Research is essential to sustaining innovation in responsible investment

This interview with Timothée Jaulin, Head of ESG Development and Advocacy at Amundi, has been originally published in the inaugural newsletter of the Institute. To subscribe to this complimentary newsletter, please contact: [email protected].

In this exclusive interview, we speak to Timothée Jaulin, Head of ESG Development and Advocacy at Amundi, about sustainable finance. We cover a range of topics, including the key issues facing the investment management industry, Amundi's research agenda, and the company's support for leading research initiatives on climate change mitigation and adaptation. Timothée also discusses Amundi's support for EDHEC-Risk Institute’s transition into EDHEC-Risk Climate and the objectives of the research chair jointly funded by Amundi and the EDHEC Endowment, titled "Measuring and Managing Climate Risks in Investment Portfolios".

What do you see as the key issues facing the investment management industry in matters of sustainability and the key investor asks?

Timothée Jaulin: In recent years, and especially since the 2015 Paris Agreement, responsible investing has gained traction and imposed itself as a credible model, supported by strong tailwinds that include: 1) major environmental and development issues requiring stringent regulations and massive additional financing 2) targeted regulation of sustainable finance and 3) strong societal support with increased responsible commitments from the private sector. The COVID crisis and the numerous fallouts from the war in Ukraine and, most recently, the US-EU race for a green ‘re-industrialisation’ have – if anything – demonstrated the significant materiality of environmental, social and governance factors.

Yet somehow, paradoxically, after several years of broadly consensus expansion, sustainable investing is facing a backlash in different regions around the world, involving very different and sometimes opposing debates: for some, the approach is too mild, and ESG investing should go beyond financial materiality consideration to embrace outcome and impact, while others believe it has gone too far and is breaching fiduciary duties.

Having said that, I am convinced that this so called ‘ESG backlash’ should rather be seen as the sign of an industry that is maturing. First, it shows that, beyond declarations, real change is at work. Second, it calls for a need for clarity in the value propositions. We need to meet investors’ expectations on these two fronts.

In 2022, Amundi grouped its economic/quantitative/market/asset allocation research activities under Amundi Institute. ESG is one of the themes it looks at. The Institute’s Head of Quantitative Strategies Dr Thierry Roncalli has done a lot to promote education on sustainable finance and its Head of Investor Intelligence Dr Marie Briere has also contributed to interesting research on ESG. How is your research agenda defined and what are the key items on it?

Timothée Jaulin: The Amundi Institute produces numerous ESG-related contents, with a rich pipeline of working and thematic papers developed in partnership with Amundi Investment teams, investors, and institutions.

The current research agenda of the Quantitative Strategies team focuses on: 1) the integration of ESG and climate risks in portfolio construction and asset allocation such as the development of net zero metrics, the impact of carbon taxes on asset pricing, the core-satellite approach of net zero investment portfolios, and the valuation of the clean-tech sector; and 2) the use of Artificial Intelligence in asset management, especially to assess geopolitical risk and monitor the real estate market.

The Investor Intelligence and Academic Partnerships team examines the impact of investors’ changing preferences for ESG on asset valuation and firms’ behaviour. It includes the assessment of retail and institutional investors’ ESG preferences, of their ESG policies and the measurement of their real impact.

In addition, the Macro and Strategy teams develop ad hoc research to integrate climate and social considerations into capital market assumptions for strategic asset allocation.

This year, the Institute will also sponsor an extensive survey on DB and DC pension funds in Europe to analyse investors’ ESG preferences and their attitudes on future trends, after the war in Ukraine.

Amundi has announced it is increasing its support to leading research initiatives on climate change mitigation and adaptation and selected three research initiatives in 2023: EDHEC-Risk Climate Impact Institute, OS-Climate by Linux Foundation, and the MIT Joint Program on the Science and Policy of Global Change. Can you tell us more about the objectives, challenges and benefits of the work you are supporting at OS-Climate and the MIT?

Timothée Jaulin: As a responsible asset manager, Amundi believes that research is fundamental to keep innovating in the responsible investment field, in particular to mobilise effectively capital markets in the fight against climate change. For this reason, in 2023 Amundi has not only renewed its support to the EDHEC-Risk Climate Impact Institute but will also start to support OS-Climate by the Linux Foundation and the MIT Joint Program on the Science and Policy of Global Change.

OS-Climate is an open data and open source analytics initiative which supports projects relating to the investment, risk assessment, financial implications and analyses of climate change. Its goal is to rapidly accelerate the shift of global investment away from relatively GHG-intensive companies, technologies, and infrastructure into mitigation, resilience, and adaptation that is financially sustainable and high-impact — especially in developing countries — as well as to enable the design of better policy that effectively engages capital markets in addressing climate change.

The MIT Joint Program on the Science and Policy of Global Change studies the interactions among human and Earth systems to help decision-makers confront the coupled challenges of future food, energy, water, climate, air pollution and human health. Its mission is to advance a sustainable world through scientific analysis of the complex interactions among global systems.

Amundi supported EDHEC-Risk Institute research on indexing and exchange traded funds from 2009 to 2021 – why did you decide to accompany the transformation of EDHEC-Risk Institute into EDHEC-Risk Climate?

Timothée Jaulin: Amundi has been a longstanding partner of EDHEC-Risk, since 2009, and through time EDHEC-Risk has become the premier academic centre for industry-related financial research on risk and investment management, especially on ETF. When the institute changed its focus, and thus its name to EDHEC-Risk Climate Impact Institute in October 2022, it reinforced its commitment to helping organisations integrate sustainability risk and impact considerations. So, it was a very natural decision for us to sponsor the new programme of the research chair on “Measuring and Managing Climate Risks in Investment Portfolios” of the newly formed EDHEC-Risk Climate Impact Institute and support its goal to become a leading academic reference point helping long-term investors manage the asset-pricing implications of climate change as well as mitigation and adaptation efforts. There is actually a strong alignment between our respective institutions, both in terms of research agenda and ambition.

The research chair jointly funded by Amundi and the EDHEC Endowment is titled “Measuring and Managing Climate Risks in Investment Portfolios" and will initially study how the equity market and equity fund managers react to climate news. What kind of questions to you expect the work to answer?

Timothée Jaulin: The chair aims to investigate whether it is possible to identify a measure of climate-change risk and, if so, to investigate whether it can be used to construct optimal portfolios with respect to climate-change risk. The first part involves the creation of a climate change news index, using a variety of language models and high-quality English-language newspaper sources (including the Financial Times for the first time in the literature). The second part aims to use this index to create climate-change risk hedged portfolios.

In the first part of the study on how the equity market and equity fund managers react to climate news, I expect the work to answer whether certain news topics or phrasings have more influence on the behaviour of equity fund managers rather than others, and whether certain newspaper sources are more influential than other for what concerns climate news.

About Timothée Jaulin, Head of ESG Development & Advocacy, Special Operations at Amundi

Timothée Jaulin oversees ESG Development & Advocacy for Amundi Asset Management and Special Operations for the Institutional Clients Division. He joined Amundi in 2012 as a Research Associate, and then contributed to the setting-up and development of the Investment Solutions team before being in charge of the coverage of supranational entities globally.

In both capacities, he has been closely involved in the development of some of Amundi most innovative investment solutions including Amundi climate finance offer. Timothée was notably involved in the launch of flagship green finance public-private partnerships such as the Portfolio Decarbonization Coalition with the United Nations Environment Program, green bond development programs with the International Finance Corporation and the European Investment Bank and the Asian Infrastructure Investment Bank’s Climate Change Investment Framework.

Prior to working in Amundi Paris headquarters, Timothée worked for Amundi in London and New York and for the French Treasury in Washington D.C. Timothée is a graduate from the Ecole Normale Supérieure Paris-Saclay and holds a Master in Theoretical and Applied Economics from the Paris School of Economics.