From climate change to the current pandemic, today’s crises serve to remind the world of the importance of investing with environmental, social and governance (ESG) objectives in mind.

European sustainable funds, reflecting rising demand, posted record-breaking asset flows of $282 billion, and 505 fund launches, in 2020[1]. These figures represent both passive and active interests; refuting a common assumption, that ESG investing is difficult to do on a passive basis.

Far from simply offering a binary choice to invest or disinvest, investors using index-tracking products have numerous opportunities to make investments that are more influential. Finding the right fund management group, selecting a suitable underlying index and choosing the best product in which to place assets are all active decisions that make a difference.

“Investors’ voting power is the most powerful tool they have; it is vital that all investors use it.”

ShareAction’s Voting Matters 2020 report

As more ESG research comes to market and the investment space becomes busier, choosing an underlying index that matches investor objectives is an obvious starting point. Not all sustainable indexes are created equal, and it is worth investigating their composition to see how they might go further in their ability to make an impact.

For example, one index might simply work on an exclusion basis at sector level, shielding investors from “sin” sectors such as fossil fuels, weapons and tobacco. Other indexes will focus on assessing a company’s board composition or the quality and ESG credentials of their supply chain, perhaps pegged to several of the U.N.’s Sustainable Development Goals. An index also might be built around metrics like diversity targets or carbon emission goals, while another might work on a “best-in-class” basis, giving more weight to companies that score better on ESG criteria than their peers.

Source: Bloomberg Intelligence Oct. 25, 2020

With 21% ($18 trillion) of shareholders’ capital currently invested globally though index funds, and this figure projected to reach 23% ($25 trillion) by 2024[2], their voices are certainly heard. However, while all shareholders have voting rights, how they use them is far from consistent.

Integrity Matters

As fund groups scramble to launch investment strategies and bolster resources, it is important to avoid any “greenwashing”—not just of the products being marketed, but also of the fund houses themselves.

European fund management house Amundi believes that integrity matters. As a major shareholder, the firm says it takes seriously its responsibility to hold companies to account, which is demonstrated by its voting record.

89%

Amundi’s positive voting record in favor of climate- or social-related resolutions.

^{Source: ShareAction, Voting Matters 2020}

A recent report by ShareAction—an independent organization driving responsible investment and seeking reform through investor cooperation and accountability—illustrated a wide disparity between fund providers in the extent to which their voting rights were used “for good.”

“While there is encouraging improvement when it comes to voting for climate change resolutions, many still shy away from holding companies to account,” states the report, which analyzed the voting records of 57 of the world’s largest asset managers. “Investors’ voting power is the most powerful tool they have; it is vital that all investors use it.”

Amundi has an 89% positive record of voting in favor of climate- or social-related resolutions[3], the strongest record of the larger ESG providers in Europe, with some providers voting in favor of fewer than 15% of the same resolutions.

With a dedicated team that votes on behalf of all of its investments, Amundi can leverage collective shareholder power worth $1.729 trillion, and no distinction is made between its active and passive capabilities.

As a leading provider of ESG index strategies and a pioneer of climate indexing, Amundi now has even more data, expertise and experience on which to draw. Thus enabling a far larger impact than a simple binary option could ever allow, while arming an investor with more tools with which to build a fully diversified ESG portfolio.

Green comes in many colors, explore Amundi’s full range of responsible investing ETFs to find one that suits you.

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Morningstar, Feb. 2021 (www.morningstar.co.uk/uk/news/209411/sustainable-funds-record-breaking-year.aspx)
Boston Consulting Group, May 2020 (www.bcg.com/publications/2020/global-asset-management-protect-adapt-innovate)
ShareAction Voting Matters 2020 report (https://shareaction.org/wp-content/uploads/2020/11/Voting-Matters-2020.pdf)

Amundi ETF, Indexing & Smart Beta