Our extra-financial positioning
With a view to reinforcing transparency in extra-financial matters, the Autorité des Marchés Financiers (AMF) has imposed new obligations on management companies since 10 March 2021 with its Position-Recommendation No. 2020-03 (“AMF Doctrine”), requiring them to position their range of UCIs according to the extent to which extra-financial criteria are taken into account in their investment process.
The AMF Doctrine has thus defined minimum standards that are more or less restrictive according to the three possible extra-financial approaches:
- approach to significantly engaging extra-financial criteria: non-financial criteria represent a central element of communication (category 1),
- non-significantly engaging approach (reduced communication) (category 2),
- approach that does not meet central or reduced communication standards (category 3).
Our range of UCIs has therefore been aligned with the requirements of this Doctrine; each UCI in the range has been positioned in one of the three possible extra-financial categories.
Furthermore, the entry into force, on 10 March 2021, of European Regulation (EU) 2019/2088, Sustainable Finance Disclosure Regulation (SFDR) known as the “Disclosure Regulation” intended to govern the publication of sustainability-related information in the financial services sector, has introduced the complementarity of the AMF Doctrine, on the one hand, new requirements in terms of non-financial transparency focused this time on factors1 and sustainability risks and, on the other hand, a new classification of our UCIs. Thus, a distinction was made between products according to the following categories:
- “Social and/or environmental” products (Article 8 of the Regulation);
- “Sustainable investment objective” products (Article 9).
Furthermore, this categorisation involves the relevant integration of the consideration of sustainability risk2 (Article 6).
Transparency on adverse impacts
The SFDR is based on a dual materiality principle that aims to ensure that sustainability risks and negative impacts on sustainability factors are taken into account in the investment.
While the materialisation of sustainability risks may 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 the assets. As a reminder, 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, financial players must specify whether they take into account the main negative impacts of investment decisions on sustainability factors. In order to be able to claim compliance with this article, financial players must strictly follow the monitoring and reporting procedures imposed by the SFDR technical standard.
Covéa Finance, as a long-standing player in socially responsible investment, has developed an approach that takes into account the negative externalities of its investments.
However, the existing framework does not fully meet SFDR requirements. Consequently, Covéa Finance considers that the approach implemented does not take into account the main negative impacts of investment decisions on sustainability factors within the meaning of Article 4 of the SFDR.