Timothée Jaulin

Sustainable investing needs to seek out the small disruptors who can drive change

Amundi has two big areas of focus in its engagement with companies, Timothée says: climate change and social cohesion, which includes wage balance and gender diversity. He says: “To a large extent, the two systemic issues of energy transition and social cohesion are linked to one another. We will not be able to implement an ambitious energy transition successfully if we do not make it socially acceptable. At Amundi, we work a lot on an area which is at the crossroad between those two topics, namely the just transition.”

When it comes to smaller businesses, the firm recognises that not being able to provide data does not mean they are doing nothing for the energy transition. “Actually, we expect a lot of positive change coming from small businesses in their ability to disrupt business models which are not necessarily sustainable. You can think about circular economy, but also potentially clean tech. For many other sustainable development goals for which we need to accelerate, we expect quite a significant change coming from small economic actors too, because that is the way disruption works. Small and mid-cap companies and listed companies’ ventures already have a significant role to play, and will keep having one for the foreseeable future.”

Investors need to ensure that carbon footprint measurements are meaningful for every sector. “That means having a clear understanding of the entire value chain and its overall carbon impact. And that will be true as well for its social impact. At Amundi we take into account the impact on biodiversity and other negative impacts that companies’ activities can potentially have, and we also take into account the social and the governance pillars.” The SDGs are “among the key complementary indicators that we take into account.”

Climate adaptation planning is going on behind the scenes

Some companies are clearly investing heavily in climate mitigation, Timothée says, particularly in heavy industry. He adds: “It is easier to communicate figures and plans on climate mitigation rather than adaptation, but it does not mean that economic actors are not preparing themselves for it. Adaptation activities are harder to capture, and can be small adaptations, perhaps adjustments in your insurance policy, relocation of some assets or the intention to relocate. I think we might see more communication around climate adaptation from economic sectors in the near future.” Timothée says some climate disaster scenarios are already getting integrated into strategic planning, but not necessarily for everyone to see yet.

The COP 26 verdict: more ambition needed, but positive signals from finance

COP 26 had its positive sides but showed that there are still three gaps that need to be closed, Timothée says, namely the climate ambition gap, the climate policy gap, and the climate financing gap. “We have to close those gaps to be capable of limiting global warming to acceptable levels, which means an increase of 1.5°C, at most” he says. “Having said that, progress was made in the run up to COP 26, and during the conference. Closing the ambition gap is critical to closing the policy gap, which is the gap between making an announcement of intent and actually implementing it within your jurisdiction.”

“When it comes to closing the financing gap, we believe that the financial community as a whole had been mobilising ahead of COP 26, and throughout it, notably with the establishment of the Glasgow Financial Alliance and the four Net Zero alliances that have emerged. These are important signals in terms of closing the climate financing gap.” But Timothée adds: “I think we need to be quite transparent on the fact that we are not yet on track to be aligned with the Paris Agreement.”

Divestment is only needed as a last resort

Timothée says the firm has a clear attitude towards divestment. “We have a very targeted execution policy. And the reason for that is we would always strive to encourage the energy transition, notably across sectors exposed to stranded assets, to the extent that we believe it is really a way to drive change in a meaningful and impactful way. When it comes to thermal coal production, we have very strict execution policies that will apply across all our actively managed funds. But we will also take into account the plans of companies exposed to coal assets to phase out from coal, not phase down.”

The solutions to climate change need the right legal framework

The private sector with financial institutions can make a big step forward, but the legislation must come first, Timothée says. “We are firm believers that more binding legislations are needed to gradually force companies to shift their businesses away from carbon-intensive activities. Encouraging as many private actors as possible to embrace net zero targets is critical. And clearly, when we set the net zero carbon emission targets, the focus is on reducing gross emissions, not offsetting them. Carbon offsetting is a last resort option for sectors that are very difficult to transition, such as aviation.”

“In this aspect the financial sector has a critical role to play: we should all work together not only on ESG integration, engagement, and potentially divestment, but also on developing impactful solutions, notably focused on emerging markets.”

The outlook for 2050: the glass is still half-full

“There are quite a few encouraging signals in terms of countries’ ability to implement the policies needed to meet net zero objectives,” Timothée says. “We see a very ambitious set of regulations emerging within the EU, around strategic Sustainable Development Goals, which will become a reference for those markets. The private sector is also sending positive signals in terms of its ability to embrace net zero targets.” 

He concludes: “I belong to one of the generations that will be exposed to the consequences of the action we take, or do not take, today. The glass is half full, but it is a half glass. There should be no stones left unturned, which means change needs to come from everywhere, from policymakers, the private sector, and individual consumers. If everyone relies on what another sector is doing, or not doing, then we might not be able to act fast enough.”