Commitment & ESG
Environmental, Social and Governance (ESG) criteria have been part of our investment process for several years now
Our ESG approach runs through our entire value chain. We see ESG as a complementary means of controlling risk in our portfolios, complementing and enriching the traditional view of investment based on financial, accounting and stock market criteria.
20 years of socially responsible investment
Socially responsible investment and the study of E, S and G criteria are long-term commitments for Covéa Finance and date back to 2001 with the creation of the "Covéa Flexible ISR" fund (at the time "Covéa Finance Horizon Durable"). For 20 years, our ambition has been embodied by integration: integration of ESG research into management, integration of non-financial analysis into financial analysis, integration of Covéa Finance into numerous market groups (AMF, AGF, FFA, etc.).
Today, in line with our commitment to transparency (since 2016 we have voluntarily published an ESG report in line with the French Energy Transition Act), we are taking a further step by sharing the way we meet the requirements of the SFDR (Sustainable Finance Disclosure Regulation) which came into force on 10 March 2021
3 politics frame our ESG approach
We consider direct dialogue with companies to be an essential means of promoting better governance and more responsible practices.
We engage this type of dialogue with companies we consider to be “core”, that is to say the companies that form a foundation for our long-term investments, and with companies that can be included in environmental funds. This shareholder engagement strategy is designed to be constructive, endeavouring to confront companies with the most substantive challenges for them and for the sector while making them aware of the need to improve their level of transparency in non-financial matters.
All of these dialogues are based on an analysis of the companies’ performance on the social, environmental and governance levels and their compliance with current or future regulations, with the ultimate result that they are able to determine the opportunities, areas to be developed and risks revolving around an issuer.
Voting at General Meetings
The purpose of the General Meeting is to enable dialogue between the shareholders and the management. The GM is thus a special, legally required framework for shareholder commitment and democracy.
We vote at all the General Meetings of the high-priority companies where we have voting rights, and we sometimes cast a negative vote.
A negative vote is an opposition vote. It can be a vote “against” a resolution approved by the Board of Directors, but can also be a vote “for” a resolution not approved by the Board.To find out more about our Engagement policy
Implementation of our exclusion policy
Covéa Finance's exclusion policy, in line with the AFG recommendations on banning the financing of sub-munition weapons and anti-personnel mines (APM), excludes all direct investment in shares or bonds of companies involved in controversial weaponry:
- sub-munition weapons and anti-personnel mines as defined by the Ottawa Convention (1997) and the Oslo Convention (2008) and signed by France;
- bacteriological and/or chemical weapons.
In addition to the standard exclusions, we have also undertaken to exclude tobacco companies and companies that generate more than 5% of their direct sales in the gambling and betting sector.
We also exclude from our investments:
- Energy companies with over 30% of their electricity production generated from coal (i.e. thermal coal), with the exception of those that have made a clear commitment to reduce this proportion below the 30% threshold by 2025.
- Companies deriving over 30% of their turnover from coal.
In general, we prefer shareholder dialogue with companies to exclusion as a means of promoting more responsible practices.To find out more about our Exclusion Policy
ESG appreciation and follow-up of controversy
As part of the ESG project, we have developed two internal methodologies for rating sovereign issuers and private issuers respectively.
We have defined criteria for each of the cornerstones: Environment, Social and Governance, which are then subdivided into what we consider to be the fundamental indicators common to all private issuers. And we have done the same for sovereign issuers.
By consolidating the ratings according to indicator, then criteria, we obtain a positive, neutral or negative rating for each of the three cornerstones: E, S and G.
A sudden drop in a rating can trigger an alert to management and may be followed up in more detail via the shareholder dialogue process.
Our contribution to the energy transition and climate indicator
We have chosen to publish our asset portfolio’s carbon intensity on a yearly basis. Monitoring can be done at the corporate, State or portfolio level.
CO2 intensity of Covéa Finance's portfolios by asset class in 2019
Source : London Stock Exchange Group (ex-Beyond Ratings), Covéa Finance
* The market comparable, as provided by the London Stock Exchange Group, corresponds to the members of the OECD for the Sovereign Bonds pocket and to comparable market indices for the Equity and Private Bonds
Pursuant to Article 173-VI of law no. 2015-992 of 17 August 2015 relating to the energy transition for green growth (LTECV) and its implementing decree no. 2015‑1850 of 29 December 2015, Covéa Finance has published an annual ESG report since 2017.Read the 2021 report
For entities subject to reporting obligations, the law provides for an eligibility threshold of €500 million in assets or balance sheet size. This threshold determines the nature and content of the duty of information.
At the end of 2018, the open funds strictly falling within the eligibility thresholds enacted by the implementing decree were:
Extra-financial positioning of our range of funds
With a view to strengthening transparency in extra-financial matters, the Autorité des Marchés Financiers has been charging asset management companies, since March 10, 2021 with its Position-Recommendation No. 2020-03 (“AMF Doctrine”) , new obligations in this area leading them to position their range of UCIs according to the degree to which extra-financial criteria are taken into account in their investment process.
The AMF Doctrine has thus defined more or less restrictive minimum standards according to the three possible extra-financial approaches :
- significantly engaging approach to extra-financial criteria: extra-financial criteria represent a central element of communication (category 1),
- non-significantly engaging approach (reduced communication) (category 2),
- approach that does not meet the standards of central or reduced communications (category 3).
Our range of UCIs has therefore been aligned with the requirements of this Doctrine; each of the UCIs in the range having been positioned in one of the three possible extra-financial categories.
In addition, the entry into force, on March 10, 2021, of the European Regulation (EU) 2019/2088, Sustainable Finance Disclosure Regulation (SFDR) known as the “Disclosure Regulation” intended to regulate the “publication of information on sustainability in the financial services sector ”has, in addition to the AMF Doctrine, introduced, on the one hand, new requirements in terms of extra-financial transparency, this time focused on sustainability factors1 and risks, and on the other hand, a new classification of our mutual funds. Thus, a distinction was made between the products according to the following categories:
- Products “with social and / or environmental characteristics” (article 8 of the Regulations);
- Products with a "sustainable investment objective" (article 9)
Moreover, this categorization requires the relevant integration of the consideration of sustainability risk2 (Article 6).
Transparency on negative impacts
The SFDR Regulation is based on a principle of dual materiality which aims to ensure that investments take into account sustainability risks and negative impacts on sustainability factors.
While the materialization of sustainability risks can lead to a negative impact on the value of an investment, the negative impacts on sustainability factors, for their part, constitute negative externalities, and are not always reflected in the valuation of assets. As a reminder, the sustainability factors are environmental, social and personnel issues, respect for human rights and the fight against corruption and acts of corruption.
Under Article 4 of the SFDR Regulation, financial players must specify whether they take into account the main negative impacts of investment decisions on sustainability factors. In order to claim compliance with this article, financial players must strictly follow the monitoring and reporting procedures imposed by the technical standard of the SFDR Regulation.
Covéa Finance, as a historical player in socially responsible investment, has developed an approach that takes into account the negative externalities of its investments.
However, the existing system does not correspond in all respects to the requirements of the SFDR regulation. Consequently, Covéa Finance considers that the approach implemented does not lead to consideration of the main negative impacts of investment decisions on sustainability factors within the meaning of Article 4 of the SFDR Regulation.
Our environmental and SRI product lines
A range of funds was created in 2018 at the conclusion of a cross-disciplinary project initiated in 2017. This product line is based on a long-term vision of the environmental issues and is divided into four funds:
- Covéa Aqua
- Covéa Aeris
- Covéa Solis
- Covéa Terra
In 2018 and 2019, two Covéa Finance funds also obtained the SRI label:
- Covéa Actions Solidaires
- Covéa Flexible ISR
To find out more about these funds: