Fonds de Réserve pour les Retraites (FRR), the €20.7bn French public sector fund, has invested €100m in a new energy transition equity index that it developed in partnership with BNP Paribas in a bid to overcome perceived limitations of existing indices.
Dubbed the BNP Paribas FRR Eurozone Advanced Transition Equity Index, the new index sets out to identify large- and mid-cap companies that are best positioned to successfully achieve their climate transition, taking into account both their current emissions footprint and their future financing and implementation capacity.
To do this, the methodology considers greenhouse gas emissions intensity (Scopes 1, 2 and 3); implied temperature rise; and the share of green investments aligned with the EU Taxonomy.
The index is also built using what FRR describes as a consensus indicator, provided by the firm ValueCo, that assesses the credibility and quality of companies’ transition strategies as judged by institutional investors.
“FRR has been committed for more than 20 years to integrating environmental issues into its investment policy,” said Salwa Boussoukaya-Nasr, member of FRR’s executive board. “With this new index developed with BNP Paribas, we want to take an additional step by favouring an approach based not only on current emissions and impacts, but also on companies’ ability to transform their business models to meet the challenges of the climate transition.
“This €100m investment illustrates our desire to support financing for the transition of the real economy while preserving our long-term performance objectives.”
Thibaut Heurtebize, head of sustainable structuring at BNP Paribas, said reconciling climate ambition with financial performance was possible due to “ESG-oriented quantitative optimisation”.
Next steps
The new index is being implemented within FRR’s equity index replication mandates, which the reserve fund manages to align with the goals of the Paris Agreement. It said this supports the commitments it has made as part of the UN-backed Net-Zero Asset Owner Alliance.
FRR said it would monitor the financial and non-financial performance of this index over time in order to assess opportunities to extend this approach to other investment universes.
“This initiative may also lead to complementary approaches and broaden the range of tools available to tackle the challenges of climate change and the necessary energy transition,” it said.
