Ashley Fagan is global head of ETF, indexing & smart beta strategic clients at Amundi Asset Management
Climate change represents a systemic risk and we are convinced that the financial sector has a key role to play in supporting the transition to a low carbon economy and the alignment with the Paris Agreement.
Engaging for better
Amundi already engages with companies to increase the transparency of their emission reduction strategy. This year we will be working with investee companies to encourage more action on the energy transition, with five key focus areas:
- Aligning company objectives with the Paris agreements using the Science-Based Targets framework.
- Striving to implement better reporting and transparency on companies’ climate-related strategy.
- Understanding how organisations develop practices that also address the social acceptability of the energy and ecological transition.
- Engaging with companies in sectors with high exposure to the energy transition to include climate KPIs in their corporate compensation packages.
- Strengthening our engagement action on targeted “laggards”.
For investors taking a “passive” approach to investing, there are plenty of opportunities to align investments with the energy transition and reduce exposure to fossil fuels.
- Fossil fuel-free indices: In 2020, Amundi transitioned all its ETFs tracking MSCI SRI indices to be fossil fuel free, screening for companies involved in fossil fuel extraction, generation and reserves. This range offers a broad geographic exposure meaning that investors can eliminate fossil fuel exposure in their core equity allocation while considering other ESG criteria.
- Paris-aligned indices: With the introduction of new climate index labels in EU regulation, investors have a new way to make a difference. At Amundi, we offer a range of ETFs tracking Climate Transition Benchmarks (CTB) targeting 30% reduction in carbon intensity compared to the parent index, and the Paris-Aligned Benchmarks (PAB) taking a stronger approach with a 50% carbon intensity reduction and additional activity exclusions.
- Aligning engagement: the assets invest- ed through index-tracking vehicles have the same shareholder rights as actively managed holdings. Using those rights is a valuable way for asset managers to drive sustainable change and to ensure investor objectives are met.
Building back better
With economic recovery in sight, one should bear in mind that there should be no return to “business as usual”. “Build- ing back better” will entail significant shifts in our production and consumption patterns, and more broadly, an acceleration of policy response and citizens mobilisation across the world. In this new world, successful companies will certainly be those with sustainable practices, thriving companies will undoubtedly be the ones providing solutions to the global challenges the world is facing.