Amundi SA wants the European Union to free asset managers to add oil and gas exposures to a new fund category intended to support the transition to a lower-carbon economy.
Elodie Laugel, Amundi’s chief responsible investment officer, says excluding fossil-fuel producers from such funds would make it harder for money managers to pressure them to reduce their carbon emissions over time.
“The more you have exclusion constraints on the transition category, the more you are missing the objective of actually using asset managers like us to help companies to transition,” she said in an interview.
The comments from Europe’s biggest money manager come as Brussels rewrites the world’s most comprehensive regulatory framework for sustainable investing, the Sustainable Finance Disclosure Regulation. Efforts to overhaul the rule-set have overlapped with the ongoing war in Iran, which is forcing Europe to focus more on energy supply.
Some of the proposed revisions to SFDR, which covers assets worth about $14 trillion, currently don’t go far enough in allowing asset managers to hold oil and gas companies in transition funds, Laugel said. The EU’s proposal on such funds, which represents just one plank of the revised SFDR framework, is a “challenge for us,” she said.
SFDR, which was originally enforced in early 2021, is being overhauled after facing criticism it was a confusing piece of regulation that failed to prevent greenwashing. Transition funds are expected to address those concerns, and provide a credible pathway for investing in companies that stand to benefit from the push toward a lower-carbon economy
Lawmakers have been debating though whether to require transition funds to exclude fossil-fuel companies still expanding production. Their inability to reach agreement led to the delay of a critical vote on revisions to SFDR that had been due to take place earlier this month.
Proposals to include oil and gas exposures in transition funds come as companies including BP Plc and Shell Plc wind back earlier commitments to invest in renewable energy. Against that backdrop, some asset owners and managers have been stepping up exclusions of the sector, according to Covalence SA, a Geneva-based ESG ratings company.
Fossil energy accounted for 30% of all sector exclusions in the second quarter, up 4 percentage points in just three months, according to an analysis conducted by Covalence.
At the same time, companies that depend on fossil fuels to power operations are increasingly being penalized in the market, according to an analysis by Bloomberg. Top renewable-power users outperformed them by 6% as of May. That’s in part as sources of energy that aren’t disrupted by the Iran war see their appeal rise, the analysis found.
Money managers have long disagreed on the extent to which oil and gas companies belong in funds that claim to be supporting the clean-energy transition. Purists argue that investment clients would rightly be surprised to find that their sustainable fund holds fossil fuels. Energy companies have countered they’re more likely to transition if they’re not shut out by investors