French asset management powerhouse Amundi will move 13 of its ESG exchange-traded funds (ETFs) – valued at a whopping €13.4 billion – to MSCI indices based on the EU’s Climate Benchmarks criteria.
Yesterday, Amundi notified clients that it had shifted a range of nine ESG ex-fossil fuel ETFs to an MSCI Paris-Aligned Benchmark (PAB) index, and four other ETFs to an MSCI Climate Transition Benchmark (CTB) index. The move will reclassify €12 billion and €1.4 billion worth ETF assets to PAB and CTB criteria respectively.
Under the Climate Benchmark methodology, a voluntary standard introduced as part of the EU’s Action Plan on Sustainable Finance, funds are first required to decarbonise compared with parent indices, and then by 7 percent year-on-year. Investors can choose between the more ambitious PABs, which target an initial 50 percent carbon intensity reduction versus the parent universe; or CTBs, which target a 30 percent initial reduction.
Both categories are described as being aligned with the Paris Agreement’s 1.5°C target, and take into account Scope 1, 2 and 3 emissions.
The benchmarks have proved to be an unlikely success story for the EU, which has faced pushback against most of its other sustainable finance initiatives – most notably its green taxonomy, which is accused of being too complex and weak in its environmental ambition.
On the other hand, it is estimated that tens of billions of Euros have already been shifted into activities in line with the EU’s climate objectives via instruments based on the Climate Benchmarks. Last year alone, Swedish pension fund AP2, French pension fund Ircantec, asset manager Handelsbanken Fonder, the workplace pension scheme for Dutch company UWV, four German public pension funds and the UK’s Brunel Pension Partnership announced they would be investing into Climate Benchmarks.
Separately, the EU has indicated that EU climate-focused funds will have to be benchmarked against the Climate Benchmarks criteria whenever possible. This will impact all investment products with a climate objective – known as ‘Article 9’ funds in the EU – not just official PAB or CTB funds.
Amundi’s announcement comes after it finalised its €825 million acquisition of Société Générale’s ETF unit Lyxor in January – a deal that made it the second largest ETF issuer in Europe, although its 13.4 percent share of the EU ETF market is some way off market leader BlackRock’s roughly 40 percent share.
At the time, Amundi said its ESG & Climate ETFs would be “one of the largest and most comprehensive in the market” at around 20 percent market share.