Interview with Frédéric Samama, Deputy Global Head of Institutional & Sovereign Clients Amundi
Climate Action recently spoke with Frédéric Samama, Deputy Global Head of Institutional & Sovereign Clients Amundi – a partner of the upcoming Sustainable Investment Forum on 19th September in New York.
Firstly, could you please explain who Amundi are and what you do?
Amundi is Europe’s largest asset manager by assets under management and ranks in the top 101 globally. Thanks to the integration of Pioneer Investments, it now manages over €1.3 trillion of assets2 across six main investment hubs.3 Amundi offers its clients in Europe, Asia-Pacific, the Middle East and the Americas is a wealth of market expertise and a full range of capabilities across the active, passive and real assets investment universes. Headquartered in Paris, and listed since November 2015, Amundi is the 1st asset manager in Europe by market capitalization, and the 5th globally. Leveraging the benefits of its increased scope and size, Amundi has the ability to offer new and enhanced services and tools to its clients. Owing to its unique research capabilities and the skills of 5,000 team members and market experts based in 37 countries, Amundi provides retail, institutional and corporate clients with innovative investment strategies and solutions tailored to their needs, targeted outcomes, and risk profiles.
What trends are you seeing in the sustainable investing landscape?
The sustainable investing landscape has known a major boost with regards to the environmental aspects since the Paris Agreement in December 2015. Indeed, the COP21 has put the energy transition at centre stage, and it seems that this trend is only going to continue as a growing number of actors are starting to mobilize to facilitate a low-carbon economy. This shift has given rise to a dual movement that will be crucial in the upcoming year, and that we’ve been seeing emerging in the past two years:
- The necessary mobilization of asset owners, civil society and policy makers: policy innovation regarding reporting through the Article 173, the mobilization of shareholders, the mobilization of asset owners in a number of coalitions, etc.
- The rise of financial innovations to finance the energy transition and a low-carbon economy. This new phenomenon can be seen in the emergence of low-carbon indices, green bonds, green infrastructure, thematic funds, impact funds, impact reporting, etc.
Amundi is renowned for its commitment to sustainable development and socially responsible investment policies. Why is acting socially and sustainably responsible so important?
Amundi firmly believes that an asset manager's responsibility extends beyond the purely financial aspect and is eager to be a driver of environmental progress and change. One of Amundi’s founding principles from the time of its inception in 2010 was that investment policies should be shaped not only by financial criteria but also by sustainability and social utility criteria.
Today, with €168 billion in SRI management4, Amundi is one of Europe’s most socially committed investors. Its objective is to gradually increase the inclusion of public interest criteria, that is to say environmental, social and governance criteria (ESG) in all of the Group’s investing. The Group believes that far from hindering financial performance, the inclusion of environmental, social and governance criteria by companies actually enhances it. Amundi is also committed to provide its clients with high-performing, transparent investment and savings solutions as part of a long-lasting relationship built on trust. Amundi’s aim is to apply the principles of social responsibility to its own operations. Reducing and managing its environmental impact, eliminating discrimination, promoting equal opportunity, ensuring transparency and integrity in its governance, developing a long-term philanthropic policy and encouraging the social involvement of its employees. Amundi publishes a Corporate Social Responsibility report (available on the website) on an annual basis which analyses its progress across all areas of the business.
The following recent initiatives can be demonstrated as part of Amundi’s continued commitment to green finance and innovation:
- Co-founding the Portfolio Decarbonization Coalition, launched under the umbrella of the UN in 2014;
- Co-development of “low-carbon” indexes alongside AP4, FRR and MSCI
- Signing a partnership with EDF to offer energy infrastructure investments based around renewable energy;
- Involvement in numerous collective initiatives to encourage best practice on a company and country level, such as the disclosure of ESG practices and development of a framework on human rights;
- Launch of two green bond funds;
- Co-publication of academic papers on climate risks and financing the energy transition with prominent institutions of the green ecosystem;
- Amundi was also elected as the representative for the Investor community in the Executive Committee of the Green Bond Principles at ICMA in June 2017, exemplifying our active engagement as an investor and on spreading best practice in the green bond market.
Strategic partnership with IFC to unlock private capital flows for climate finance in developing countries through, among others, a $2bn green bond projectAmundi is working with the International Finance Corporation (IFC) to create the world’s largest green-bond fund dedicated to emerging markets. Could you tell us more about this exciting project?
Climate change efforts have progressively evolved from top-down policy initiatives to bottom-up civil society participation and private sector implementation. Public and private institutional investors have both the capacity and appetite to deploy massive amounts of capital to finance the green transition in emerging countries, but are hindered by a lack of scalable investment vehicles which meet those objectives.
The IFC/Amundi partnership tackles these issues through an innovative platform and a pragmatic approach to unlock private capital flows for climate finance in developing countries. The new platform combines deep expertise in both asset management and private sector development in emerging markets to help developing countries achieve long-term sustainable growth. The first fund on the platform will seek to channel capital through emerging market financial institutions to expand finance in ways that are adapted to the endowments and intentions of the individual country climate transition goals.
The $2bn project is designed to simultaneously stimulate demand (through the Fund) and supply (through targeted technical assistance to financial institutions) of green finance to “complete the circuit” and propel climate finance in emerging markets. The synchronized development of the supply and demand forces for climate investment creates an ecosystem in which markets can be nurtured and sustainably developed.
Specifically, the first fund on the platform will address the needs of four key stakeholders:
- For developing countries it facilitates the implementation of nationally determined contributions (”NDCs”) arising from the Paris Agreement. By channeling capital from developed to developing countries, the strategy contributes to the critical contributions of the emerging markets to global climate finance objectives, and helps investors efficiently direct capital toward climate finance. By acting on both the demand and supply side of the finance equation, it builds a base for sustainable green bond markets.
- For investors seeking adequate returns in the current low yield environment, the fund secures higher bond yields from a diversified range of emerging markets with the added benefit of the first-loss protection offered by IFC, while ultimately achieving climate alignment through green bond investments.
- For IFC, partnering with an asset manager enables them to leverage their core skills as a catalyst for the development of the private sector across the world, with the positive benefit of financing green assets, thereby also supporting Sustainable Development Goals (SDGs). The project also underscores IFC’s commitment to sustainable finance through its own investment in the fund and the deployment of a technical assistance.
- For Amundi, the development of this innovative emerging market green bond fund is a new green finance initiative that has set Amundi as a frontrunner in this field. Indeed, following the avant-garde development of low-carbon indices, Amundi created a unique joint-venture with EDF, a leading European electricity provider, to finance renewable energy and energy efficient real assets. Co-founder of the Portfolio Decarbonization Coalition, Amundi has been actively participating in green finance academic research in an ongoing effort to contribute to the public good. The new initiative expands Amundi’s climate finance investment offerings for institutional clients across the three main assets classes of equities, illiquid assets and fixed income. This illustrates Amundi’s asset management capabilities of over 1tn euros, its strong track record in emerging market debt management and its core commitment to responsible investing.
The IFC and Amundi venture is designed to transform aspiration to implementation. While the first fund targets developing markets financial institutions, the fund platform will subsequently add other green bond fund strategies addressing sustainable growth in the developing world. Over time, the emerging market green bond platform will offer a variety of climate-friendly funds that create new markets and deepen existing ones.
Amundi is sponsoring the Sustainable Investment Forum which is taking place this September. Why did you wish to be involved in this event?
Supporting the development of green finance is key to financing the energy transition, and Amundi believes that such initiatives such as the Sustainable Investment Forum are key to facilitating that process. In addition, Amundi sees the Sustainable Investment Forum as a vector through which to spread best practices and share knowledge, and we believe that it is an opportunity to share with all actors all along the value chain on key aspects for the development of financial innovations pertaining to green finance.
You will be speaking at the Sustainable Investment Forum 2017. Could you give us a brief outline of what you will be discussing?
Innovation is a key factor of success in the fight against climate change. But if the necessity to innovate is a fact, there is no single way to do so. Innovation can only be specific to each asset class, and obstacles must be overcome one after the other:
- For equity, the difficulty comes from time horizon, complexity and scalability.
- Low carbon indices help reduce climate change risks over the long term without impacting returns in the short term5. So they are generating a form of free option on a mispriced asset. They address all major identified challenges investors were facing so far: time horizon (purchase of time for free), complexity (it focuses on corporates that could be impacted instead of trying to identify the next successful green technology) and scalability (addressing a $6tn underlying market6).
- For infrastructure and real assets, obstacles stem from the lack of knowledge and long learning curve. One innovative solution to address these concerns is to set up a strategic partnership with a key player, such as EDF, in order to facilitate the financing of green real assets leveraging on both areas of expertise.
For bonds, the “testing phase” whereby one invests money to finance green assets is risky insofar as there had been no proof of concept. Rather, the objective is to signal an intent to invest in a sustainable manner, and that can be done through green bonds. Due to their similar profile as conventional debt instruments, green bonds are a way for investors to signal that they are seeking to invest responsibly, and more specifically to be able to exactly track down what it is they are actually financing. Not only is this encouraging issuers to behave sustainably to finance their projects, it is also a way to pave the way towards other financial innovations to finance green assets.
Frédéric Samama will be talking about Expanding Green Portfolios at the Sustainable Investment Forum, on Tuesday 19 September, at the Crowne Plaza Hotel in New York City.
For more information visit our website here.