AMX Master ICAV – Amundi – Asian Climate Bonds
Article 10 ESG and Sustainability Information
Below, investors can find relevant information regarding the investment strategy of the Sub-Fund and its related ESG and sustainability considerations. Any capitalised terms used herein shall have the meaning ascribed to them in the Sub-Fund’s supplement (the “Supplement”).
AMX Master ICAV – Amundi – Asian Climate Bonds has been categorised as meeting the provisions set out in Article 8 of the SFDR in relation to products that promote environmental and social characteristics.
The Sub-Fund’s investment objective is to generate income and the potential for long-term capital
growth by investing in Green Bonds and Climate Bonds selected using the Climate Change Investment
Framework developed by the Asian Infrastructure Investment Bank (“AIIB”) and Portfolio Manager.
Environmental or social characteristics of the financial product
The environmental characteristics promoted by the Sub-Fund through its investments in Climate Bonds and Green Bonds include: Climate Change Adaptation; Climate Change Mitigation; and Contribution to the Low-Carbon Transition. Consideration of ESG risks and opportunities is a component of the Portfolio Manager’s risk management framework and incorporated into investment processes.
Proportion of investments
The Sub-Fund will primarily invest in Green Bonds and Climate Bonds, which will comprise primarily of corporate bonds, privately placed bonds, subordinated bonds and contingent convertible ‘CoCo’ bonds, focussing predominately on developed and emerging market Asian countries. 75% of the Sub-Fund’s securities and instruments will meet the promoted environmental or social characteristics in accordance with the binding elements of the investment strategy of the Sub-Fund.
The Sub-Fund will primarily invest in Climate Bonds and Green Bonds selected and monitored using the Portfolio Manager’s Climate Change Investment Framework. This framework translates the objectives of the Paris Agreement into fundamental metrics to assess an issuer’s level of alignment with climate change mitigation, adaptation and low-carbon transition objectives. As described in the Supplement, investment decisions are also taken in accordance with the Portfolio Manager’s proprietary ESG approach, incorporating Targeted Exclusion, ESG Scoring and Rating of Issuers, and Green and Climate Bond analysis.
Monitoring of environmental or social characteristics
The performance of Green Bonds and Climate Bonds from an ESG perspective is monitored by the Portfolio Manager’s ESG research team through the Portfolio Manager’s proprietary ESG Scoring and Rating framework and Controversy Screening described below. Issuers are regularly reviewed to assess whether the Sub-Fund’s targets of Climate Change Adaptation, Climate Change Mitigation and Contribution to the Low-Carbon Transition are being met and to monitor whether the Issuer has made changes or improvements to its environmental strategy. Furthermore, Green Bonds are systematically checked:
- for the presence of an allocation and impact report to ensure that an Issuer is reporting on the realisation of their commitments; and
- for the continuing presence of a second party opinion or other certification, such as certification by the Climate Bond Initiative or verification using the Green Bond Principles.
A copy of the Sub-Fund’s most recent climate report as well as ESG and engagement reporting will be made available to Shareholders on request.
The Sub-Fund uses the Portfolio Manager’s proprietary Climate Change Investment Framework which combines a top down and bottom-up approach to assess an Issuer’s level of alignment with Climate Change Mitigation, Climate Change Adaptation and Contribution to the Low-Carbon Transition objectives. A detailed description of the methodology is available at: Amundi/AIIB Climate Change Investment Framework. The Sub-Fund also employs Targeted Exclusion and ESG Scoring and Rating of Issuers according to the Portfolio Manager’s Responsible Investment policy. This policy and the underlying methodology are available at: Amundi Responsible Investment Policy
Data sources and processing
The Portfolio Manager’s ESG Research Team leverages off data provided by 15 external providers. The information received covers ESG scores, ESG controversies and other ESG-related information. Our ESG analysis draws on this data to generate internal ESG scores, ratings and ESG controversies analysis. Furthermore, Amundi has established indicators and targets to identify, qualify and effectively manage climate-related risks and opportunities. For this purpose, Amundi relies on a broad set of data providers to guarantee that its measurements and assessments are as accurate as possible. Further details are outlined in Amundi’s Climate and Sustainability Report, which is available at: Climate and Sustainability Report
Limitations to methodologies and data
The Portfolio Manager relies on a broad set of data providers to guarantee that its measurements and assessments are as accurate as possible. We recognise that each provider has its own methodology and inbuilt biases, but by taking inputs from a range of sources and applying our own proprietary analysis we believe that we can gain a fuller understanding, and provide our investment teams with unique and valuable insights. Comparing the data we receive is crucial for us in order to assess the quality of the underlying information that we deploy in our strategies. We seek to identify any significant discrepancies in terms of the outputs from different ESG or climate-related data providers, and (in addition to our standard ESG analysis) conduct a deeper analysis ourselves. ESG data is verified internally to assure its consistency.
No sustainable investment objective
The Sub-Fund promotes environmental social characteristics, but does not have as its objective a sustainable investment nor will make any sustainable investments.
The Portfolio Manager’s investment decisions are made in accordance with the Climate Change Investment Framework and includes: 1. Targeted Exclusion and 2. ESG Scoring and Rating of Issuers:
- Targeted Exclusion - The Portfolio Manager screens for and excludes specific sectors and industries (“Controversy Screening”) such as coal production and use, tobacco and companies involved in the production, sale, storage or services for and of anti-personnel mines and cluster bombs, prohibited by the Ottawa and Oslo treaties, companies involved in the production, sale or storage of chemical, biological and depleted uranium weapons, and companies that violate, repeatedly and seriously, one or more of the ten principles of the UN Global Compact, without credible corrective action.
- ESG Scoring and Rating of Issuers - ESG scoring and rating of Issuers (“ESG Scoring and Rating of Issuers”) depends on the level of ESG information available, but typically includes:
- ESG Controversies screening (outlined above in the Targeted Exclusion section) using third-party data services;
- internal analysis by the Portfolio Manager’s ESG analysts using 38 quantifiable ESG criteria combined with ESG data from different leading external data providers; and/or
- more specifically for Green Bonds, it will include the use of proceeds analysis and verification of an issuer’s alignment using global leading industry standards such as the Green Bond Principles and/or the Climate Bonds Standard.
Further details are outlined in the Supplement and in the Portfolio Manager’s “Responsible Investment Policy” available at: Amundi Responsible Investment Policy
Climate Bond and Green Bond Analysis
Climate Bond and Green Bond proceeds are expected to finance projects on energy efficiency, sustainable management of living natural resources, pollution prevention, climate change adaptation, sustainable water management, eco-efficient products, terrestrial and aquatic biodiversity conservation, renewable energy, clean transportation, and/or green buildings.
- Climate Bonds
As defined in the Supplement, a Climate Bond is a bond whose issuer scores highly according to the Portfolio Manager’s Climate Change Investment Framework. The issuer will therefore demonstrate a high level of alignment with Climate Change Mitigation, Climate Change Adaptation and Contribution to the Low-Carbon Transition objectives. The ESG analysis process also incorporates the Portfolio Manager’s Targeted Exclusions, proprietary ESG Scoring and Rating of Issuers framework and Controversy Screening described above.
- Green Bonds
As defined in the Supplement, a Green Bond is a bond issued in line with Green Bond Principles. In addition to the ESG analysis described above, the Portfolio Manager’s ESG team conducts use of proceeds analysis and verifies an issuer’s alignment with the Green Bond Principles and other leading industry standards such as the Climate Bonds Standard. They also check for the presence of a second party opinion as well as an allocation and/or impact report for external verification purposes.
Active engagement with Issuers is used to drive progress and influence positive change and is conducted independently and in collaboration with industry peers and broader stakeholders. Engagement activities focus on specific and material ESG issues. A formal engagement strategy is formulated which sets out the objectives of the engagement and key performance indicators. The Portfolio Manager aims to track, review and report on the progress of the Issuers during this process. A copy of the Sub-Fund’s most recent engagement reporting will be made available to Shareholders on request. The Portfolio Manager’s corporate-level engagement report is available at: Amundi Engagement Report
No ESG reference benchmark has been designated for this Sub-Fund.