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It is difficult to establish a direct connection between the health crisis we are now enduring and global warming. However, it is clear that climate change, the destruction of biodiversity, but also the changes in our lifestyles, with the increase in the movement of people and goods and urban growth, favour the emergence of infectious diseases. Overall, everything in our lives seems to bring us back to the issue of global warming and, for many of us, not a day goes by without it having an impact on our daily lives or occupying our minds.
Update on our Climate funds
Based on this observation and the significance of the issue, we took a step forward in 2019 and created a range of funds implementing a proactive management of carbon intensity within the portfolio. We launched R-co 4Change Climate Equity Europe with the ambition of using carbon trajectory as a stock selection tool. This fund obtained the SRI[1] label in 2019. It is managed with a view to steering the carbon intensity of the portfolio, by having each company monitoring its direct (scope 1) and indirect (scope 2, related to the energy consumption necessary for production) greenhouse gas emissions.
Our management philosophy is based on the idea that, to bring about change, it is worth investing in players that today have strong emissions, but who show a real ambition to reduce them, rather than focusing on players and sectors that are already low emitting. The commitment that we are thus making through these funds is to reduce the carbon intensity of our portfolio by an average of 5% per annum by 2030. In order to ensure that this reduction will come from the most emitting players, we are committed to holding a minimum portfolio weighting in the 5 most polluting sectors.
The idea is to promote players who are betting on a real carbon transition in their activity, via a credible reduction programme, hoping that these good practices will be welcomed by other investors or even replicated by their competitors.
This aim is ambitious because 2021 will be a test year, after such a rare and unprecedented 2020 where carbon emissions fell significantly in G20 countries by around 7.5%, following the periods of lockdown.
[1] Created in 2016 by the French Ministry of the Economy and Finance, the label ISR promotes French investment funds that comply with the principles of socially responsible investment (SRI).
Update on R-co 4Change Green Bonds
Now, for many borrowers, the issue of the impact of their activity on the environment is also becoming increasingly important. In order to finance sustainable projects or initiatives, the latter (companies, governments or any other supranational institution), can opt for the issuance of “Green Bonds”, a market now in full expansion.
The issuer undertakes to comply with strict “specifications”. Thus, the proceeds of the issue must be exclusively dedicated to the financing of environmental projects and fall within a reference framework (CBI, ICMA[1], etc.). This financing is intended to enable issuers to change their economic model towards greater environmental sustainability and to contribute to the energy and ecological transition.
[1] Climate Bonds Initiative and International Capital Market Association. These are two non-profit organisations of finance professionals who have determined a strict framework to define Green Bonds.
Completed writing on 26 November 2020
