ESTea #15 18/09/21
Spotlight on: CPR Invest - Climate Action
Alexandre Blein and his team at CPR Asset Management had been running the successful ‘Climate Action’ fund well before the recent explosion in ESG investing - and also before much of the concomitant green-washing. Mister Blein can trully say that he was ‘doing it before it was cool’ since the fund launched in December 2018, when a ‘CoronaVirus’ was a really bad hangover. Since then the CPR team have steadily achieved an impressive performance (12.68% YTD) while sticking strongly by their environmental commitments.
Alexandre himself has a strong European equities and asset management pedigree with 23+ years in the industry - most of it focused on global and European equities. Likewise, CPR has their own pedigree in sustainable investing. Operating as a wholly-owned subsidiary of Amundi they’ve combined niche, thematic offerings with the fire-power offered by their gigantic owner.
Climate Action is one of an emerging group of ‘Article 9’ funds in Europe - meaning that the fund has met the most exacting taxonomy of the SFDR regulation and that they wish to market themselves as an ‘impact’ fund. ‘Article 9’ is the most specific regulatory bracket for ESG funds and allows the fund to promote their work as not only caring about their ESG impact, but as actively solving the ethical problems of the world.
Becoming ‘Article 9’ comes with a list of public and pre-contractual requirements set down in the legislation but without it, a fund cannot market themselves as an ‘impact’ fund.
The Climate Action fund takes a sector-based approach, looking for companies ‘most engaged with energy and environmental transition’ in each business sector - based on their management team’s priorities. The team is not looking for the most environmentally friendly companies per se, instead they’re focused on companies in each sector who will leverage the capital into a transition to low or zero emissions.
This does mean that historically they have included automobile manufacturers such as Toyota in their holdings; equities which may smack of ‘greenwashing’ to some. However, this approach allows ‘green capital’ to be allocated to companies in each sector who are making the most progress in a carbon transition. This creates competitive advantage (low cost of capital) between companies in a sector, all in favour of the most environmental company.
The alternative approach, of disinvesting from all companies within a sector such as automobile manufacturer would result in no competitive advantage for the best companies in a specific market, and it wouldn’t materially affect any automobile manufacture since demand for cars is still high.
Climate Action takes a traditional approach when applying its ESG requirements, using an ESG screen on top of sector-based strategy. This screen is, I presume, is heavily informed by their impressive partners at CDP.
For the reasons previously mentioned in ESTea, the screen approach is likely to lead to a lower performance, although the advantage is that it almost totally excludes the risk of an equity with a poor ESG approach being included in the portfolio. Perhaps as importantly, this approach excludes the risk of including any equity that is a reputation hot potato for such an ethical fund. Even funds with green cores, must also paint the outside green - and Climate Action clearly has this in mind with their partners at RepRisk.
All in all, while The Climate Action is a higher-risk investment, its ESG credentials are anything but high risk. This is an ethically strong and stable fund with a very low risk that they will invest in an equity which would embarrass you, your employer or your client.