FRANCE - French civil servants pension fund Erafp has opted for risk-weighted socially responsible investment (SRI) indices in its latest euro-zone listed equity mandates.
Prior to the mandate renewal in May, the scheme used to have four asset managers for its active equity SRI mandates, which were benchmarked to the MSCI Emu.
However, last month, six mandates corresponding to four types of listed fund equity management were allocated.
Two former mandates remain, while two mandates are now SRI-index based - one for large caps and the other one for small and mid caps - and another two are non-benchmarked managed within an SRI investment universe.
Olivier Bonnet, head of SRI at Erafp, told IPE: "The index mandates provide better diversification and risk management to our portfolio but are also cheaper than active mandates and fully integrate Erafp's SRI criteria."
For financial reasons, Erafp wanted to have risk-weighted indices rather than market cap indices. These were specifically designed for the pension fund by FTSE and French business school Edhec.
SRI rating agency Vigeo screens out companies from the investment universe that do not meet the pension fund's SRI requirements. Each index is then calculated based on the remaining universe.
Bonnet said: "Although we were satisfied with the implementation of our SRI criteria by asset managers in the past, we had to deal with contradicting opinions between our asset managers and rating agency as to what companies respected our SRI requirements, which was very difficult to explain to our trustees.
"With a specific SRI index based on Vigeo's data, we have control over the implementation of our criteria because the investment universe has been screened for compliance with our SRI framework.
"A customised index reflects our own individual SRI approach, which may differ from that of other investors and which is why we have not chosen a sustainable index from the market.
"Of course, you lose the opportunity to exchange views with active managers with a passive mandate. However, because two of our mandates remain active, we can still discuss the performance of companies in a different part of the portfolio."
Erafp runs a 100% SRI strategy.