European Working Group

Transcription

1 European Working Group ESG Data Standardisation for disclosure & suitability tests Ghislain Périssé 7th February 2019 TISA MIFID II Seminar

2 Agenda technical principles ESG & Mifid : ESMA consultation- Suitability tests => EMT Disclosure : the French ESG regulatory approach (the article 173). => EET 2

3 work on European standard templates such as TPT, EPT, and EMT is governed by a few common principles... The templates aim at standardizing the data exchanges between producers/manufacturers and distributors to help them fulfilling their regulatory requirements, while restricting the delivery to the minimal number of data The results are free of copyright We try to keep it simple and avoid redundancies (no data in the file should be deducted from others) We work for the exclusive benefit of the financial industry We are focused on practical implementation We capitalise on existing templates, standards, or regulation There is no technical standard obligation: CSV or XML (fundxml) We are focused on value creation. That will be applied as well to an ESG data dictionary 3

4 ESG & Mifid A French practitioners position on ESMAconsultation- Suitability tests Responsibility split consensus Manufacturers will only say if the product is ESG or not, as each manufacturer has its own ESG policy Distributors will add to their suitability test one question to check if their clients are ESG sensitive. More questions could be defined tio propose more appropriate products but will sit only on distributors side. Governance / ESG integration into the asset managers / distributors / institutional processes Consensus is that the ESMA approach is an overtransposition, as existing regulations already cover most aspects (fiduciary, corporate and delegation responsibilities for banks / distributors and ERM for insurers/mutuals) Labels / taxonomy Some market participants would like to have more available labels with a focus only on processes Some market participants are concerned by the taxonomy which may create a bubble on certain asset classes / activities, and would prefer any approach which allows really to transition the economy to a more ESG one. The ESG field of the EMT might be sufficient 4

5 Disclosure : example of French requirements Institutional investors have to annually disclose information on ESG and climate criteria integration (1/2) Context Publication of the French Energy Transition for Green Growth Act in August 2015 and of December 31st, 2015 the implementing decree on Application for financial year beginning January 1st, 2016 Main requirements The Article 173-VI of the French Energy Transition for Green Growth Act (Loi de Transition Énergétique pour la Croissance Verte) requires asset management companies and institutional investors to disclose information on the manner in which they incorporate environmental, social and quality of governance (ESG) objectives into their investment and risk management policies and how they contribute to the ecological and energy transition. Comply or explain principle: flexibility in choosing the best way to fulfil the law s objectives: all reportable data listed in the decree represent best practice and not an obligation An approach similar to the PPP (Prudent Person Principle) 5

6 ESG and climate reporting requirements in France Institutional investors have to annually disclose information on ESG and climate criteria integration (2/2) Reporting format Any reporting format may be used, regardless of the ESG information provided 90 % of insurers chose to publish a specific ESG report This information must be disclosed on the website of the organization. Reporting frequency This information must be reported annually. 6

7 ESG and climate reporting requirements in France Decree of application: What type of information must be reported? Asset managers and institutional investors (AUM or consolidated balance sheet ) < 500 M > 500 M ESG reporting ESG and climate reporting Information about the investor General approach to incorporating ESG criteria into investment and, where applicable, risk management policies Content, frequency and means used to inform clients (investors) Membership/support to charters, codes, initiatives and labels relating to the incorporation of ESG criteria Where applicable, a description of ESG risks, the business s exposure to these risks and the internal procedures used to identify and manage them Details on ESG criteria Description of the type of ESG criteria taken into account Information used for the analysis conducted on ESG criteria Methodology and results of this analysis Description of the way in which the results of the analysis are integrated into the investment policy of the investment fund : changes made to the portfolios and engagement strategy with issuers and asset managers Focus on climate criteria For the environmental criteria taken into account, explain the associated climate risks (transition and physical risks) and their contribution to the international objective of global warming limitation. Contribution to the international objectives towards climate change by explaining - the analysis of the consistency of the investment policy with these objectivs and the internal objectives of the organization ; - Changes made to the portfolios following the climate analysis (exclusion, engagement, investment in green assets or thematic funds, etc.) 7

8 The French approach: the EET the French working group target Context: there is a strong heterogeneity of ESG data reported by insurers and asset managers to the French regulators and administration, especially in the Art 173 reports The French asset managers and insurers (AFG, FFA, Club Ampère) decided to work on the standardization of ESG data information and on the data exchanges between asset managers and insurers, with a similar governance approach to the TPT / EPT creation (at French then at European level, thanks to the ) They want to build a data dictionary which is a support for discussions between all actors to define the data according to their needs. This data dictionary includes a non exhaustive list of ESG data used by asset managers and investors to follow the implementation of their investment politic and generate the reports (especially the report required by the LTE, art. 173 regulation) They decided to split the data into 3 sets : (1) ESG data referring to investment politic and general politic of the asset managers (2) ESG data linked to the funds : labels, specific politics (3) Brut data at issuer level to build ESG indicators (line by line) According to the existing level of regulations and the lack of information, only data at AM and funds levels will be required. This workshop does not aim at standardizing issuer data, neither will it require this data. The data would be provided only on a bilateral basis. The workshop tries only to build a non exclusive list of the more commonly used data to build indicators across all economic sectors in order to make the diversity of this data more obvious.

9 EET asset management level 33 Asset_Manager_Number_Of_Engagements Asset Manager Company ESG Data Asset Manager policies 7 Asset_Manager_Existing_ESG_Policy 8 Asset_Manager_ESG_Managed_AUM 9 Asset_Manager_ESG_Managed_AUM_Calculation_Methodology 10 Asset_Manager_Existing_Engagement_Policy 11 Asset_Manager_Type_of_Engagement 12 Asset_Manager_Existing_Voting_Policy 13 Asset_Manager_ Voting_Policy_Organisation 14 Asset_Manager_ Existing_Global_Exclusion_Policy Asset Manager resources 24 Asset_Manager_ESG_Team_FTE Asset Manager international initiatives 28 Asset_Manager_PRI_Signature 29 Asset_Manager_Existing_PRI_Notation 30 Asset_Manager_PRI_Governance&Strategy_Notation 31 Asset_Manager_Collaborative_Organisation_Initiative 32 Asset_Manager_Collaborative_Organisation_Initiative_Complement 34 Asset_Manager_Number_Of_Pre_General Meetings_Year 35 Asset_Manager_Number_Of_companies _Individually_Engaged 36 Asset_Manager_Number_Of_Collaborative_Engagement 37 Asset_Manager_Number_Of_Collaborative_Engagement_As_Lead er 38 Asset_Manager_Number_Of_Collaborative_Engagement_ As_Working_Group_Participant 39 Asset_Manager_Number_Of_Collaborative_Engagement_As_Sign atory Votes 40 Asset_Manager_Number_Of_Resolutions_Year_N-1 41 Asset_Manager_Number_Of_Resolutions_Voted_Year_N-1 42 Asset_Manager_Number_Of_Votes_Supporting_Management_Yea r_ N-1 43 Asset_Manager_Number_Of_votes_Against_Management_Year_N Asset_Manager_Number_Of_Null_Votes_Year_N-1 45 Asset_Manager_Number_Of_Meetings_Year_N-1 46 Asset_Manager_Total_Number_of_Meetings_Voted_Year_N-1 47 Asset_Manager_Voting_Policy_Exceptions 48 Asset_Manager_Voting_Policy_Exceptions_Explanations Asset Manager ESG Risk Policy

10 EET portfolio level 1/2 Portfolio Data Portfolio Policies 58 Portfolio_does_ Asset_Manager_Global_ESG_policy_apply 59 Portfolio_Existing_Dedicated_ESG_Approach 60 Portfolio_does_Asset_Manager_Global_Engagement_policy_apply 61 Portfolio_Existing_Specific_Engagement_Policy 62 Portfolio_does_Asset_Manager_Voting_policy_apply 63 Portfolio_Existing_Specific_Voting_Policy Portfolio Label (One by portfolio) 64 Porfolio_Labelled_by_third_party 65 Porfolio_Label_Name 66 Porfolio_Additional_Label_Name 67 Porfolio_Label_Rating Reporting Portfolio ESG Integration in the investment process Positive screening 69 Portfolio_ESG_Existing_Positive_Screening_Strategy 70 Portfolio_ESG_Positive_Screening_Scope 71 Portfolio_ESG_Positive_Screening_Best_in_Universe 72 Portfolio_ESG_Positive_Screening_Best_in_Class 73 Portfolio_ESG_Positive_Screening_Best_Effort 74 Portfolio_ESG_Positive_Screening_Portfolio_ESG_Score_vs._Benchmark _ESG_Score 76 Portfolio_ESG_Positive_Screening_ESG_KPI_Optimization 77 Portfolio_ESG_Positive_Screening_Impact_Fund 75 Portfolio_ESG_Positive_Screening_Selected_ESG_Thematic 78 Portfolio_Investing_Environment_Thematic 79 Portfolio_Investing_Social_Thematic 80 Portfolio_Investing_Governance_Thematic 81 Portfolio_Investing_Multi_Thematic Negative screening 82 Portfolio_Existing_ESG_Negative_Screening_Strategy 83 Portfolio_ESG_Screening_Approach_Scorecard_Based 84 Portfolio_ESG_Screening_Approach_Norms_Based 85 Portfolio_ESG_Screening_Approach_Controversial_activities _or_and_sector 15 Asset_Manager_Alcohol_Exclusion_Threshold 16 Asset_Manager_Tobacco_Exclusion_Threshold 17 Asset_Manager_Gambling_Exclusion_Threshold 18 Asset_Manager_Conventional_Weapons_Exclusion_Threshold 19 Asset_Manager_Unconventional_Weapons_Exclusion_Threshold 20 Asset_Manager_Nuclear_Weapons_Exclusion_Threshold 21 Asset_Manager_Pornography_Adult_Entertainment_Services_Exclusion_Threshold 22 Asset_Manager_Coal_Exclusion_Threshold 23 Asset_Manager_Other_Exclusion_Scope 86 Portfolio_ESG_Screening_Approach_Sector based 87 Portfolio_ESG_Screening_Approach_Countries Integration in Investment Decision process 88 Portfolio_ESG_Integration 89 Portfolio_ESG_Integration_in_investment_analysis 90 Portfolio_ESG_Integration_in_portfolio_construction 91 Portfolio_ESG_Integration_type_Of_Investment_decisions

11 EET portfolio level 2/2 Portfolio ESG metrics 97 Portfolio_Weight_Of_green_investments 97 Portfolio_Weight_Of_investments_Energy_transition_>50% 98 Portfolio_Weight_Of_investments_Energy_transition_50%>x>10% 99 Portfolio_other_green_investment_indicator_type 100 Portfolio_other_green_investment_indicator_value 101 Portfolio_Weight_Of_investments_fossil_energy_>50% 102 Portfolio_Weight_Of_investments_fossil_Energy_50%>x>30% 103 Portfolio_Weight_Of_investments_carbon_footprint_coverage 104 Portfolio_Weighted_carbon_emissions_scope Portfolio_Weighted_carbon_emissions_scope Portfolio_Weighted_carbon_emissions_scope Portfolio_Weighted_carbon_emission/market_valuation_scope Portfolio_Weighted_carbon_emission/market_valuation_scope Portfolio_Weighted_carbon_emission/market_valuation_scope Portfolio_Weighted_carbon_emission/turn_over_scope Portfolio_Weighted_carbon_emission/turn_over_scope Portfolio_Weighted_carbon_emission/turn_over_scope Portfolio_Weighted_carbon_emission/net debt_scope Portfolio_Weighted_carbon_emission/net debt_scope Portfolio_Weighted_carbon_emission/net debt_scope 3

12 Let us wait now for EC / ESAs final requirements to finalize the EET 12