Ashley Fagan, global head of ETF, indexing & smart beta strategic clients at Amundi Asset Management, tells portfolio institutional about climate change, index-tracking and the role of investors.
PI: We are all aware, by now, of the climate emergency and that we have only 10 years, at most, before reaching the point of no return. How can the investment industry play its part?
By the end of 2019 close to £70trn of assets were managed by asset managers globally1 – that’s approximately five times the GDP of all the countries in the European Union combined! With such large amounts of money to invest, asset managers have a real opportunity to drive sustainable change.
PI: But is sustainability just about active strategies?
Not at all. We believe that there are arguments for both sides of the story. Our view is that there is a role for active and index-managed strategies in an ESG portfolio. According to the BCG1, 21% of assets globally (around £14bn) are deployed to track indices; this is projected to grow 23%, or more than £19bn, by 2024. This gives index investors a powerful voice and it would be remiss to ignore the potential impact of index-tracking assets shifting to more sustainable indi- ces and employing engagement and voting more positively.
PI: Let’s talk about a hot topic: climate change. We hear a lot about the climate emergency, but is climate an investment consideration?
Absolutely, and increasingly so. In a survey conducted by EDHEC-Risk as part of Amundi’s research chair, almost 60% of respondents highlighted the environment as the most important dimension of ESG. And, more specifically, almost a third of respondents were looking for ETF providers to deliver more climate solutions.
consider climate; first the management of climate-related risks such as transition risk or physical risks. Secondly, keeping up with evolving regulation as governments and trade bodies around the world implement increasingly stringent rules around climate impact. And last, but not least, the performance of sustainable and climate investments has shown some promise in terms of their risk and return during the past five years. We looked at MSCI standard v climate indices across regions and the climate versions outperformed over one, three and five years.
PI: How can investors have a climate impact while using index strategies?
Index approaches to climate investing have existed for some time. In fact, Amundi was at the forefront of low car- bon index innovation when they co-devel- oped the MSCI Low Carbon Leaders index series in 2014. Recently the EU developed the EU Climate Transition Benchmark
(CTB) and Paris-Aligned Benchmark (PAB)3 benchmark labels to provide investors with a transparent framework for sustainable investing. These labels have well defined decarbonisation requirements, and in the case of the PAB, specific activity exclusion criteria. As a pioneer in this space, Amundi was one of the first asset managers to launch Paris- aligned climate ETFs earlier this year.
We believe that the more investors incorporate a climate-positive approach the better, which is why we recently launched this range of climate ETFs. Covering key regions, they allow investors to incorporate the EU labels simply, cost-effectively aligned to their unique objectives.
PI: Is there anything else investors should consider to maximise their impact?
We also recommend investors select the manager for their climate investments carefully to ensure that they have a robust engagement and voting policy in place that is in line with investor values. In 2019, Amundi voted against management in 55% of shareholder meetings, it is important to select a fund manager who not only “talks the talk” on ESG issues, but also “walks the walk”.
For more information about investing sustainably with Amundi ETFs contact Ashley Fagan at firstname.lastname@example.org or visit www.amundietf.co.uk to explore our range.
This promotion is issued by Amundi (UK) Limited, registered office: 41 Lothbury, London, EC2R 7HF. Amundi (UK) Limited is authorised and regulated by the Financial Conduct Authority under number 114503. This document is not intended for citizens or residents of the United States of America or any “U.S. Person” as defined in the prospectus of Amundi Index Solutions (the “Fund”). Amundi Euro Istoxx Climate Paris Aligned PAB UCITS ETF, Amundi MSCI Europe Climate Paris Aligned PAB UCITS ETF, Amundi MSCI World Climate Paris Aligned Pab UCITS ETF, Amundi Index MSCI Global Climate Change – UCITS ETF and Amundi Index MSCI Europe Climate Change – UCITS ETF are sub-funds (the “Sub-Fund”) of the Fund,, and are recognised scheme for the purposes of S. 264 of the Financial Services and Markets Act 2000. The Fund is a UCITS SICAV established under the laws of Luxembourg and subject to the supervision by the Commission de Surveillance du Secteur Financier. The content of this advertisement is for information purposes only and does not constitute a recommendation to buy or sell. The risks materially relevant to the Sub-Fund are liquidity, counterparty, operational and capital risks as detailed in the Sub-Funds’ Key Investor Information Document (the “KIID”) and Fund’s prospectus. Investment return and the principal value of an investment in the Sub-Fund may go up or down and may result in the loss of the amount originally invested. Subscriptions in the Sub-Fund will only be accepted on the basis of the latest Fund’s prospectus and/or KIID, which may be obtained free of charge at www.amundi.lu.
1) BCG article, Global Asset Management 2020: Protect, Adapt, and Innovate (May 19, 2020)
2) Source: MSCI as at 31 July 2020 MSCI World Climate Change Index, MSCI EM Climate Change Index, MSCI Europe Climate Change Index and MSCI AC Asia Pacific Climate Change Index
3) European Commission Delegated Regulation of 17.7.20 supplementing regulation (EU) 2016/1011 as regards minimum standards for EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks. This regulation sets out minimum technical requirements for EU Climate Benchmarks, as well as a number of environmental, social and governance (ESG) disclosure requirements.