POINTS OF VIEW: ONE QUESTION, THREE EXPERTS
The Responsible Investment Live Event, organized by AF2I, affords Alain Richier, Director of Monetary Management, Nathalie Pistre, Director of Research & SRI, and Iain Bremner, COO of the Management Department, the opportunity to reveal the basics on which the development of responsible monetary management is based.
A selective monetary ESG universe
The entire €50bn in Ostrum AM’s sustainable money market funds qualify for the SRI Label1, which positions us as leader in France and internationally2. The same rigorous SRI process is applied to money market funds as to the other funds we manage.
The principal aim of money market management is to seek the NAV3 highest stability. We are convinced that the consideration of ESG4 issues enables industrial and financial risks to be minimised, which may otherwise potentially impact issuers’ credit ratings, or reputation risk. Sustainable money market funds should be subject to fewer potential shocks.
We therefore invest in money markets under the High Credit Quality regulatory framework, which integrates ESG factors into the fundamental analysis. We complete our selection with a non-financial rating and by integrating impact indicators into our investment process for SRI funds with the SRI Label since summer 2020.
Money market investments have a key role to play, due to the huge amount of assets under management: supporting the best-in-class issuers, through short-term financing and promoting a more sustainable world, by engaging dialogue with others.
Finally, sustainable money market investments will benefit from the development of short-term responsible financial instruments, Green NeuCP / NeuMTN5.
References to rankings, awards or ratings are not a reliable indicator of a fund’s future returns.
1 SRI: Socially Responsible Investment. Further information on lelabelisr.fr.
2 Global ESG Money Market Fund Dashboard 2020, FitchRatings. Classement Mondial de 50 fonds.
3 NAV: Net Asset Value.
4 ESG: Environment, Social, Governance.
5 NEU CP – NEU MTN: Euro zone short & medium term negotiable securities market. Green NeuCP / NeuMTN : Banque de France programs involving investments used exclusively for financing eligible green businesses or projects.
A transversal ESG approach
At Ostrum AM, we adopt a highly transversal ESG approach, which feeds through to all of our funds. Our sustainable money market funds fit perfectly into this approach.
They benefit from our proprietary credit research, which for several years now has integrated an analysis of ESG factors on credit quality. Our fundamental analysis is therefore more robust, drawing systematically on financial and non-financial criteria.
Furthermore, our quantitative research examines methodological aspects in order to measure portfolios’ climate alignment for example and participate in adequately calibrating responsible investment processes.
Lastly, the ESG Strategy team enables us to provide our clients with support regarding regulatory changes and ensure full transparency in our methodologies.
These measures are completed by sector, voting and stewardship policies, aiming to accompany corporate transition and exclude major risks.
In conclusion, there is a seamless continuity between Ostrum AM’s CSR policy6 and our conception of SRI. Our coherent and stringent approach appeals to investors seeking an asset manager providing support for their responsible engagement.
6 CSR: Corporate Social Responsibility. Definitions: https://www.ostrum.com/en/glossary-en.
The importance of non-financial data
The development of sustainable investing is associated with non-financial data, to comply with regulatory requirements and also to ensure strict issuer selection and provide comprehensive and transparent reporting.
Ostrum AM selects providers based on the quality and depth of data, and our needs. Data is uploaded into our investment management systems via our information center and is used as a support for our ESG analyses and policies.
Provider examples :
Sovereign issuers: SDG index
Corporate issuers: Sustainalytics, MSCI, Vigeo-Eiris
Climate data: Trucost, CDP and the NGO Urgewald.
For our SRI labelled funds in particular, this data enables us to integrate impact indicators into our investments and reporting : carbon intensity, social impact / human rights (staff turnover for companies, education for governments)…
A comprehensive non-financial database has multiple aims: enabling the research teams to integrate financial and non-financial analyses; providing portfolio managers with the means to include these criteria within their investments and analyse their portfolios; producing pertinent investor reports.
sdgindex.org; sustainalytics.com; msci.com; vigeo-eiris.com : trucost.com ; cdp.net ; urgewald.org