HOW CAN FINANCE

REINVENT ITSELF TO
BETTER SUPPORT
SUSTAI NAB LE PRO JE CT S ?

Guillaume Burnouf – Émilien Taieb –

Rémi Labatut – Grégoire Ludovic
Team 21
INTRODUCTION TO ESG INVESTMENTS

Awareness of
The integration of non-
environmental, social and While investor interest in
financial factors into the
governance (ESG) issues ESG issues has increased
investment process is a
and the pursuit of in recent years, younger
response to global
objectives beyond profit investors in particular
challenges such as climate
maximization and risk expect their investments to
change and inequality, with
minimization is a growing reflect ESG concerns
the aim of having a
trend worldwide.
positive impact on society.
ESG PERFORMANCE MEASUREMENT

ESG impact is still difficult to measure, although around a third of invested

1) assets are defined as sustainable, and the subject is becoming increasingly
well-known.

Several rating systems are used to measure the risks and effects of investments
2)

In many cases, there are significant discrepancies between them, even when they
are standardized and measure the impact of a single company.
DRIVERS OF ESG INVESTMENTS

GROWTH LIMITS

• Regulators • Performance concerns

• Performance
• Customer demand
• Influencing corporate behaviour
• Maintaining a good brand and
reputation
• Lack of reliable data
• Greenwashing
• Complex regulatory landscape
• Focus on short-term investments horizons
• Lack of suitable products / strategy
G E O G R A P H I C A L D I S PA R I T I E S I N
S U S TA I N A B L E I N V E S T M E N T
Leaders
Europe and the USA are the leaders
in sustainable investment, with
between 80 and 90% of sustainable
assets under management.
Pioneers in the cooperation and
implementation of international rules
85% of AuM
Laggards
APAC countries are lagging
(between 5-10% AUM) but have
been gradually expanding their
investments in recent years,
particularly in China and Japan.
10% of AuM
Rest of the World
Other developing countries
account for only a tiny
proportion of sustainable
investment(<5%) despite
economic and demographic
growth.
5% of AuM
F O C U S O N B L A C K R O C K & VA N G U A R D
BlackRock and Vanguard have a
reputation for supporting ESG
initiatives. However, it is worth
asking whether this commitment was
part of an ideological approach or
simply a response to market demand.
They appear to be changing their
approach to environmental, social
and governance (ESG) investment
strategies, increasingly rejecting
shareholder proposals focused on
environmental and social issues.
How the largest
assets managers react
towards ESG ?
Recent statements from
Blackrock CEO Larry Fink
indicating that he was moving
away from controversial ESG
terminology, and a reported
loss of around $4 billion in
assets under management
linked to ESG reaction.
F O C U S O N B L A C K R O C K & VA N G U A R D
Asset managers need to be wary of
any factor that increases volatility or
decreases returns. ESG, despite the
social and environmental benefits it
is supposed to bring, can add
complexity that investors generally
prefer to avoid.
While it seems that BlackRock,
Vanguard and similar companies
are increasingly turning their
attention to traditional financial
performance indicators, it is crucial
to observe their actions closely, as
they are industry leaders.
How the largest
assets managers react
towards ESG ?
Transparency is essential to
ensure that these major players
are truly committed to meeting
their investors' primary need:
to focus on maximizing the
returns and growth of their
clients' portfolios.
N E E D F O R L E G I S L AT I O N &
R E G U L A T O R Y I N I T I AT I V E S

Current situation and initiatives

Corporate Sustainability International Sustainability An urging need for

Reporting Directive (CSRD) Standard Board (ISSB) international and
applicable from 1 January 2024 created in 2022 under IFRS foundation governmental cooperation

Harmonize the extra- Provide standardized framework Considering all stakeholders

financial reporting of to promote transparency involved, including NGOs
European companies & consistency and developing countries
 H O W T O E N C O U R A G E S U S TA I N A B L E
INVESTMENTS

How can we change it?

Promoting research Education Access to investment

Providing ESG training and

Enhance research to build extensive
ESG databases
Implement stringent standards to
counter greenwashing
fostering innovation and innitiatives
through funding
ressources to investors, companies,
and schools Fintechs, who facilitate and
standardise sustainable investment,
can be taken as an example
enhance understanding
better decision-making
deeper commitment to sustainability
R E G U L AT I O N T O S U P P O R T E S G
INVESTMENTS

Clear ESG Reporting Framework

Informed Decisions
Fight Green-Washing Transparency
Right Incentives Choices

1) Penalties for “dirty” investments 2) Incentives on sustainable investments

Carbon Emission Quotas Green Bonds Preferential regulatory treatment or guarantees

Taxes on polluting activities Eco-Bonus Incentives towards final client, impacting purchase
R&D Providing financial support and resources on R&D
ESG Disclosure Requirements in sustainable technologies
support
TA R G E T S T H R O U G H M E A N I N G F U L K P I

KPI Description Target Exemple

The most important KPI. Measures the

200 tons of CO2 equivalent per
Portfolio Carbon Footprint carbon footprint of investments to assess
$1M invested
their environmental impact

15% of the portfolio is in green

Green Bond Proportion Percentage of green bonds in a portfolio
bonds

ESG perf. Score based on environmental,

ESG Score 85/100 ESG score
social, and governance criteria

Sustainable Development Degree of investments' alignment with the 70% of investments are aligned
Goals (SDG) Alignment United Nations SGG with at least one SDG

Renewable Energy Ratio of investments in renewable energy 25% of total investments are in
Investment Ratio compared to total investments renewable energy