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Groupama Asset Management

PRI reporting framework 2020

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ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation carries out scenario analysis and/or modelling, and if it does, provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe Our approach aims to incorporate ESG in every asset class (equity, credit and sovereign bonds). ESG criteria provide a key to understanding the three transitions that are profoundly transforming today’s corporate models: 1/Energy and environmental transition 2/Digital transition 3/ Demographic transition.
Describe We have integrated climate-related issues into our analysis methodology for several years. We have also developed an in-house green bonds methodology, in order to enhance our investment in this asset class. We are also using a 2° scenario analysis for a part of our assets (ALM).

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]


SG 13 CC.

13.4 CC. Describe how your organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, its results, and any future plans.

Describe

In 2019, Groupama Asset Management has implemented two parallel assessments of a part of its portfolios with regard to global warming (on our Asset and Liability Management (ALM)).

The first results of these analyzes indicate divergent conclusions on the alignment of portfolios with a 2°C trajectory. Nevertheless, the concrete application of these multiple initiatives, although heterogeneous and not stabilized, enriches the thinking of Groupama Asset Management teams, which participate in different working groups.

In addition, in 2019, we integrated a new indicator on the alignment of the company's strategy with a 2°C scenario (in temperature unit) in our internal environmental methodology. This indicator is analyzed under the “Climate” pillar of our in-house methodology. This indicator provides a more forward-looking view of the company's positioning in the face of the energy transition.

13.5 CC. Indicate who uses this analysis.

13.6 CC. Indicate whether your organisation has evaluated the potential impact of climate-related risks, beyond the investment time horizon, on its investment strategy.

Describe

For the last three years, we have been analyzing the climate change exposure of a part of our assets, ie. directly invested equity and corporate bonds in our Asset and Liability Management portfolios (ALM). In 2019, we worked on applying this approach to dedicated funds.

We choose to focus on 7 sectors (vs 5 sectors in 2018), partially because they are carbo-intensive sector and partially because they are providing solutions regarding climate change (Auto, utilities, capital goods, materials, energy, transport (new) and food and beverage(new)). We are classifying each year these issuers in 3 categories:

  • Category 1: issuers favorably positioned in relation to the energy transition
  • Category 2: issuers whose positioning and/or implementation of climate policies seem unconvincing in terms of coherence between objectives and means or in terms of dynamic
  • Category 3: issuers whose positioning penalizes the energy transition

This classification is made based on our internal fundamental analysis, which relies on four pillars

- Strategic management of environmental (including climate) issues: identify physical risks, transition risks, opportunities related to climate change, governance on environmental issues, management risks process, is the company member of the initiative Science-Based Targets?
- Change in business model: current positioning of finished products / activities, means implemented by the company to change its business model (% capex in low carbon activities, development of green products/services, new technologies, eco-conception, innovation, etc)
- Climate: carbon footprint, energy efficiency, internal carbon pricing, positioning the company in a 2°C scenario (new indicator in temperature)
- Resource and externalities management: 1/ efficiency of the production tool (input): energy consumption, water consumption, protection of biodiversity, 2/ externalities management (output) : waste management, recycling, circular economy

Each one of this category have an implication regarding portfolio management and investment decisions:

  • Category 1: Retention or strengthening of securities
  • Category 2: issuers "under supervision". On these issuers we plan not to increase the exposure. In case of prolonged degradation or non-progression, a progressive disengagement will be plan.
  • Category 3: total disengagement is targeted.

13.7 CC. Indicate whether a range of climate scenarios is used.

13.8 CC. Indicate the climate scenarios your organisation uses.

Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other
Other
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

other description (1)

          Inequality
        

other description (2)

          urbanization
        

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

Specify the AUM invested in low carbon and climate resilient portfolios, funds, strategies or asset classes.

Total AUM
trillions billions millions thousands hundreds
Currency
Assets in USD
trillions billions millions thousands hundreds

Specify the framework or taxonomy used.

We have 711 million euro of assets under management invested in Green Bonds. We invest in Green Bonds following our internal methodology (updated in 2019). Four criteria are analysed: 1/ characteristics of the green bond (evaluation and selection process, management of proceeds, etc) 2/ environmental quality of the projects 3/ ESG strategy of the company 4/ transparency

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

other description

          Two metrics: Green share and NEC (Net Environmental Contribution)
        

14.5. Additional information [Optional]


SG 14 CC.

14.6 CC. Provide further details on the key metric(s) used to assess climate-related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Climate-related targets
          When analysing a company, we are taking into account their climate-related target
        
          Depends on the company
        
          Depends on the company
        
Weighted average carbon intensity
          Metrics used to assess climate related risks and opportunities in our internal analysis
For our SRI/thematic/impact portfolios, this indicator has to be lower than the benchmark
        
          tons CO2e/EUR million of revenue
        
          Carbon intensity of each constituents weighted at the portfolio level
        
Carbon footprint (scope 1 and 2)
          Metrics used to assess climate related risks and opportunities in our internal analysis
        
          tons CO2e/EUR million of revenue
        
          data from Beyond-Ratings
        
Portfolio carbon footprint
          For our SRI/thematic/impact portfolios, this indicator has to be lower than the benchmark
        
          tons CO2e/EUR million of revenue
        
          Carbon intensity of each constituents weighted at the portfolio level
        
Total carbon emissions
          Metrics used to assess climate related risks and opportunities in our internal analysis
        
          tons CO2e
        
          data from Beyond-Ratings
        
Carbon intensity
          must be lower than the benchmark
        
          tons CO2e/EUR million of revenue
        
          data from Beyond-Ratings
        

14.7 CC. Describe in further detail the key targets.

Target type
Baseline year
Target year
Description
Attachments
          Monthly
        
          
        
          The carbon intensity of the portfolio level has to be lower than the benchmark's
        
          Monthly
        
          
        
          The carbon intensity of the portfolio level has to be lower than the benchmark's
        
          Monthly
        
          
        
          The carbon intensity of the portfolio level has to be lower than the benchmark's
        
          Monthly
        
          
        
          The carbon intensity of the portfolio level has to be lower than the benchmark's
        
          
        
          
        
          
        

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risk management processes used for identifying, assessing and managing climate-related risks.

Please describe

We have put in place a new environmental analysis to better highlight climate-related issues and align our analysis with TCFD recommendations.

We have a fundamental analysis of environmental issues. Climate related-risks and opportunities are included into our global vision and taken into account for each analyzed company. Investment analysts have a responsibility to integrate environmental issues into their analysis and a distinction should be made between an issuer's environmental policy analysis and environmental thematic analysis.

To identify, assess and manage climate-related risks and opportunities, we have an environmental analysis which has 4 pillars depending on the sectors:

  • Strategic management of environmental (including climate) issues: identify physical risks, transition risks, opportunities related to climate change, governance on environmental issues, management risks process, is the company member of the initiative Science-Based Targets?
  • Change in business model: current positioning of finished products / activities, means implemented by the company to change its business model (% capex in low carbon activities, development of green products/services, new technologies, eco-conception, innovation, etc)
  • Climate: carbon footprint, energy efficiency, internal carbon pricing, positioning the company in a 2°C scenario (new indicator in temperature)
  • Resource and externalities management: 1/ efficiency of the production tool (input): energy consumption, water consumption, protection of biodiversity, 2/ externalities management (output): waste management, recycling, circular economy

In this environmental fundamental analysis, we use four KPI's to assess the transition risks : 

The carbon footprint: we use scope 1, scope 2, Upstream scope 3 for all sectors and we use sectorial-related carbon footprint when relevant (gCO2/km for the auto sector). In 2019, we changed provider of carbon footprint data. As a result, our scope has been expanded.

- Green Share: percentage of positive activities in the revenue of companies. It adresses only the positive side of company activities. The methodology for calculating the green share is based on European taxonomy.

- NEC: (Net Environmental Contribution). It is based on the environmental impact of all the products and services of the company: 100% is the best product or service performance available, 0% the industry average and -100% the worst. For example, for a utility, renewable energy would have 100%, and coal -100%. By netting positive and negative contribution to the environmental transition, this indicator is given a full picture of the issuer's performance and contribution and therefore giving an indication of its ability to face transition risks.

- Alignment of the company's strategy with a 2°C scenario (temperature): In 2019, we integrated a new indicator on the alignment of the company's strategy with a 2°C scenario (in temperature) in our internal environmental methodology. This indicator is analyzed under the “Climate” pillar of our methodology. This indicator provides a more forward-looking view of the company's positioning in the face of the energy transition.

Therefore, these environmental and climate issues are taken into account in the final recommendation if they have or will have a material impact on the company's activities and results.

14.9 CC. Indicate whether your organisation, and/or external investment manager or service providers acting on your behalf, undertake active ownership activities to encourage TCFD adoption.

Please describe

Groupama AM participated in an initiative set up by AFG (French Asset Management Association), MEDEF (the French Business Confederation) and FFA (French Federation of Insurance) bringing together issuers and investors in order to define a communication framework on corporate climate strategy and related indicators. We relied on the TCFD recommendations to set this reporting framework and extract the essential information expected.

Groupama AM also participated in two working Group inside the initiative Finance for Tomorrow : 

- Workshop on Climate risks for investors : aiming to analyse how, as investors, we are analysing physical and transition risks, which tool are we using and rely on and their limits.

- Workshop on Professionnal Training : aiming to define a list of ESG and climate "knowledge" that each member of a financial institution needs to acquire.


SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

0.1 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

Asset class invested

8 Percentage of AUM (+/-5%) per asset class invested in the area
41 Percentage of AUM (+/-5%) per asset class invested in the area
27 Percentage of AUM (+/-5%) per asset class invested in the area
24 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

One of our main investment strategy consists in selecting world leaders companies in alternative energy sectors: for example wind or bio mass energy.

Our choices are guided by the connection of the issuers' strategies with the SDGs related to thoses issues.

We diversify out of the core energy sector among the equipment manufacturers : we choose the companies  that deliver products in capacity to improve their environmental print.

Asset class invested

2 Percentage of AUM (+/-5%) per asset class invested in the area
47 Percentage of AUM (+/-5%) per asset class invested in the area
28 Percentage of AUM (+/-5%) per asset class invested in the area
22 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

One of our main investment strategy consists in investing in world leaders companies of waste treatment.

Our choices are guided by the connection of the issuers' strategies with the SDGs related to thoses issues.

At the same time, in order to finance durable infrastructures we are focused on supra national issuers that finance many climate actions.   

Asset class invested

51 Percentage of AUM (+/-5%) per asset class invested in the area
40 Percentage of AUM (+/-5%) per asset class invested in the area
9 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

Our main strategy consists in investing in green bonds of sovereign issuers that finance infrastructure works throughout the world.

Our choices are guided by the connection of the issuers' strategies with the SDGs related to thoses issues.

We diversify in investing in corporate bonds market : we are specialy interessed in investing in issuers working in construction and renovation of green buildings.

Asset class invested

77 Percentage of AUM (+/-5%) per asset class invested in the area
23 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

 We support sovereign issuers that finance their struggle to avoid deforestation in their countries.

Our choices are guided by the connection of the issuers' strategies with the SDGs related to thoses issues.

This is particularly the case in latin America and this is the reason why we invest in such bonds issued by some south american states.

Asset class invested

17 Percentage of AUM (+/-5%) per asset class invested in the area
13 Percentage of AUM (+/-5%) per asset class invested in the area
70 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

Among the many healthcare companies of the sector we support particularly the laboratories involved in the struggle of infectious deseases or those involved in the manufacturing of specialized products , for example pharmaceutical diagnostics or reagents.

Our choices are guided by the connection of the issuers' strategies with the SDGs related to thoses issues.

          durable consumption
        

Asset class invested

45 Percentage of AUM (+/-5%) per asset class invested in the area
55 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

The main sector where we invest is the food industry's sector. We support companies of food industry's sector particularly focused on environmental issues.

Our choices are guided by the connection of the issuers' strategies with the SDGs related to thoses issues.

To diversify the investments we are not only focused on this specific sector : for example we select companies related to this sector but specialized in the recycling packaging food industry business.

15.4. Please attach any supporting information you wish to include. [OPTIONAL]



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