We conduct physical and transition risk analysis to track climate change risks through risk management that identifies, assesses and addresses risks.
Prior to entering a portfolio company, an ESG risk review is conducted in conjunction with financial analysis. The physical, economic and even legal impacts on the assets held directly or indirectly in the investment portfolios are assessed. If an ESG-Climate risk appears too high, we do not invest.
To reduce these physical and transition risks, measures can be taken such as the development of insurance products linked to climate hazards, continued financing of the energy transition and green technologies.
For physical risks, we apply our risk analysis to our public issuers such as sovereigns (23% of the portfolio). We mainly have developed countries (63% French sovereigns, followed by the neighboring countries of Italy and Belgium). We are therefore only slightly exposed to physical risk. Our investments are mainly in France and France is one of the countries with the least vulnerability. For example in real estate, our investments are mainly in Paris and Lyon, which are low-risk cities. In infrastructure, we have a higher risk on the wind farm on the seaside due to erosion linked to the marine space.
Transition risk, we have two methodologies that fully cover our portfolio in Top-down (Scope 1, 2 and 3 aggregated in a macroeconomic manner) and Bottom-up (issuer view with Scope 1, 2 and 3 approach on the supplier side).