European asset manager Amundi has rolled out a suite of seven net zero funds, offering investors access to the companies "best equipped" to support the net zero transition.
The range comprises seven actively and passively managed funds, and is open to both institutional and retail investors.
The strategies are: Net Zero Ambition Global Equity; Net Zero Ambition Top European Players; Amundi Net Zero Ambition Global Corporate; Amundi Funds Net Zero Ambition Pioneer US Corporate; Amundi European Net Zero Ambition Real Estate; Amundi Funds Net Zero Ambition Multi-Asset and Amundi EM Equity Target Net Zero.
The asset manager explained the funds will seek out and invest in companies "best equipped" to help with the transition to a net zero economy by 2050.
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Amundi believes the financial services industry is a "vital catalyst" in the race to net zero and its push will help governments and companies in their responsibility to decarbonise economies.
All seven net zero funds have a common intermediary objective, which is to reduce the portfolio's carbon intensity by 30% by 2025 and 60% by 2030, compared to 2019.
In recognition of the lack of a ‘one size fits all' approach to net zero, Amundi said it will move away from pledges towards action and select companies it believes are best positioned to transition to net zero by 2050 with "regards to their carbon reduction pathway".
Vincent Mortier, group CIO at Amundi, said trillions of euros of capital will be needed to speed up the decarbonisation process, which cannot be achieved by governments alone.
"The global asset management industry - which is expected to be managing over $145trn by 2025 - has the scale to make things happen and trigger the momentum required to get the world to net zero," he added.
Investment process
Kasper Elmgreen, head of equities at Amundi, told Investment Week stock selection comprises a five-step investment process.
The investment universe is comprised of the MSCI World Paris Aligned benchmark, companies aligned to the Science Based Targets initiative and those rated A-D under Amundi's ESG methodology.
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The initial group of companies is then analysed through a carbon screening, which reduces the investment universe by around half, as the asset manager will only invest in companies which have a CO2 intensity lower than the industry average.
"In this way, we treat all industries equally," Elmgreen explained. "This helps us to have an overall balanced portfolio with no structural style or sector biases."
The third step is assessing the financial strength of each company, followed by Amundi's ESG analysis.
The analytical stage, the fourth in the process, is probably the most important one, according to Elmgreen, as it looks at the concept of ‘environmental capital' - weighing the impact carbon reduction can have on operating costs and capital intensity.
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"Ultimately these two elements are the primary building blocks of future return on invested capital and therefore require careful fundamental consideration within our investment process," he added.
The last step is portfolio construction, in which the asset manager selects a "concentrated portfolio" of companies it believes can deliver on CO2 reduction in line with the Paris Agreement, while also generating alpha for investors.
Mortier concluded: "We are launching the net zero ambitions range across active, passive, and real assets, so investors can fuel the transition and put their savings to work, while earning investment returns.
"It is also critical to provide investors with a wide range of choices in order to help them align their investments to a net zero decarbonisation pathway."
