Frédéric Samama discusses how institutions can be encouraged to issue green bonds

Ahead of the Sustainable Investment Forum taking place in New York on the 26th September, we caught up with Frédéric Samama, Co-Head Institutional Clients Coverage, Amundi Pioneer to discuss how financial institutions can be encouraged to issue green bonds, lessons learned from the PDC and the work of Amundi in being sustainable investment pioneer.

How can local financial institutions be encouraged to issue green bonds?

Financial institutions can be encouraged to issue green bonds through demand injection as well as through supply-side support and that is exactly the strategy for AP EGO. The fund will inject $2bn into green bonds issued by financial institutions operating in emerging markets over its lifetime with proceeds reinvested. At the same time, IFC is operating a supply side support mechanism for financial institutions to foster the development of green bonds aligned with international standards (the Green Bond Principles). As such, it will seek to deliver tailored capacity building activities for green bond issuers in emerging markets. The program will support the creation of new markets for climate finance by developing green bond policies, providing training programs for bankers, and facilitating the adoption of the Green Bond Principles and international best practices in emerging markets.

What lessons have you learnt from the Portfolio Decarbonisation Coalition (PDC)?

The PDC is a multi-stakeholder initiative that will drive GHG emissions reductions by mobilizing a critical mass of institutional investors committed to gradually decarbonizing their portfolios. Members of the Coalition share a dual vision, setting themselves two interconnected and intermediary targets of disclosing their carbon-footprints and taking action to decarbonize their portfolios. Specifically, the PDC encourages and supports investors in meeting this dual objective through acting as a platform for sharing best practices. The PDC does not advocate a particular strategy. Rather, it encourages each member to identify which approach is best suited to their investment practices. This is facilitated by publishing each member’s carbon reduction plan on the PDC website, and convening member networking events to enable the exchange of ideas and information.

Through this dual objective the PDC expects that having a critical mass of institutional investors - owners of large segments of the global economy - decarbonize their portfolios, will send a strong and unequivocal message to carbon-intensive companies that carbon-efficiency is now centre-stage. It provides strong incentives to actors in the real economy to re-channel their own investments from carbon-intensive to low-carbon activities, assets, and technologies.

How is leadership and collaboration important in promoting sustainable investment?

Amundi has been a pioneer in sustainable investment since its foundation in 2010, considering social and environmental responsibility as one of its four founding pillars. With that in mind, to move sustainable finance forward, Amundi reinforces its belief in the importance of collaboration in promoting sustainable finance. Amundi has been and continues to be an active participant in working groups and market initiatives. Just to name a few, these range from Amundi as a signatory to the Principles of Responsible Investment (PRI), to Amundi as a member of various Sustainable Investment Forums across Europe, North America, Asia and Australia, to Amundi as a co-founder to the Portfolio Decarbonization Coalition (PDC). Other initiatives Amundi is part of aim to encourage businesses to improve their practices and transparency in the fields of deforestation to protecting water resources, health and nutrition in developing countries, etc.

At the same time, Amundi works on developing the next generation of financial solutions to help align institutional investor portfolios with sustainable goals in mind. For example, when considering the alignment of portfolio with a low carbon economy, Amundi developed market leading innovative solutions which are underpinned with collaboration with other industry experts.

Amundi Energy Transition (AET): Amundi partnered with Electricité de France (EDF) in order to launch a joint-venture, Amundi Transition Energétique that seeks to finance green physical assets. This innovative partnership combines EDF’s expertise as a global electricity provider and largest European renewable electricity producer and Amundi’s expertise as largest European asset manager in order to source for our clients the best private deals offering tangible benefits for our society.
 Amundi Planet – Emerging Green One (AP EGO): AP EGO is a $1.42bn Layered Capital Green Emerging Market Debt Fund structured and managed by Amundi. This Fund is part of IFC’s Green Cornerstone Bond Programme, which aims to facilitate the financing of the energy transition in emerging markets through the creation and development of a local green bond market. Yield-starved institutional investors, who have both the appetite to capacity and appetite to deploy significant amounts of capital in emerging countries, are limited in their ability to do so due to the higher risk perception of investing in emerging markets. This is why the fund was structured as a layered fund with three tranches, offering investors exposure to different risk/return profiles, based on their risk appetite. Specifically, this enabled development finance institutions, namely IFC, EIB, EBRD and Proparco, to take first-loss positions in the junior tranche securing the senior tranche with more protection to enhance the investment case for institutional investors as they search for yield while delivering a positive societal impact.
Low Carbon Indices: AAmundi, alongside Swedish National Pension Fund AP4, Fonds de Réserve pour les Retraites (FRR) and MSCI co-developed low-carbon indices, with subsequent launch of indexed and ETF investment solutions. The methodology is now being replicated by renowned institutional investors such as GPIF, CalsTRS and Unilever PF. These low carbon indexes are now outperforming the market, demonstrating to the rest of the investment community that there need not be a trade-off between returns and going green.

What role is Amundi Pioneer playing in expanding SRI offerings to investors?

Amundi continues to expand its responsible investment offering which heavily relies on our ESG foundations. Amundi’s ESG operations cover more than 5,500 ESG issuers worldwide while Amundi also operates an active engagement policy designed to support companies in their sustainable development strategy. With such a foundation Amundi applies a targeted exclusion policy on the majority of assets under management and offers a broad range of responsible funds and tailor-made ESG solutions amounting to more than 250 billion Euros under management across all asset classes. Of which:

€168 billion consists of Socially Responsible Investment (SRI) management based on a “best-in-class” approach;
€2.3 billion consists of a range of social impact funds designed to offer a financial performance objective with a measurable social impact; and
More than €10 billion in investments supporting the low carbon energy transition.

You can join Frédéric and many others at the Sustainable Investment Forum in New York on the 26th September. To find out more about the event and to register visit www.sinvforum.org