European Stock Story of the Month – Amundi

Sadly, things rarely surprise me these days. It was therefore a moment of jaw dropping incomprehension when I watched HSBC’s Head of Responsible Investment Stuart Kirk at FT’s Moral Money Symposium talking about the irrelevance of climate change from a financial risk perspective. Kirk has been suspended and HSBC may have to do a lot of back pedalling. Whatever point Mr Kirk was trying to make, his speech elicited muted applause, and there has been a fair amount of comment on the subject. It is well worth watching just for the sheer toe-curling horror of his delivery[1]. Our worry is that this presentation may be indicative of what many in the City actually think but dare not say for obvious reasons. Has Stuart Kirk just pointed to the tip of a rather worrying iceberg?

This month’s stock story is about another financial institution, but one that we feel has a much more consistent approach to sustainability. Amundi (www.amundi.com) is a French based asset manager, founded in 2010 and listed on equity markets in 2015. With €2 trillion under management as at the end of 2021[2], Amundi is the largest European asset manager and one of the top ten globally. The company started out as the merger of two French asset managers, Credit Agricole and Société General. In late 2016, Amundi bought Pioneer Investments, the Irish based asset manager which belonged to Unicredit. Over time, the organisation has ratcheted up its international expansion in an industry that is consolidating fast. The Pioneer purchase ramped up AUM to over €1.4trn, and gave Amundi access to Italy, Germany, and Austria, adding to the foothold the company had earlier made in the US. 

Since then, further acquisitions and tie ups have been made from Spain to India and China, giving Amundi huge growth opportunities in terms of savings and investments in fast growing Emerging Markets. How then does an organisation of this scale and rapid growth embed a consistent ESG approach in its philosophy and its strategy? According to the company 50% of 2021 inflow were directed at ESG solutions and products. Our contact at Amundi tells us there is 100% incorporation of ESG into the active fund range and ESG is deployed into the passive assets as well. At the end of 2021 ESG assets under management sat at €847 billion with €780 billion categorised as complying with either Article 8 or Article 9 of the EU’s regulation new rules covered by Sustainable Finance Regulation Disclosure (SFDR)[3]. This new law sets out mandatory ESG disclosure requirements for asset managers to comply with. The aim is to create more transparency on investment strategies as well as preventing greenwashing and claims that products are sustainable when they are, in reality, not. Put simply, Article 8 funds (light green) are funds that promote environmental and social characteristics. Article 9 funds (dark green) are funds which have sustainable investment as their objective.

We vote on every agenda item for every resolution at every AGM for each company we hold. For the European fund, in which Amundi is held, we publish every voting decision with rationales for every against and abstention. We seek either to support the company or take a stance against. We also openly communicate the rationale for our decisions to management teams. So how do Amundi do in terms of the way we view their resolutions? How independent is their board? How diverse? How handsomely paid are these executives and how do they manage conflicts of interest? It is often interesting to look at how executives at asset managers treat themselves relative to how they expect other company managements to behave. The “say-do” gap is sadly often wider than we might want for an industry which has struggled with integrity and needs to lead by example. Gratifyingly, Amundi’s remuneration policy sits well within our concept of what we consider to be restrained pay scales, and the bonus scheme is below our upper limit. We would like to see further disclosure on various aspects of compensation, but we have voted in favour of the scheme, with a note to engage on improved disclosure in 2023.

Board independence is a perennial issue for many companies and Amundi is no exception. Again, we are clear on what we want to see from our companies, and we engage, fully cognisant that board succession is indeed a journey. Yves Perrier has stepped down from the day-to-day management of the firm after 12 years as CEO, paving the way for Valerie Baudson who started work this May. In the 2021 Annual Report, she is quoted as saying “Increasing commitments across environmental and social issues will be Amundi’s number one lever for growth in every geography”. I suspect anyone working in Amundi’s responsible investment team may not wish to contradict her clear mantra, and we should be clear that Baudson will be held accountable for that statement. We back her public stance and have confidence in the integrity of her strategy. One thing is for sure. All financial institutions will want to avoid another HSBC moment,

Written by Rory Hammerson

Sources and references

[1] https://www.youtube.com/watch?v=bfNamRmje-s

[2] https://en.wikipedia.org/wiki/Amundi

[3] file://ukfcp-file-01/UserRedirectedFolders$/Rory.Hammerson/Downloads/02.09.2022%20-%20Slides%20-%202021%20Amundi's%20Q4%20and%20annual%20results%20(1).pdf (p14)

Information is accurate as at 07.06.2022. Opinions constitute the fund manager’s judgement as of this date and are subject to change without warning. The officers, employees and agents of CIP may have positions in any securities mentioned herein. This material may not be distributed, published or reproduced in whole or in part. With investment capital is at risk.