Sovereign, municipal and supranational bonds are managed in-house. ERAFP's investment team is thus directly in charge of the implementation of the SRI policy defined by the Board. This approach is based on an ESG rating framework comprising ERAFP's five values (Human rights, Social progress, Employee democracy, Environment, Governance and transparency) which are declined into about forty criteria adapted to the specificities of countries, supranational bonds and local governments. Based on customised ESG scores and analysis provided by Vigeo, ERAFP's investment team ensures that investment proposals comply with ERAFP's SRI policy for this asset class: ERAFP cannot invest in issuers with overall ESG scores below average (50/100). Moreover, for supranational bonds, the SRI rate on at least one of the 5 SRI values of ERAFP's SRI Charter could not be below 25/100. For local governments bonds, the SRI rate on at least one of the 5 SRI values could not be below the half of average of the benchmark. On a bi-annual basis our ESG third-party providers (Vigeo) assess our bond portfolios and reviews are conducted with the Investment Policy Committee of the Board.
Aside from the integration of best in class ESG criteria the Board of Directors decided to add three specific exclusion criteria for sovereign bonds. Are excluded from the investment universe, countries which:
- have not abolished the death penalty,
- practice torture,
- have recourse to child soldiers.
Since the ERAFP SRI Charter review in 2016, ERAFP also specifies in its SRI Charter that it favours States that have ratified the International Labor Organisation's fundamental conventions.
Our investment universe for direct investment is relatively limited since it only comprises € denominated bonds issued by OCDE countries. As a consequence rather than implementing issuer selection rules based on a ranking of European countries, it has been decided to set a minimum ESG average score to obtain in order to be eligible for investment : ERAFP cannot invest in a country with an overall ESG score which is below the average (50/100).
On a bi-annual basis our ESG research providers (Vigeo) provide us with a third-party assessment of our portfolio: they identify the issuers in our portfolio which do not respect our SRI requirements according to their research.