French investors to revive Enhanced Analytics Initiative on ESG broker research

Launch of new project in Paris with subsequent aim of rolling out globally.

A group of French brokers and investors is attempting to resuscitate the Enhanced Analytics Initiative (EAI), which promoted the inclusion of ESG factors into company and sector research, but was mothballed after being amalgamated into the UN-supported Principles for Responsible Investment (PRI) in 2008. The group, which includes participants from some of France’s largest banking and investment groups, will announce its plans today (October 10) in Paris before formally naming the organisations involved. The brokers and investors have been working under the aegis of the French SIF (Forum pour l’Investissement Responsable, FIR), which will house the initiative and publish half-yearly progress updates. The aim is to first attract a critical mass of investors and brokers in Paris to commit to the project before gauging interest abroad with members of other national SIFs (Social Investment Forums), the European Sustainable Investment Forum (Eurosif) and signatories to the PRI. The Paris-based RI professionals leading the new project include Franca Perin, Head of ESG Research at Generali Investments Europe and Jean-Philippe Desmartin, Head of ESG research at Oddo Securities. The original EAI ran for four years between November 2004 and December 2008. Buy-side members directed 5% of their investment research budget towards a list of best sell-side ESG research providers. The project helped stimulate significant growth in ESG broker research that asset managers could incorporate into investment decisions. It ran into problems over thecommitment of buy-side investors to maintain the 5% ESG cut as part of their broker research budget and focus. In October 2008, EAI was amalgamated into PRI, which said that it would “internationalise” the call for better investment research. But the EAI has not been promoted since and has effectively ceased activity. The new French initiative is asking buy-side asset manager participants to sign up as members to a local or regional SIF and/or to the PRI. It will then expect sign-ups to make an ESG vote in their regular broker reviews by which brokers get paid research commission and to publish the budget allocated to ESG research as a percentage of their overall research pot. Among the main commitments of sell-side research brokers that sign up, it says, will be to have a dedicated ESG contact/reference within the broker, to publish a substantial ESG report at least once every six months, and to promote ESG research ideas in its research that do not yet receive sufficient coverage.
Last month, RI reported that sell-side analysts at investment banks working on renewable energy and SRI research had been dealt a serious blow by the decision of Institutional Investor’s (II) All Europe Equity Research poll to drop the two sectors from its main voting categories. The II survey, along with that of Thomson Reuters Extel, is one of the two main ways that asset managers vote on the quality of the broker research they receive and, importantly, through which their research commissions are divvied up within the investment bank.