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EUROBANK ASSET MANAGEMENT MFMC

PRI reporting framework 2020

You are in Organisational Overview » Asset class implementation gateway indicators

Asset class implementation gateway indicators

OO 10. Active ownership practices for listed assets

10.1. Select the active ownership activities your organisation implemented in the reporting year.

Listed equity – engagement

Listed equity – voting

10.3. Indicate why you do not cast your votes

The allocation of our total AUM to listed equities amounts to 24% or to approximately EUR 755 million.  Of this amount, EUR 252 million are invested in the EM space, with approximately EUR 210 million invested directly and not through external managers.  Approximately 90% of this amount is directly invested in equities listed in the Athens Exchange. As our size in the global equity space is extremely limited, it would be impossible to cast votes for direct holdings we may have in the developed market space. 

However, our Company is the biggest asset and fund management company in Greece by means of AUM.  In this respect, and within our broader initiative of engaging responsibly and sustainably both on our corporate activities and our investment activities, and in order to become an active steward as per the principles of responsible investing we have to adhere to owing to our PRI membership, we decided to pursue this goal by submitting our application to become a member of the Council for Sustainable Growth of the Hellenic Federation of Industries (SEV), the local charter of the World Business Councial for Sustainable Development.  We boast to be the first asset and fund management company in Greece to take this initiative, which was welcomed by the Board of Directors of the said Council that approved our application.  With this honourable membership - which was endorsed at the end of 2019 - and our PRI membership, we will  embark in engaging directly with the member companies of SEV which are also listed in the Athens Exchange.  We hope to be able to cast our votes in General Assemblies of such companies within 2021. 

In the space of developed markets equities in which we heavily resort to external managers through their pooled funds, we tend to select ESG compliant equity funds for the following mandates: (1)  segregated mandates of Occupational Pension Funds that are obliged to incorporate ESG criteria into their investment decision process and in their investment portfolios according to the IORP II Directive which has been transposed into national law, and (2) the (LF) FOF ESG Focus fund, which is a Fund of Fund explicitly incorporating ESG criteria in its fund selection process.

Fixed income SSA – engagement

Please explain why you do not engage directly and do not require external managers to engage with companies on ESG factors.

          As already described in the previous section, the majority of our SSA holdings regard Greek Government Bonds.  The Hellenic Republic, due to the 10 year long financial and sovereign crisis the country went through, is striving to get back to the markets and re-finance its already huge, as a percentage of GDP, public debt.  In this respect, ESG factors cannot be readily applicable for the Greek sovereign space.  Regarding the rest of our holdings in the SSA space, our AUM are limited in size and therefore we cannot engage directly with the issuers (supranational or national governments) on the implementation of ESG factors regarding their bond issuance.  However, when we engage in direct bond selection of supranational issues, we tend to opt for such bonds that have been issued to be deployed for an ESG cause, such as the EIB CAB bonds.  Furthermore, when we resort to external managers through their pooled funds for our SSA holdings, we tend to select funds that are ESG compliant by means of use of proceeds. We have also noticed that ESG Ratings for Countries have started being available and we will review their credibility, timeliness and applicability to our investment process under this asset class.
        

Fixed income Corporate (financial) – engagement

Please explain why you do not engage directly and do not require external managers to engage with companies on ESG factors.

          Our direct holdings in the Corporate Financial space are extremely limited, amounting to approximately EUR 158 mio.  The majority of such holdings pertains to issues of Greek systemic banks which have been issuing mainly due to balance sheet issues rather than due to financing "green" projects due to the extraordinary percentages of NPLs in their portfolios.  Up to the end of 2019, Greek Banks had an average NPL ratio of around 40%, so engaging with their management for incorporating ESG factors in their bond issuance would not have been constructive. 
Regarding our indirect holdings of Corporate financial instruments through pooled funds of our external managers, our exposure is extremely limited, amounting to approximately EUR 30 million which does not allow us to explicitly require our external managers to engage with Banks and insurance companies on ESG factors.  In this context, we rely upon the ESG initiatives taken by our external managers without submitting explicit requests to them.
        

Fixed income Corporate (non-financial) – engagement


OO 11. ESG incorporation practices for all assets

11.1. Select the internally managed asset classes in which you addressed ESG incorporation into your investment decisions and/or your active ownership practices (during the reporting year).

Listed equity

Fixed income - SSA

Fixed income - corporate (financial)

Fixed income - corporate (non-financial)

Cash

Money market instruments

Select the externally managed assets classes in which you and/or your investment consultants address ESG incorporation in your external manager selection, appointment and/or monitoring processes.
Asset class
ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes
Listed equity

Listed equity - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fixed income - SSA

Fixed income - SSA - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fixed income - corporate (financial)

Fixed income - corporate (financial) - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fixed income - corporate (non-financial)

Fixed income - corporate (non-financial) - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Commodities

Commodities - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Money market instruments

Money market instruments - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

11.4. Provide a brief description of how your organisation includes responsible investment considerations in your investment manager selection, appointment and monitoring processes.

In this section we will provide you with a description of the fund selection processes that we follow for two distinct parts of our business: (1) fund selection incorporating ESG criteria for the management of portfolios of Occupational Pension Funds that have to observe the provision of the IORP II Directive regarding the incorporation of ESG criteria in the investment decision making process and the assessment of sustainability risks, and (2) fund selection incorporating ESG criteria for the management of Fund of Funds specifically set up for ESG incorporation.

(1) Fund Selection process for the management of portfolios of Occupational Pension Funds:  We employ a process that identifies the funds that use a dedicated ESG compliant investment process.  Thus, we invest in ESG compliant funds for the majority of our fund allocation.  As part of our qualitative fund selection process, we regularly conduct one-to-one meetings and conference calls with the dedicated fund managers to get an in-depth analysis of their ESG investment process and make sure that they stick to this process.  It is also noteworthy that we have organized dedicated meetings with some of our third party fund providers' ESG analysis teams that proceeded to deliver an extensive presentation of the ways they approach ESG incorporation with a special focus in the way they incorporate their own ESG criteria along with the weight that they apply to each of these criteria.  Moreover, some of our providers also exhibited the questionnaire they use when analysing a company for ESG factors and showcased the way they onload the respective answers to their systems in order to produce their in-house rankings that they then couple with rankings they get from other data providers.   In this context, we are quite confident that the ESG compliant funds offered by our third party providers are indeed incorporating in a meticulous and pedantic way ESG factors.  As a next step, we also do detailed look through into the ESG compliant funds that we choose in order to also enhance our investment idea generation process for individual stocks and bonds.

We also rely on the ESG ratings of the funds under selection that are issued by well trusted indpendent European and global organizations or government agencies.  We assign an ESG score of 100 to these funds.  The fund managers themselves also update a list with "ESG" integrated funds that do not have an independent third party ESG certification, but nonetheless have an investment process that is ESG focused and designed to systematically capture ESG risks and opportunities in the portfolios.  We assign an ESG score of 66 (2/3) to such funds.  We then update our third party funds database with all the relevant ESG funds in order to facilitate our sectorial ESG fund selection. 

Our IOPF ESG investment process entails investing mainly in ESG certified funds and ESG compliant funds in order to make sure that the funds we invest in have a pure ESG strategy with a dedicated ESG investment process. 

In addition to the above, we also use the following tools and systems to screen mutual funds in terms of their ESG compliance: (i) Mercer ESG rating that used to be available on Bloomberg and was applicable at the investment strategy level of each fund, (ii) Morningstar ESG ratios, and (iii) Eurobank AM Fund of Funds ESG process that will be described below.

(2) ESG Fund of Funds Selection and Investment Process: We start with a universe of UCITS available in Bloomberg, which comprises of approximately 1,500 funds.  First, we exclude all funds with a Mercer ESG rating of 3 and above (Mercer ESG ratings range from ESG1 to ESG4 being the lowest).  We then take the higher rated funds, ESG1 and ESG2 as well as all non-rated ones and create an Investment List in Morningstar Direct.  We take the Morningstar Sustainability Score (which incorporates Sustainalytics ESG data) of the portfolios and we exclude funds that are ranked below the 40th percentile in the Sustainability Score percent-rank.  It should be noted that Morningstar calculates the Portfolio Sustainability Score by combining a fund's Portfolio ESG Score with its Portfolio Controversy Score, by deducting one fifth of the Portfolio Controversy score from the Portfolio ESG one. The resulting score is displayed as a number between 0 and 100.  From a sustainability standpoint, higher scores are better than lower ones and indicate that a fund has, on average, more of its assets invested in companies that score well under Sustainalytics' ESG methodology.  The top 60% selected funds are then ranked with our Quantitative Model developed for Fund Selection adjusted for ESG.  From each of the six sub-universes (four for equity funds and two for fixed income funds) we take the 10 to 15 highest scores.  In the next step we apply a three factor (equal weight) ranking and sort them for max Momentum, low Volatility and Quality.  For ESG incorporation, Quality may include ESG and Governance scores (equity funds) or Environmental Scores (Fixed Income Funds).  In the final stage of portfolio construction we adjust the asset class exposure as well as the geographic/style allocation based on our assessment of the current market conditions and of the fund's or the account's specific mandate and investment guidelines.

 

 

 

 

 

11.5. For your externally managed pooled funds, describe any mechanisms in place to set expectations as part of the appointment or commitment process.

As already explained in section 11.4, apart from relying on the quantitative fund selection model, our qualitative fund selection criteria and the ESG scoring provided by various well-respected and widely accepted providers, we do engage closely with the representatives of our third party fund providers who either arrange one-to-one meetings with the dedicated fund managers or with the ESG or Sustainability analysis team.  In both cases we engage actively with our counterparties in order to ensure that the ESG integration process they follow is of the essence and does not solely rely on scorings offered by data providers.   Moreover and what is of a primordial importance for our investment management teams is the evolution and progress exhibited in the ESG analysis space by the dedicated teams of our fund providers.  It is at this second aspect that we pay enormous attention in order to make sure that ESG is applied in progressively deeper manner that will eventually bring about change in the environment, the society and the way corporations operate.


OO 12. Modules and sections required to complete

12.1. Below are all applicable modules or sections you may report on. Those which are mandatory to report (asset classes representing 10% or more of your AUM) are already ticked and read-only. Those which are voluntary to report on can be opted into by ticking the box.

Core modules

RI implementation directly or via service providers

Direct - Listed Equity incorporation

Direct - Listed Equity active ownership

Direct - Fixed Income

Closing module

12.2. Additional information. [Optional]


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