France’s giant sovereign fund announces muscular environmental engagement strategy

€300bn Caisse des Dépôts tightens thermal coal exclusions list

France’s €300bn Caisse des Dépôts et Consignations (CDC) sovereign wealth fund has announced a muscular environmental engagement strategy where it says it will divest companies in its €55bn direct investment portfolio if it is not satisfied with their attempts to green their businesses and lower C02 emissions.
The fund is also tightening a blacklist of thermal coal companies to include those with up to 25% of their business in the sector, a strategy it says it will move to a zero policy within the next few years.
Speaking at the Novethic conference in Paris, Pierre René Lemas, Chief Executive Officer of CDC, said that this year the Caisse had pulled out of companies to a value of €100m that had a high exposure to thermal coal.
Lemas, one of France’s most important financial figures, also anounced that the Caisse would be joining the Portfolio Decarbonisation Coalition, a UN backed group of international institutional investors.
The announcement by the Caisse ahead of next week’s COP21 climate change conference in Paris is a key signal to the French market of government backing for investment decarbonisation.
In the last year, the Caisse surveyed its CO2 exposure to France’s SBF120 index. It has set itself the immediate goal of reducing its carbon footprint by 20% per thousand of euros invested.

To this end, Lemas said CDC had been engaging with its portfolio companies and asking them to explain their strategies on carbon reduction.He said CDC would implement a “reinforced shareholder commitment” programme via engagement, meaning that it could divest companies where it saw insufficient work to lower emissions. The Caisse is a long-term investor, holding companies for an average of 8-10 years, so the announcement will have serious weight amongst corporates in France.
Lemas said the Caisse would start in 2016 to look at the carbon exposure of its externally managed assets invested by a roster of fund managers.
Lemas also outlined a list of moves the fund will make in the coming years to decarbonise its huge investment portfolio, starting with the €55bn of internally managed assets.
The fund has a large slant towards property and real estate. On the former, along with its insurance subsidiary, CNP Assurances, it has pledged to reduce the energy consumption of its property portfolios by 38% by 2030. It is currently looking at its infrastructure exposure and will put together a related green investment plan in 2016.
The Caisse has pledged to mobilise a total of €15bn to green finance between 2014-2017. Circa €10bn has been pledged to local authorities and social housing projects for green building finance. About €4bn will go to finance green companies via BPIfrance, the public investment bank. Lemas said the Caisse would shortly start working on a 2018-2020 roadmap for low carbon investment, and was now working with the French Development Agency (ADF) on international sustainable investment.