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CDP measures “temperature” from Amundis funds

I.n More and more industries are under increasing pressure to set more ambitious sustainability goals and to meet them. The financial industry is no exception. One of the challenges for fund companies is often to correctly measure their investments and portfolios with regard to their sustainability and to disclose the results – not an easy task. Amundi, Europe’s largest fund company, has now partnered with the British non-governmental organization Carbon Disclosure Project (CDP) to measure the contribution to global warming from four selected funds.

The Paris climate agreement provides for global warming to be limited to well below two degrees, or better still, not more than 1.5 degrees compared to the pre-industrial age. However, many states and companies are still far from that. In order to measure the temperature or the contribution to global warming in its funds, the French fund company uses the CDP rating. The temperature of the funds with names like CPR Invest – Climate Action or Amundi Global Ecology ESG fluctuates between 2.2 and 2.6 degrees. If you transfer the measurement to the entire value chain of the companies in the fund, the temperature of the respective fund can rise again by up to 0.5 degrees Celsius.

Investments like “black box”

The industry lacks transparency, says Laurent Babikian, director of capital markets at CDP. Many investments are still a “black box”. The CDP temperature rating helps transparency and is also controlled, for example, by the environmental protection organization WWF. The companies in the fund itself are checked once a year. Then when the companies report on their climate indicators and their goals. When asked what happened to companies that did not publish enough information, Babikian replied that they automatically received a “default score” of 3.2 degrees. However, there is no worse score yet, even if the companies may perform worse.

Babikian believes that 2.6 degrees for a sustainability fund still still misses the two-degree target of the Paris climate agreement, because there are still too few companies in the investment universe that can maintain this brand. “At the moment, only 250 companies are compatible with the 1.5-degree target and only 400 companies with the two-degree target.” The more funds are measured, the more objective and easier it is to compare them. At Amundi, the first step is to start with the four funds, says Babikian. Then you want to see if the customers are interested.

Ready to change banks

Customer interest in sustainability is steadily increasing. In its 2020 sustainability study, the consulting company Zeb, which specializes in financial service providers, states that more than half of all surveyed participants show a fundamental affinity for sustainability in everyday life or in finance. In contrast, only six years ago, only around a fifth of all those surveyed stated that they had a moderate awareness of social responsibility and sustainability.

The topic had reached the center of society, says Jens-Uwe Holthaus, a co-author of the study on Monday when it was presented. The willingness of customers to switch to a more sustainable bank is high. For a certain clientele, there is a certain “willingness to pay more” for the topic, says Holthaus and adds: “Sustainability has an impact on the earnings targets.” In a conservative calculation, Zeb assumes earnings potential of 1.6 billion euros in Retail business. So money that could be paid for sustainable products or for higher fees.

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