The FRR and climate change
Since its creation, the FRR has incorporated climate change issues into its investment strategy. Even today, the FRR is reaffirming its commitment by significantly reducing its exposure to CO2 emissions.
The challenges
The FRR has set itself global targets and targets by mandate for decarbonization efforts.
Reduce your carbon footprint
Like the vast majority of investors, the FRR does not practice sector exclusion. It works to reduce the carbon footprint of its entire portfolio by assessing risks and increasingly orienting its investments towards the energy and ecological transition (TEE).
The Group's current carbon footprint reduction trajectory is expressed in absolute terms in relation to its 2019 portfolio, and translated into relative terms in relation to benchmark indices.
Concrete actions
In a proactive approach, the FRR has for several years subscribed to international commitments in order to promote best practices, but also to set targets for institutional investors, and to encourage the most polluting companies to reduce their negative impact on the environment, whatever their sector.
The FRR undertakes the following actions:
Measure
carbon footprint
Reduce
the carbon footprint (emissions) of its portfolios and therefore the associated carbon risk
Investing and Dialogue
in renewable energies and innovative technologies, and to engage in dialogue with institutional investors and issuers as part of a policy of commitment based in particular on collaborative initiatives (PRI, IIGCC, NZAOA, etc.).
Encourage
issuers to adopt virtuous behavior by promoting greater transparency of information.
The FRR: involved in several international climate change initiatives
One of the main ways in which institutional investors can promote sustainable development is by exerting their influence on the companies they help to finance, as well as on their ecosystem.
With this in mind, the FRR has been involved in numerous international and national initiatives from the outset. In particular, it was a founder of several of the most influential of these (PRI, Principles for Responsible Investment).
In addition, the FRR has chosen to support dialogue with companies through collaborative initiatives, in collaboration with its mandate and fund managers but also, when necessary, directly with companies.
Measuring the carbon footprint of your portfolio
In 2007, the FRR calculated the environmental footprint of its portfolio for the first time. Since then, in line with its responsible investment strategy, commitments and efforts to decarbonize part of its portfolios, the FRR has measured the carbon footprint of its mandates and funds every year.
In 2023, the FRR launched a call for tenders to renew its service provider responsible for measuring and analyzing the environmental and climate footprint of the FRR portfolio. Following this procedure, the FRR selected S&P Global Market Intelligence LLC for a 4-year term, with a possible one-year extension.
Methodology
This mission is carried out under the authority of the FRR Management Board and independently of CDC's other activities. It gives rise to the payment by the Fund of management fees in the amount of the expenses incurred.
It is exercised within the framework of the texts governing the FRR and the internal regulations of its bodies.
Carbon footprint of equity portfolio
At the end of 2023, the weighted average carbon intensity (WACI method) of the companies in the FRR's Global Equities portfolio stood at 138 tonnes of CO2 equivalent per million euros of sales. This was 38% lower than the FRR's benchmark index. From 2016 to 2023, the carbon footprint of the FRR's equity portfolio decreased by 41% (or around 5% per year), while that of the index representing the FRR's portfolio decreased by only 30%.
| Portfolio | Index | |
|---|---|---|
| World Equities | -41,5 % | -30,3 % |
| Equities Developed markets | -43,7 % | -41,0 % |
| Equities Emerging countries | -42,2 % | -42,2 % |
Carbon footprint of corporate bond portfolio
Green bonds finance projects with a positive environmental impact, such as renewable energies or eco-friendly transport. In this sense, they could be considered as having no net CO2 emissions. However, it is important to note that the projects financed by green bonds are not always free of CO2 emissions.
For example, a renewable energy project may generate CO2 emissions during its construction phase. In addition, the issuer of the green bond may have other activities that generate CO2 emissions.
At this stage, the FRR assigns the issuer's footprint to green bonds, in line with the provider's methodology. This is a conservative approach. Nevertheless, the FRR asks its managers to take exposure to green bonds beyond their proportion in the benchmark indices. These exposures therefore appear in the portfolio footprints declared by the FRR, which are, in fact, increased.
