France’s FRR plots SRI review for all asset classes

High-level committee of experts appointed for extra-financial risks.

by Hugh Wheelan | April 15th, 2008

The €34bn ($54bn) French pensions reserve fund (FRR) plans to extend its responsible investment approach to the entire range of asset classes in which it invests following an examination over whether it can apply environmental, social and governance (ESG) factors to them.
In addition, the fund has created a high-level responsible investment committee, including external financial and SRI-related experts to advise it on extra-financial risks. The outside experts are Jean-Claude Javillier, a renowned professor of work and industrial relations in Paris and former chair of the Nobel Peace Prize professorship for the International Labour Organisation, and Daniel Lebègue, former director general of CDC, the French state-owned bank and board member at Crédit Agricole, the French banking group. Lebègue is also president of the French institute of sustainable development and international relations. Announcing a new five-year strategy on responsible investment, the FRR, which runs assets designed to cover a portion of the future costs of the French pay-as-you-go pensions system, said the portfolio review would allow it to decide if it could integrate ESG criteria into asset classes such as non-euro equities, bonds, property, infrastructure and private equity, as it has already done in European equities.
The FRR, which is a signatory of the UN Principles on Responsible Investment, also has about €600m ($946m) invested in pure SRI mandates with five asset managers.
It said it would carry out a special study on the question of climate change and investment as part of its strategic asset allocation review scheduled for early next year. In December 2007, Responsible Investor revealed the fund was reviewing managers for a potential allocation to clean tech mandates.
The FRR said the new responsible investment committee would help it avoid investment in companies that do not respect the UN Global Compact or the conventions of the International Labour Organisation.
Raoul Briet, president of the FRR board, said that in November last year the fund had divested from three US companies and one South Korean corporation over involvement in the production of landmines in contravention of the Geneva convention, to which France is a signatory.
The fund’s investment return for 2007 was 4.8% or €1.6bn, six per cent down on its 11.1% return for 2006. On a rolling annual basis the fund has returned 8.8% since its inception five years ago.