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ERAFP - Etablissement de Retraite Additionnelle de la Fonction Publique Pension Scheme

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

          - policy on controversial practices
          - measuring impact of ESG

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

ERAFP is a fully funded, mandatory pension fund for France's 4.5 million civil servants. As such, the fund carries the values of public service which our members and their trustees are deeply committed to. For this reason, environmental, social and governance (ESG) issues have been a defining feature of the development of the investment policy since the inception of the scheme in 2005. This commitment to socially responsible investment is also consistent with our long term investment horizon. Most pension funds have long-dated liabilities, but on top of that, since ERAFP is a recent scheme, it is in the more uncommon situation of having predictable and sizeable positive net cash flows for the coming decades. We therefore intend to use our particularly low need for liquidity to the advantage of our beneficiaries. At the same time, the fund has been following very cautious asset-liability management and solvency frameworks. Using a low discount rate allows us to keep expected returns realistic, enabling us to keep steadier allocation decisions through the turmoil. We believe this is to the benefit both of our beneficiaries and the general financial markets.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

Since its inception in 2005, ERAFP's Board of Trustees decided to adopt a Socially Responsible Investment (SRI) policy covering all assets in all asset classes. This SRI policy, which is consistent with ERAFP's long term investment horizon, is based on a SRI Charter which reflects the Board's investment beliefs rules.

Since part of the Trustees are trade union members representing the scheme beneficiaries, the Board gave a social orientation to the SRI policy. Indeed, among ERAFP's five investment values, three deal with social issues - human rights, social progress, employee democracy - while through the two others, ERAFP intends to promote effective protection of the environment and good governance principles. Each of these investment values is declined into more detailed criteria which are adapted to the specificities of each asset class.

This SRI approach which mainly focuses on stringent ESG stock selection rules, has been completed by the adoption of a dedicated engagement policy in early 2012 which includes a voting policy and is updated on a yearly basis.

In 2016, ERAFP has updated its SRI charter. The changes include the strengthening of its active ownership policy, a better consideration for controversial issues and the measurement of effective impacts of applying ESG criteria. In addition, ERAFP's framework of ESG criteria have been updated in order to better appreciate the ESG relevant issues of each issuer. For instance, weights of climate change risks and contribution to energy transition or those of responsible management of supply chain have been strengthened and weights of ESG criteria could be adapted according to specificities of each sector. 

01.6. Additional information [Optional].


SG 01 CC. Climate risk

01.6 CC. Indicate whether your organisation has identified transition and physical climate-related risks and opportunities and factored this into the investment strategies and products, within the organisation’s investment time horizon.

Describe the identified transition and physical climate-related risks and opportunities and how they have been factored into the investment strategies/products.

The consequences of climate change are probably one of the risk factors most likely to have a long-term impact on the value of ERAFP’s assets. That is why, in breaking down the SRI Charter into more detailed issuer evaluation rules, ERAFP has integrated criteria designed to better determine the level of these issuers’ exposure to the various facets of climate risk.

In particular, under the ‘environment’ value of ERAFP’s SRI Charter, the Control of the risks associated with climate change and contribution to the energy transition criterion makes it possible to assess the commitments that issuers have made, the measures adopted and the tangible results achieved as regards containing and reducing the greenhouse gas emissions associated with their activity. The listed and unlisted companies, the countries and the other issuers that score most highly on this criterion will probably be the best placed to cope with the adjustments needed as a result of climate change, such as more stringent regulations, the introduction of carbon pricing, client and investor expectations and increased vigilance by civil society.

This criterion also makes it possible to assess the efforts made by issuers to anticipate and adapt to the ramifications and consequences of climate change. Finally, this criteria also evaluates the compliance of issuer’s strategy with the objectives of Paris Agreement and allows an exclusion of companies who have more than 10% of their sales resulting from thermal coal activities.

In order to estimate the degree of control that issuers have over the physical risks associated with climate change (increasing scarcity of natural resources, especially water, increased occurrence of extreme weather events, impacts on biodiversity, etc.) ERAFP also applies a Control of environmental impacts criterion, making it possible to assess the commitments made by issuers regarding the protection of water, the preservation of biodiversity and the prevention of pollution risks.

Conversely, ERAFP’s SRI environment value criterion relating to the Product or service’s environmental impact makes it possible to promote companies that offer innovative solutions to sustainable development challenges, particularly in the area of the energy and environmental transition.

Monitoring an asset portfolio’s consolidated average scores for these criteria can be a way of gauging that portfolio’s exposure to climate change-associated risks. Such an indicator is difficult to interpret, however, and does not facilitate the factoring in of the real impact of ERAFP’s assets on the environment and of climate change on ERAFP’s portfolio.

The search for a better understanding of a portfolio’s degree of exposure to the risks and opportunities associated with climate change has led investors to acquire specific monitoring tools. That’s why in addition to the a priori vision provided by the best in class approach, ERAFP has adopted climate-related tools that give an ex-post vision of allocation choices (see SG 01.7.CC).

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

Describe the associated timescales linked to these risks and opportunities.

Different timescales have been applied, depending on the risks and opportunities factored into the climate analysis on the respective portfolios and the asset classes concerned.

Driven by its conviction that what is not measured cannot be managed, ERAFP was one of the first investors to calculate and publish its carbon footprint, in its 2013 annual report. ERAFP measures its portfolios’ exposure to carbon risk by calculating the average carbon intensity (CO2 emissions normalised by revenue) of the constituent companies or countries, weighted for their respective weights in their portfolios. The advantage of this metric is that it can be applied to all assets in the portfolio, but the drawback is that it is based on past data.

ERAFP also measures its portfolios’ “green share”, an indicator of their associated climate-related opportunities. In 2019, the green share of its listed bond and equity portfolios was measured on the basis of the percentage of renewable energy in the energy mix of electricity producers. However, this metric also gives a static view.

To overcome this limitation, ERAFP also evaluates its portfolios’ alignment with a “2°C” scenario. This evaluation facilitates the measurement of, for example, a 2°C carbon budget ratio and an equivalent temperature to 2023, based on the past and future carbon emission trajectories of issuers held in its listed equities portfolio. Calculations of carbon budget ratios and equivalent temperatures are based on several 2°C alignment scenarios (relied to SDA and GEVA methodologies) that establish trajectories through to 2100. 

To evaluate its transition risks, ERAFP measures the exposure of its asset valuations to the risk of changes in carbon pricing in 2030, based on the representative concentration pathways (RCP 2.6 and 4.5) adopted by the IPCC.

Lastly, physical risks are measured based on the exposure and vulnerability of its assets to seven physical risks (water stress, fires, floods, heat waves, cold waves, hurricanes and rising water levels). Evaluations are performed on the basis of three climate scenarios (low, moderate and high levels of global warming), that are in turn based on the IPCC’s representative concentration pathways (RCP 2.6, 4.5 and 8.5). The results are expressed for a time horizon to 2050 (but are also calculated for 2020 and 2030).

The climate analysis methodologies are tailored to each asset class. ERAFP does not yet publish results for its infrastructure and private equity portfolios because we do not consider the data to be sufficiently robust. However, we have been working on analysing these portfolios, together with Carbone 4, since 2017.

01.8 CC. Indicate whether the organisation publicly supports the TCFD?

01.9 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.


This two-pronged analysis of climate-related risks and opportunities, performed through pre-investment best-in-class screening (see reply SG01.6. CC) and post-investment climate analysis tools (see SG01.7. CC), enables us to identify the issuers presenting the highest number of climate-related risks or opportunities and thus to prioritise engagement actions to be taken by ERAFP or its asset managers.

Moreover, ERAFP aims to continuously improve its approach. In 2019, it made changes to its best-in-class reference framework for companies in order to factor in climate-related issues more effectively (addition of an evaluation criterion based on the consistency of company strategies in high stakes sectors with Paris Agreement goals and divestment from issuers generating more than 10% of revenues from thermal coal that have not implemented phase-out plans consistent with Paris Agreement goals). In 2019, ERAFP also continued to improve its measurement tools (inclusion of scope 3 emissions and the evolution of carbon intensity over time, analysis of 2°C scenario alignment across all sectors, publication of the real estate portfolio climate analysis and analysis of the portfolio's exposure to physical and transition risks).


Alongside the strategy set out above, which applies to 93% of its investments, ERAFP also seeks to make a positive contribution to the energy transition through its thematic investments in areas such as renewable energy, forestry and green bonds, as well as its climate-friendly thematic equity funds and low carbon mandate.

As regards this mandate, since 2015 ERAFP has been working with French asset manager Amundi on a methodology geared towards significantly reducing the carbon footprint of a portfolio comprising around EUR 2 billion in euro-zone equities managed on behalf of ERAFP under an index-linked management mandate.

As well as best-in-class screening, an additional filter is applied to data collected on companies’ carbon intensity (CO2e emissions/revenues): 5% of the most polluting companies worldwide and 20% of the most polluting companies in each sector are excluded from the portfolio. The decarbonised portfolio, whose tracking error is capped at 0.7%, has a performance similar to the underlying index, but its carbon intensity is around 40% lower.

Since its inception, the French public service supplementary pension scheme (ERAFP) has made it a point of honour to ensure that its investment activities are consistent with its commitment to a carbon-free economy.

By joining the Net-Zero Asset Owner Alliance, an initiative supported by the United Nations, ERAFP is formalising its commitment to decarbonising its portfolio, with a view to achieving a carbon-neutral investment portfolio by 2050, thus confirming its energy transition ambitions.

1.10 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.


          annual public report

SG 02. Publicly available RI policy or guidance documents


02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

Other, specify (1) description

          - policy on controversial practices

Other, specify (2) description

          - measuring impact of ESG

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

02.3. Additional information [Optional].

ERAFP's investment principles and overall investment strategy are both available on the SRI annual report, our SRI Charter and Guidelines for ERAFP's shareholder engagement.

Asset class-specific guidelines do exist, can be made available on demand, but are not directly available via ERAFP’s website. Indeed, ERAFP’s aggregated rating framework is very detailed, comprising more than 100 pages, and regularly updated.

As already mentioned, our SRI Charter is based on five values:

- Human Rights,

- Social progress,

- Employee democracy,

- Environment,

- Governance.

For each asset class, each of these values is declined into more detailed criteria and dedicated best-in-class selection rules are set. For example, for listed companies, ERAFP's SRI rating framework comprises of 49 KPI's, 13 of which pertain to the Environmental value, 13 to the Governance value, 7 to Human Rights, 4 to Employee democracy and 12 to Social Progress .

SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

ERAFP has its own code of ethics which applies to all employees and which all employees receive before signing their employment contract.

In addition, sensitive staff has to sign up an internal document related to conflicts of interest and insider information.

03.3. Additional information. [Optional]

SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within investee entities.

04.2. Describe your process on managing incidents

Through its investment policy, ERAFP aims to encourage issuers to respect international environmental, social (human rights and labour law) and governance standards. ERAFP’s mandated investment managers may, after applying a shareholder engagement approach, exclude certain issuers from their portfolios in the case of breaches of certain international standards or non-compliance with environmental or socially responsible principles. In such cases a call for standard exclusion is made. The right the Scheme reserves to apply, in the case of the failure of shareholder engagement approaches, a standard exclusion is designed to protect ERAFP’s reputation as a socially responsible investor. With this in view, the controversies to which issuers may be exposed are monitored. As part of ERAFP’s shareholder engagement, discussions are entered into with the companies involved in proven breaches of international standards, particularly with regard to the following fundamental principles: —Universal Declaration of Human Rights; —ILO Declaration on Fundamental Principles and Rights at Work; —Rio Declaration on Environment and Development; —United Nations Conventions (particularly that against corruption). This dialogue is initiated by the ERAFP delegated manager concerned by the investment or by ERAFP itself in the case of a direct investment. The securities of a company with which discussions have been initiated following a proven breach of international standards may be kept in the portfolio for as long as a shareholder engagement initiative targeting the controversy identified is in progress. If shareholder engagement measures are not enough to ensure that the company responds adequately to the issues raised or is in the process of responding, other actions will be considered: - intense dialogue through the delegated manager in the context of preparing its vote at the general meeting of shareholders; - any other means that protect ERAFP’s interests; - lastly, sale of the securities by the delegated manager.