The Autorité des Marchés Financiers (AMF) has published a summary of a study analyzing responses to a questionnaire from 176 generalist portfolio asset management companies (AMCs) with at least one contractual non-financial commitment for at least one of their funds. The SPOT inspections targeted five AMCs, whose ESG funds or socially responsible investment (SRI) funds account for between 20% and 90% of their total assets under collective management. The study focused on the organization and resources used for ESG/SRI management, ESG management and rating methodology, external suppliers of non-financial data, the process for creating and reviewing the funds’ initial investment universe, the mapping of existing commitments, monitoring compliance with commitments, information provided to investors on non-financial contractual commitments, and the role of depositaries in monitoring non-financial commitments.
The AMF found that the five institutions inspected had put in place important and increasing human and technical resources to define, review, manage, and monitor non-financial contractual commitments. However, they were also found to be inadequacy of permanent controls to justify corrections made to ESG ratings calculated by the rating algorithm. Only 40% of the AMCs on the SPOT panel have a satisfactory process for this diligence.
The AMF also found that only two of the five AMCs concerned by the SPOT inspection carried out ex post checks to ensure the investment universe was consistent with the fund’s ESG policy. The summary also addressed two types of non-compliance with non-financial contractual commitments: active breaches and passive breaches linked to developments outside the AMC’s control.
The AMF emphasizes the need to continuously reinforce the control process of non-financial commitments, particularly given the reinforcement of regulatory requirements and the risk of making misleading promises to investors if these commitments are not met.