French reserve fund to focus SRI effort in Europe

FRANCE – The 16 billion-euro French reserve fund says it will concentrate its socially responsible investing approach on large-cap European equities at first.

The Fonds de Réserve pour les Retraites said it has decided to concentrate its ‘socially responsible’ approach on euro zone and non-euro European large-cap equities mandates, due to the lack of information elsewhere.

The mandates represent a total of just under three billion euros, or 18% of its assets.

“This does not rule out the option of extending this approach to a broader universe in the medium run, after the FRR's initial management mandates have expired,” it added. Other possibilities include: Asian large-caps, euro zone small and mid-caps, US mid-caps and value/growth as well as fixed income.

It says it does not want to exclude certain sectors, adding: “Socially responsible fund management practices are heterogeneous and lack sufficient maturity.

“In particular, they are directly dependent on the quality, quantity and relevance of the sources of information available on a company’s social and environmental policies and performance.”

The fund will submit a draft set of proxy voting guidelines to its supervisory board by the end of this year. It seeks to adopt a “progressively active” proxy voting policy.

The FRR calls its approach “both gradual and inclusive”. “The FRR did not want to establish a fixed set of SRI criteria from the outset, applicable to all companies in its portfolios, without engaging in genuine consultation beforehand.”

The fund, which has been critical of some applications for mandates from asset managers, says it wants asset managers to incorporate SRI criteria.

“The FRR requests that asset management firms gradually incorporate extra-financial criteria into their stock-picking process (if they are not already doing to) and that, in doing so they use generally accepted international guidelines.”

And those managers who are awarded mandates by the fund are expected to share the information they acquire on companies with the fund, which will eventually establish its own formal guidelines.

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