Engagement strategy
The FRR engages with management companies and businesses through various channels.
The voting guidelines are public. The following points were highlighted:
- The importance of establishing a committee within boards dedicated to Corporate Social Responsibility (CSR) issues.
- The desire to establish regular voting at General Meetings on climate ambitions and climate reporting.
- Encouraging companies to publish an equity ratio, including in countries where this is not mandatory. This ratio indicates the ratio between the highest remuneration in the company and the average and median remuneration of employees. In addition, in order to preserve social cohesion within the company, the FRR would like to see the total annual remuneration of executives capped at 100 times the minimum wage in the country where the company's headquarters are located, or, in the absence of a minimum wage, at 50 times the median remuneration calculated at the Group level.
- The need to analyze dividend distribution by portfolio companies:
- taking into account changes in the company's payroll to ensure a fair balance between employees and shareholders in the long term
- in line with the challenges of energy transition and related investments.
FRR commitment through collective initiatives
The FRR participates in several collective engagement initiatives, including Climate Action 100+, which has more than 600 signatories. These signatories engage with 168 of the world's largest publicly traded private emitters and drive corporate climate action in line with the global goal of achieving net-zero emissions by 2050 or earlier.
The 2024 Net-Zero Company Benchmark report paints an encouraging picture, but one that needs to be translated into concrete action in the short to medium term. It notes that the companies surveyed continue to make progress in setting net-zero targets for 2050 or earlier. They now stand at 80%, up from 77% a year ago.
In addition, in 2024, the FRR, together with the ERAFP and under the auspices of the FIR, launched a pilot group to measure the effectiveness of ESG engagement. More and more responsible investors are seeking to influence companies to adopt more sustainable practices and change their business models.
FRR commitment through mandates
All FRR mandates (except those focused on French government bonds), whether listed or unlisted, now have ESG engagement objectives with companies in their universe and must report to the FRR on their engagement activities.
Among other things, the topics covered include:
- biodiversity conservation
- the transition to a low-carbon economy
- SBTi commitment validation
- the application of best practices from a tax perspective
In particular, as part of the NZAOA, the FRR asked two managers to initiate engagement with a selection of companies in its portfolio. The 26 target companies were selected in accordance with the NZAOA's Target Setting Protocol.This protocol provides for the selection of at least 20 portfolio companies, with a focus on those responsible for emissions "generated by companies held in the portfolio" or those responsible for a total of 65% of emissions generated by companies held in the portfolio.
The desired outcome of these engagement actions is alignment with pathways that do not exceed or only slightly exceed the 1.5°C threshold.
These two managers use the analysis grid developed by the CA 100+ initiative, the Net-Zero Company Benchmark, to carry out their own analyses.
Using this analysis grid allows you to:
- Measure as objectively as possible the positioning of targeted companies and the progress made over the duration of the commitment.
- Compare companies' progress levels on various topics: neutrality targets, decarbonization strategy, alignment of capital expenditures, climate lobbying, climate governance, just transition, and reporting compliance with TCFD recommendations.
Of the 26 companies involved in this commitment initiative, eight show a slight improvement in their overall analysis and seven show significant progress over the 2022–2024 period.
Among the latter, two profiles emerge:
- Two companies that are also within the scope of CA 100+'s commitment, one of which has made overall progress and the second, which was already among the "top performers," has made particular progress on the issue of just transition.
- Five companies that are not within the scope of CA 100+'s commitment, but which show overall improvement.
