fund into a strategy focusing on the Just Transition is based on a strong conviction: the energy transition must not be to the detriment of social issues.
Quantifying investment impact in favour of the low carbon transition
The investment universe, based on the Bloomberg Barclays Euro Aggregate Corporate index, is composed of 3,122 corporate bonds. This universe is refined using a negative screening based on climate and social criteria to maintain only those issuers that have affirmed a goal of reducing their carbon footprint, do not present an extreme physical risk and for which the ESG rating and Just Transition rating are higher than or equal to E (‘A’ being the highest and ‘G’ the lowest).
The portfolio is designed to invest towards a fair transition with a particular focus on:
- Climate, by maintaining the carbon footprint 20 per cent lower than benchmark and annual reduction
- Just Transition seeking to achieve a score above that of the benchmark
- ESG criteria based on Amundi’s proprietary ESG scoring method with a target score higher than that of the benchmark
Ongoing control and oversight of climate and social indicators ensure that the fund remains on track in line with its objectives. The investment team also carries out monitoring to keep track of engagement objectives announced by issuers.
A financial performance objective
As the investment universe is represented by the Bloomberg Barclays Euro Aggregate Corporate Index, the fund also uses this index benchmark for financial performance. The objective of the management team is to outperform the index by implementing a proven investment process, drawing on Amundi’s efficient analysis system.
The Just Transition Concept
The Just Transition Concept is based on the premise that a transition to a low-carbon and environmentally friendly economy should be acceptable for all, and therefore must address the social dimension of such a transition. These social dimensions are defined as follows:
Employees: ensure that employees in industries that are restructuring can find jobs in sustainable businesses and contribute to how these transitions are organised and implemented, that they are protected from the harmful effects of climate change.
Consumers: ensure that consumer goods are accessible to all at affordable prices.
Local communities: ensure that the costs and benefits of the transition are equitably shared.
Societies at large: a just transition allows all stakeholders to fully play their role and participate in constructive dialogue.
To reflect these dimensions, a Just Transition rating system has been designed to attribute scores which measure the performance of issuers relative to their peers on specific social issues. Each dimension is then weighted according to their importance in the social acceptability of the transition toward a low carbon economy. Continuous monitoring and dialogue with issuers ensure that the scores and weightings are adjusted as necessary.
In line with Amundi’s long term approach to responsible investing, the fund benefits from a dedicated engagement policy to support companies in their engagement on transparent, credible and ambitious transition objectives, prompting companies to work with employees and stakeholders to ensure the social acceptability of the transition.
The policy is based on:
- An annual letter sent to companies in the reference universe to encourage them to produce transition objectives and commit the resources necessary to deploy the various aspects of their transition.
- Continuous engagement with the companies in the portfolio on their transition goals.
- Fostering research and awareness on the Just Transition with non-profit organisations, international forums and stakeholder associations, and leading universities.
In terms of impact, the strategy will report on the key indicators outlined above, and also include the carbon footprint, the ESG score of the portfolio, the temperature score and the Just Transition rating.
Jean-Jacques Barberis, Head of the Institutional and Corporate Clients division & ESG at Amundi, comments: “Within the Paris Agreement, the concept of a fair transition is central to the transformation to “net zero” economies. There will be no transition if it is not socially acceptable. The social dimension of the transition is therefore becoming increasingly important for investors. The Just Transition for Climate fund is the first attempt to provide investors with a unique solution to measure and integrate the financial risks associated with climate change and use their investments for an inclusive transition in line with the Paris Agreement. The methodology will progressively evolve based on our dialogue with corporates”.
The portfolio holds companies selected for their commitment to environmental and social objectives that live up to the ambitions announced in the Paris Agreement.
Anne Chassagnette, Head of CSR at ENGIE, adds: “For several years ENGIE has been committed in a process to reduce its greenhouse gas emissions, in particular by phasing out coal by 2025 in Europe and 2027 in the rest of the world. The group has the ambition to implement a just transition, incorporating an important requirement on the environmental and social aspects of projects as was the case, for example, with the closure of the Hazelwood plant in Australia. Today we welcome the inclusion of ENGIE in Amundi’s Just Transition for Climate strategy, which supports a socially acceptable low-carbon transition.”
The Fund is managed by Alban de Faÿ, Head of Fixed Income ESG investing and Dany da Fonseca, Credit Portfolio Manager, the two Co-Lead Portfolio Managers.
Just Transition for Climate is a French domiciled fund appr