ESG/SRI is one of the newer categories in GlobalCapital’s securitization awards, but also among the most important. In a deeply complex market made up of different products and structures, Amundi stands out for its rigorous commitment to sustainability and its trailblazing approach to analysis and compliance.
“We are of course very happy to be recognised as one of the pioneers in this field, but we also want to remain very modest in our approach,” says Hubert Vannier, head of securitized assets at Amundi. “We are fully aware that there is a long path to really altering the sustainability of the securitisation sector. Amundi is working very hard on this and we appreciate the support from issuers - but there is a lot of work still to be done.”
The firm began applying ESG methodology to its securitisation investments in early 2021, and later that year its flagship Amundi ABS fund was classified as article 8 under the Sustainable Finance Disclosures Regulation. That fund now accounts for around €1bn of the €2.8bn in European securitised assets Amundi has under management. The company’s ESG team has grown to 20, spread across data, rating methodology, research and engagement. This team works seamlessly with a European securitisation management team of analysts, portfolio managers, traders and investment specialists.
We are fully aware that there is a long path to really altering the sustainability of the securitisation sector. Amundi is working very hard on this and we appreciate the support from issuers - but there is a lot of work still to be done.
“We have a very strong commitment to ESG and developing our approach to sustainable investment,” says Vannier. “Amundi has invested very strong capabilities in this area, and our dedication is one aspect that makes us stand out from our peers.”
When it comes to ESG methodology, a key debate is whether to focus on ESG-compliance from an asset pool perspective or concentrate on the use of proceeds. Recognising the limitations of a pure collateral approach, Amundi has led the way in developing an exceptionally comprehensive approach that encompasses both. The firm conducts a detailed examination of the collateral and an in-depth issuer assessment to look at the use of proceeds and the issuer’s lending and servicing practices.
Like its peers, one of the biggest challenges Amundi faces in the securitization market from an ESG perspective is a lack of data. This is particularly the case for specialist lenders or boutique CLO asset managers where the normal ESG rating process may not be applicable. Amundi has met this challenge head on, armed with an incredibly granular examination process. Issuers know to expect a questionnaire with 100 or more queries requiring an exceptional level of detail.
“We require issuers to support our efforts in implementing the ESG approach,” says Vannier. “They are all aware of how important ESG is for us, and how important we consider these investigations.”
The rigour of Amundi’s approach and its prominence as an investor is instrumental in helping ESG requirements filter through the wider market. Issuers know that in order to meet the firm’s needs, they have to provide detailed, granular data on their portfolios and activities. The more this becomes a regular feature of issuing securitisations, the higher the overall standard for sustainability in the market becomes.
“We definitely see improvement as issuers grow to understand how important these details are for us and so we see a simultaneous improvement in the quality of the data being provided,” says Amadou Loum, a senior credit analyst at Amundi. “We believe in a constant dialogue between investors and issuers when it comes to ESG.”
This focus on engagement is yet another factor that helps distinguish Amundi from its competitors. As information becomes more available, there are more data points for the firm’s methodology to absorb and more nuances to explain to originators.
“We try to have as much dialogue as possible with originators and issuers on how our methodology works and how the ESG assessment process can be improved,” says Loum. “We recognise the challenges on their side and that it's a work in progress for everyone. But we have to balance that with making sure our questions are being answered and we’re able to have the necessary insight.”