The responsible investment market has become increasingly crowded in terms of supply, as many asset managers offer strategies focusing on responsible investing. As a consequence, being able to identify solutions offering what we believe are best-in-class opportunities in a packed universe, both in terms of performance and impact, could be perceived as challenging1.
At Amundi, we have developed the ESG Improvers approach, a strategy that:
Seeks to unlock alpha by investing in companies with an improving ESG trend.
Follows an inclusive approach to ESG.
Differentiates itself from peers by identifying today the ESG leaders of tomorrow.
We believe that integrating ESG criteria into investment decisions can create value both in terms of superior risk-adjusted returns and evaluate opportunities in companies’ strategies, benefitting both their stakeholders and society in general.
There are multiple ways to engage in responsible investing, but we favour a forward-looking strategy to identify where rising ESG trends are not yet priced in companies’ valuations, combining our analysis with a strong bottom-up stock selection process1.
Why can ESG improvers be a source of alpha?
It’s important to understand that ESG factors can play a relevant role in determining portfolios’ returns . For example, companies integrating ESG factors into their strategies should lead to a reduction of non-financial risks that may have negative impacts on financial performance, such as reputation, political and regulatory risks2. As we invest primarily in companies that are on an improving ESG trajectory, we seek to get ahead of the crowd and therefore unlock return potential.
Why is it inclusive?
The beauty of an ESG Improvers philosophy is that we seek to find companies that are embarking on a positive ESG journey, across all sectors in the market. It is important to note that, ESG Improvers does not exclude companies involved in activities such as the extraction of fossil fuels, which usually bear a negative connotation. Amundi’s inclusive approach considers firms that are on a positive ESG path, regardless of their sector.
Why is it different?
Most responsible investment strategies focus on ESG winners, i.e. the highest rated ESG companies today. Thanks to Amundi’s extensive expertise, consistent investment approach and continuous engagement with target companies, we aim to identify opportunities still not visible to our peers.
Through a fundamental integration of ESG factors, we seek to identify not only the ESG related risks, but also the ESG opportunities from a financial standpoint.
What are ESG Improvers? What are ESG Winners?
Each company in the portfolio has strong investment fundamentals; they are selected through a detailed analysis that considers macro ESG trends, market movements, securities valuations and ESG key performance indicators (KPIs). The majority of the holdings are “ESG Improvers”, companies that are set to move forward on their ESG agenda. The remainder of the portfolio is allocated to what we call “ESG Winners”, these are the firms that are already well advanced in their ESG journey. If the investment case is correct, in our view our portfolio allocation should provide access to the ESG leaders of tomorrow, supporting future alpha generation.
Source: Amundi as of January 2023. Given for illustrative purposes only. May be subject to change without notice.
Note: The decision of the investor to invest in the promoted fund should take into account all the characteristics or objectives of the fund.
It's time for a journey through the world of ESG Improvers
Unless otherwise stated, all information contained in this document is from Amundi Ireland Limited and is as of 15 May 2023. The views expressed in this page should not be relied upon as investment advice, a security or service recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Ireland Limited is authorized and regulated by the Central Bank of Ireland.