Addressing climate change
The world is becoming ever more aware of the very real impact climate change and the associated legislation are likely to have on portfolio returns. At Amundi, we’ve developed a number of initiatives to provide our investors with opportunity to participate in the transition to a low carbon economy and/or to mitigate the associated financial risk.
Climate change, a financial risk
In December 2015, representatives from 195 countries agreed to collectively take measures to significantly reduce Greenhouses Gas (GHG) emissions in order to limit global warming to 2°C above pre-industrial level1. Limiting GHG emissions will invariably lead to an increase in the cost of emitting GHGs through an increase in environmental regulations and/or via the introduction of carbon related taxes. In addition, in order to have any hope of meeting the 2°C target an estimated 80% of coal reserves, 50% of oil reserves and 1/3rd of gas will have to go unburned2. Ultimately rendering these assets worthless or “stranded”.
We are, in short, transitioning to a low carbon economy and carbon intensive businesses will, inevitably, be negatively impacted.
As a signatory of Montreal Carbon Pledge and a founding member of the Portfolio Decarbonisation Coalition, the financing of the energy transition is a challenge that is particularly close to our hearts. We have developed a number of investment solutions to enable you to both mitigate the risk and/ or take advantage of the investment opportunities associated with such legislative changes.
1. Source: European Commission, June2016, for further information: http://ec.europa.eu/energy/en/topics/energy-strategy/2030-energy-strategy
2. Source: McGlade, C. and Ekins, P. (2015) The geographical distribution of fossil fuels unused when limiting global warming to 2°C
Amundi’s initiatives to address climatic change
Our range of low carbon solutions
With a range of solutions accessible via our open-ended funds, ETFs or through bespoke mandates, we have made reducing the carbon footprint of your portfolio simple.
1| Passive low carbon funds
Amundi has developed a full range of index and ETF solutions designed for investors seeking to address the financial risk of carbon exposure.
The Low Carbon range comprises two open-ended index funds and an ETF tracking the MSCI Low Carbon Leaders indices:
- Amundi Index Equity Europe Low Carbon
- Amundi Index Equity Global Low Carbon
- Amundi ETF MSCI World Low Carbon UCITs ETF
The aim of these funds is to reduce carbon footprint efficiently relative to the parent index whilst maintaining low tracking error and a similar composition in terms of sector & geographical allocation.
These simple yet innovative investment strategies seek to allow long-term investors to hedge climate risk without sacrificing financial returns. Investors are able to benefit from a potential outperformance of the parent index once carbon risk is priced in whilst achieving market-like returns in the interim.
2| Bespoke solutions
We also provide customised solutions seeking to reduce carbon exposure by decarbonizing existing portfolios or by replicating a low carbon index meeting our clients’ specific requirements. Via our partnership with Trucost, Amundi has developed sophisticated tools to assess and reduce your portfolio’s carbon exposure.
We use a risk based approach taking into account the specific risk associated with carbon intensive assets. Our low carbon strategy can be applied to any equity or corporate credit portfolio.
With very low budgets of tracking-error (TE), we can build portfolios with much lower carbon intensity than their benchmarks. For example a 40% reduction in the S&P 500 carbon intensity can be achieved with only a 0.10% TE, and a 0.50% TE budget allows to reduce carbon intensity by as much as 75%.1
1. For illustrative purposes only
Amundi, Founding Member of the Portfolio Decarbonisation Coalition
Amundi is a founding member of the Portfolio Decarbonisation Coalition (PDC). The members of this coalition, which aims to mobilise financial markets to drive economic decarbonisation, have committed to decarbonising $ 100bn of assets by December 2015.
Along with partners and key institutional investors (including AP4), the central Carbon Disclosure Project (CDP) data, the United Nations Environment Programme (UNEP) and its Finance Initiative (UNEP FI), the PDC has surpassed its target having decarbonised over $600bn Assets1. This multi-stakeholder initiative provides an open platform for the sharing of best practices in a bid to re-channel investments from carbon-intensive to low-carbon activities.
1Commitment of the 25 members of the coalition as at 07/12/2015
Our fund selction
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