2020Engagement
ReportEngagement Report 2020

Contents
05
06
08
11

Foreword
Executive Summary
A Year In Review
Amundi Philosophy and Strategy: Creating a Fair and Sustainable Transition
11 Our Engagement Strategy
11 Implementing Engagement into our Investment Strategy
12 Other Key Considerations for Engagement

15

Our Engagement Process: A Multi-Faceted Approach
15 The ESG Research Team
15 Collaborative Engagement
15 Direct Engagement

19

Voting: From Words to Actions
19 The Amundi Corporate Governance Team
19 Ongoing Engagement through Pre‑AGM Dialogue
21 Ongoing Engagement Through Voting

27

Participating in the Energy Transition
27 Achieving Alignment with the Paris Agreement through Sciences Based Targets
28 Accelerating the Energy Transition with Climate Action 100+
29 Putting Pressure on Coal: Amundi Coal Policy Engagement
30 Inspiring the Insurance Sector to set their own Fossil Fuel Policies

33

Preserving Natural Capital: The Environmental Transition
34 Circular Economy: Turning Theory into Reality
44 Increasing Accountability on Plastic
45 Pushing for Increased Reporting with the CDP Non-Disclosure Campaign
46 Biodiversity: The New Frontier in Sustainable Finance

2/

49

Protecting & Developing Employees in Companies and Supply Chains
49 Promoting Diversity and Non‑Discrimination: The 30% Club
50 Facilitating a Just Transition
51 Fair Compensation: The Case for the Equity Pay Ratio
52 Living Wage for Direct Employees: A Matter of Social Cohesion
53 The Platform Living Wage Financials and Covid-19
56 Engaging for Increased Social Reporting with the Workforce Disclosure Initiative

59

Addressing Client, Product, & Societal Responsibility
59 Access to Basic Needs: the Access to Medicine Foundation
61 Consumer Protection: Navigating the Complexities of Content Moderation for Social Media
62 Product Responsibility: Tackling the Agricultural Transition with the FAIRR Initiative
62 Ethics and Business Conduct: The Fight Against Money Laundering
63 Ethics & Due Diligence with SMEs

65

Promoting Good Governance
65 Governance in Japan

69

Other Engagements & Activities
69 Emerging Markets: Pushing for Improved ESG Practices
70 Fondation de la Mer: Promoting Greater Corporate Reporting on Ocean Impacts
70 Advancing a Harmonized Framework for Social Bond Reporting with the ICMA
71 Setting the Standard for Green Bond Reporting73

Conclusion

3

4/

Jean-Jacques Barbéris
Executive Committee Member,Head of Institutional Clients Coverage & ESG

Foreword
As a responsible asset manager since its creation in 2010, Amundi has been
deeply committed to the objective of providing its clients with financial
performance over time while contributing positively to addressing society’s
key global challenges
The socioeconomic inequalities exacerbated by the
Covid-19 crisis have been a brutal reminder that all
around the world, vulnerable populations, companies,and countries, are extremely sensitive to shocks. Thispandemic has highlighted the fact that international
collaboration and solidarity are, once again, the mosteffective responses to address global challenges.
Integrating ESG risks and opportunities in our investment
decisions, engaging with companies on ESG issues, andcarrying out voting activities that take into account ESG are
not only drivers of long term value for our clients’ portfolios,
they are an impetus of positive change for society.

Adopting a strategy to adapt business models to theclimate challenges as well as to align with the Paris
Agreement, has become a driving need to ensure longterm growth and profitability of the companies in which
we invest. Within this pandemic-driven context, equitable
sharing of added value is also more significant than ever.
Fostering positive change is no easy task, and we shallall play our part through the active dialogue we havewith the issuers in our portfolios as well as through ourvoting activity. 

5Engagement Report 2020

Executive Summary
As a responsible asset manager since its creation in 2010, Amundi has
been deeply committed to the objective of providing clients with financial
performance over time while contributing positively to addressing society’s
key global challenges. We truly believe that our duty to our customers is todeliver robust performance in a way that preserves their long-term economic,
natural and human capital.
Integrating ESG risks and opportunities in our investment
decisions, engaging with companies on ESG issues, andcarrying out voting activities are drivers of long term
value for our clients’ portfolios, as well as crucial to theglobal effort to preserve the clients’ environmental andsocioeconomic backdrops and promote a transition toa more sustainable, inclusive low carbon economy. In
2020, the Covid-19 crisis reminded us of the key value ofthese backdrops for our economy.
Five years after the Paris Agreement, significant efforts
are still needed to set a new course to reduce global
warming and dampen its dire consequences. We
sincerely hope that beyond diplomatic success, the COP
26 will be a key moment for climate action, and Amundi
will remain, now more than ever, deeply committed.
To positively contribute to the transition to an inclusive
low carbon economy, Amundi initiated a three year
action plan in 2018 to strengthen its commitment to
responsible investment, withthe ambition to mainstream
ESG-investing (Environmental,
Social, Governance), foster
innovation to expand ESGrelated financing needs, andchampion ESG integration
vis-à-vis all our counterparties
around the world.

anti-bribery matters), material to society and the global
economy even though they might not be material forthe financial statements of the company, on a short tomedium term horizon).

In 2020, Amundi engaged with issuers on
6 main areas: The transition towards a low carbon economy
 The natural capital preservation (ecosystem protection& fight against biodiversity loss) The social cohesion through the protection of direct &indirect employees and the promotion of human rights

 Client, product & societal responsibilities
 Strong governance practices that strengthen sus‑
tainable development

 Dialogue to foster a stronger voting exercise and asounder corporate governance.

In 2020, the Covid-19
crisis reminded us of
the key value of thesebackdrops for our
economy.

Engagement with issuers is key
to fostering concrete changes
and contribute effectively to the transition towards an
inclusive and sustainable low carbon economy. As such,it should not only be on how sustainability issues may
affect the company (sustainability risk) or the material
issues that affect profit & loss, cash flows, balance sheet
and valuation. Engagement is also how the company
affects society and the key elements of sustainability(such as impacts on environmental, social and employee
matters, respect for human rights, anti-corruption and

6/

Since 2019 and in particular in
2020, we have been focusing
our voting and engagement
efforts on two priority themes:
the energy transition and social
cohesion. Both topics represent
systemic risks for companies aswell as opportunities for those
who wish to integrate them in apositive way.

The Energy Transition
Regarding the energy transition in 2020, Amundi
reinforced its thermal coal exclusion policy by extending
the policy to companies developing or planning todevelop new thermal coal capacities along the entire
value chain. Amundi also voted in favor of 86% of climate
related shareholder resolutions and engaged with
472 companies on the energy transition.

Climate engagements have also included companies
in sectors that are highly exposed to the energy
transition to include climate related key performanceindicators in their corporate related compensation
packages, engagements with insurance companies
and banks concerning their own fossil fuel policies,and climate related collaborative initiatives such as the
ClimateAction100+. Finally, Amundi also commenced
a major engagement to ask companies to declare analignment objective with the Paris agreements under the
Science Based Targets framework.
Ecosystem protection must also be prioritized along withthe climate transition and thus remains a key concern
for Amundi on the environmental pillar. Amundi engaged
with 378 companies on ecosystem protection in 2020.
Amundi started a major thematic engagement on thecircular economy that spanned 4 sectors to address
how companies are adjusting their business strategies tocapture circular opportunities. We also started scaling up
our work on biodiversity by engaging with companies on
how they are addressing biodiversity risks and pushingfor companies to increase biodiversity disclosure throughthe CDP forest survey.

Social Cohesion
Social cohesion is a key factor in the economic andpolitical stability of our democracies and our societies.
In 2020, Amundi supported 88% of compensationrelated shareholder resolutions, Amundi voted infavour of 79% social, health and human rights relatedshareholder resolutions, Amundi voted against 31% ofcompensation proposals. In 2020, Amundi engaged with
447 companies on the protection of direct and indirect
employees and on human rights. Social cohesion highly
relies on the control of the wage balance within theframework of compensation policies, be it for internal
employees or supply-chain workers. Amundi considers
that companies must ensure all employees, directly or

indirectly employed in the supply chain, should have aminimum “living wage”, consistent with living conditionsin the regions where they are employed. Amundi
engaged with companies within PLWF (Platform for
Living Wage Financials) to request, within the context
of Covid-19, companies in the garment sector to befinancially prudent whilst protecting labor and humanrights standards in their own operations and across their
supply chain. We also continued our living wage workwith direct employees by continuing our engagementwith the food retail sector to address potential living
wage risks for employees globally. We also initiated an
engagement regarding the equity pay ratio to requestthat companies better address remuneration imbalanceswhere median worker pay is below a living wage andCEOs have disproportionally high remuneration
packages.
Other engagements to address social cohesion in 2020
have included our commencement of engagements
around the just transition to make sure employees
are not forgotten during the energy transition, andengagements around access to basic needs, including
our continued work with collective initiatives suchas FAIRR on responsible proteins and the Access to
Medicine Foundation. Finally, Amundi helped launch the
30% Club France in 2020, the French chapter of a global
collective initiative to help address the gender gap in
executive leadership in the SBF 120. 

7Engagement Report 2020

A Year in Review

2020 Engagement Statistics
Total Number of Companies Engaged
Total Number of Engagementsof which is

922

878
1411

ESG Research Team

600 Interactions through Email322 Direct Engagements (Company Calls)

489

ESG Voting pre-AGM Dialogue

Engagement Breakdown by Theme
Transition Towards a Low Carbon Economy

472

Natural Capital Preservation (Ecosystem Protection & Biodiversity Loss)

378

Social Cohesion through the Protection of Direct & Indirect Employees and Promotion of Human Rights

447

Product, Client & Societal Responsibility

251

Strong Governance Practices that Strengthen Sustainable Development

341

Dialogue to Foster a Stronger Voting Exercise and a Sounder Corporate Governance*

489*Shareholder dialogue conducted by Voting Team

Geographic Breakdown of Engagements (in number of companies)

370
149

France8/Europeex. France

130

111

North
America

Asia andAustralia
ex. Japan

64

54

Japan

Other

(Israel, Africa, South and Central
America, Middle East)2020 Voting Statistics
VotingStatistics on Shareholder Dialogue

2020

Alerts and dialogues with issuers489

of which Europe295

of which International

194

Voting statistics

2020

Number of Meetings Voted

4 241

Meetings Voted with at Least One Vote "Against Management"

71 %Number of Proposals Voted

49 968Percentage of Vote "Against Management"

20 %Amundivoted at4,241 AGMs

Amundi voted
against 21%
of dividend proposals

Amundi voted
against 31%of the resolutions
regardingremuneration

Amundi voted
in favour of 86%
of climate
related proposals

9

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Amundi Philosophy and Strategy:
Creating a Fair
and Sustainable Transition
As a responsible asset manager since its creation in 2010, Amundi has been
deeply committed to providing its clients with high financial performanceover time while contributing positively to addressing society’s key global
challenges, a prerequisite for sustainable robust long-term value creation.
As part of this ambition to mainstream ESG investing,Amundi has committed to integrating ESG criteria acrossthe entire portfolio management value chain, notably
through: The systematic integration of ESG criteria within theactive investment & portfolio construction process

 The strengthening of the dialogue with corporates on
ESG topics through a pro-active engagement policy A voting policy emphasizing Environmental and Social
dimensions as top priorities.
Amundi believes that all companies contribute, throughthe policies they carry out, to the achievement of global
environmental and social objectives in their countriesof activity. As such, at Amundi, we wish to support andfoster the transition towards a sustainable and low carbon
economy. We strongly believe that an active stewardshipstrategy will stimulate investees to actively go downthat road. The 2020 active stewardship strategy has
therefore been designed to be result-driven, proactive
and integrated into our global ESG process.

Our Engagement Strategy
The subject of engagement is linked to the double
materiality perspective. Engagement with issuers should
not only be on how sustainability issues may affect thecompany (sustainability risk) or the material issues
that affect profit & loss, cash flows, balance sheet or
valuation. Engagement is also about how the company
affects society and the elements of sustainability (suchas impacts on environmental, social and employee
matters, respect for human rights, anti-corruption andanti-bribery matters), material to society and the global
economy even though they might not be material forthe financial statements of the company, on a short tomedium term horizon.

In 2020 Amundi Engaged with Issuers on 6 Main
Areas:

 The transition towards a low carbon economy
 The natural capital preservation (ecosystem protection& fight against biodiversity loss) The social cohesion through the protection of direct &indirect employees and the promotion of human rights

 Client, product & societal responsibilities
 Strong governance practices that strengthen sustai‑
nable development

 Dialogue to foster a stronger voting exercise and asounder corporate governance.
Amundi is particularly active in engaging around the two
major contemporary challenges that are, on one hand,the energy transition, and, on the other, the question ofsocial cohesion.

Implementing Engagement into
our Investment Strategy
Amundi engages investees companies or potential
investees at the issuer level regardless of the type ofholdings held. Issuers engaged are primary chosen by
the level of exposure to the subject of engagement.
Amundi’s engagement spans across different continents
and takes into account local realities. The aim is to havethe same level of ambition globally but with gradualexpectations throughout different geographies. Amundi
also endeavors for engagement activities to be impactful
and contribute to the global effort of the financial
community. The engagement period varies dependingon the agenda, but it usually lasts approximately 3 years
on average. Amundi defines different milestones andengagement developments that are shared internally via
our research platform, which is available to all investment

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Engagement Report 202012/

teams. Formal assessments are carried out, at minimum
on a yearly basis. Engagements may start with a formal
letter or email, and take different formats later on.
Due to the specific sanitary situation in 2020, mostengagements occurred through calls or virtual meetings.

In case of engagement failure nevertheless, escalation
modes are:

ESG research and corporate governance analysts areintegrating the engagement outcomes into their own
practices, either in the ESG quality assessment of issuers(through overrides in the ESG scores) or in the voting
exercises. When engaging with issuers, Amundi aims todrive the adoption of best practices regarding ESG issues,that will reinforce the robustness and sustainability of thelong term growth for investees by lowering sustainablerisks. Best practices will also support a stronger andmore stable economy by strengthening key elements ofsustainability such as environmental protection, socialand employee welfare, respect for human rights, anticorruption and anti-bribery matters. We wish to have acollaborative, supportive, and pragmatic yet ambitious
dialogue with our investees, and we aim to inspire a wide
range of actions that will benefit not only the issuers but
all stakeholders. We truly believe that dialogue is thecorner stone of a sound, strong development towards asustainable and inclusive low carbon economy.

 If some equities are held, and in themes that are critical(1) https://sdgs.un.org/goals

 Downgrade of the related criteria in the ESG score,and if the issue is critical, it could lead to a downgradeof the overall ESG score(climate, severe controversies and/or violations of
Global Compact principles), Amundi could decideto vote against the discharge resolution, or in caseof long standing inaction, against the chairperson orsome board members

 The ultimate escalation mode could be exclusion incase of failure to engage and remediate on a criticalissue.
For active, “open-ended” strategies, when Amundi has
full discretion and when technically possible, the ESG
criteria are integrated into the investment processes
with the objective to deliver, in addition to the financial
objectives, portfolios’ ESG quality better than its
investment universe references.

Other Key Considerations forEngagement
The UN SDGs
What are the UN Sustainable Development Goals?
In 2015, the United Nations Member States adopted the2030 Agenda for Sustainable Development that aims
to provide a “shared blueprint for peace and prosperity
for people and the planet, now and in the future” (1). The
Sustainable Development Goals (or SDGs) are a globally
collaborative and relatively comprehensive set of goals
that apply to all countries and all actors. They include
universally pressing issues such as poverty reduction,
health, inequalities, environmental sustainability, ethics,
and economic growth.
Each SDG has specific targets and indicators to monitor
global progress to achieve these goals. These indicatorspresent opportunities for not only the public sector
but also civil society, and private entities to engage
in sustainable development in a meaningful way andcommunicate so accordingly.
The SDGs at Amundi

The SDGs as a Guideline for Engagement
Regarding engagement, the SDGs can help outline
areas where engagement can have a positive impact.
The targets and indicators can often act as a guideline
to evaluate how Amundi engagements are contributing
to this “shared blueprint for peace and prosperity” andhighlight areas that might be poorly addressed by theinvestment community and where Amundi’s efforts canhelp accelerate a positive impact.
While the SDGs were not originally designed for investors,
the SDGs provide a framework to help align KPIs (keyperformance indicators) and benchmarks for corporates
performance to universal goals regarding sustainable
development. As such, highlighted in the report are links
between Amundi engagement and the UN SDGs.

Building Trust with Investee Companies
We value the trust of our investee companies as it fosters
impactful engagement and often-positive outcomes. As
such, in this report company names are only disclosed withconsent from the companies. Companies are often happy
to be featured in our report (especially when it shows
positive outcomes resulting from constructive dialogue). 

The SDGs can provide a framework for a wide variety of
products and strategies within the realm of responsible
investing. For example, the SDGs can be used as aframework to risks and opportunities for particularsectors and companies and aid in analysis, strategy &product development.

Contributing to the SDG is one of our engagement objectives

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Our Engagement Process:A Multi-Faceted Approach
Whatever the agenda, engagement always has a purpose. The engagement
methods are either direct engagement or collaborative with other investors
and/or stakeholders.

The ESG Research TeamThe Amundi ESG Research & Engagement team consistsof 16 people with a balanced set of skills and backgrounds.
The team spans across Paris, Dublin, London, Tokyoand Singapore. The Responsible Investment division at
Amundi is a separate business line independent from theinvestment management and financial analysis teams.
This ensures the quality and the independence of the
ESG analysis, but does not prevent them from working
in close collaboration with portfolio management teams.
ESG analysts meet, engage and maintain constantdialogue with companies to improve their ESG practices
and have the final say over ESG ratings of companies
to ensure that internal ESG scores are accurate andin line with key Amundi convictions. The team is also
responsible for monitoring sector trends, staying abreastof established and emerging ESG topics and assessing
the impact of ESG topics on the macro-sectors covered.

Collaborative Engagement
Collective efforts can often have a greater impact.
Just as we encourage issuers to act collectively on key
sustainability issues, investors also often collaborate.
Collaborative initiatives can provide additional scope forengagement or provide opportunities for greater impact.

Collaborative Engagement versus Our Own
When deciding between collaborative engagement or
our own, Amundi will choose the most efficient method
to push the agenda, which could favor a collaborative
method. Amundi might supplement collaborative efforts
with direct engagement if a collaborative engagement
does not cover particular issues, sectors, or companies,
or if the collaborative initiative does not address the
topic in a way Amundi might wish.

Collaboration – Active Engagement versus
Participation
Amundi normally plays an active role in collaborative
initiatives (Active Engagement). This generally meansthat Amundi takes the role of lead investor to engage
with one or more companies. Sometimes, active
engagement means that Amundi contributes to theplanning, methodology and operations of the initiative.
By contrast, occasionally, Amundi is simply a participant
in a collective initiative. This is often the case when theinitiative is dynamic and impactful without particularassistance from Amundi. For other collective groups,
Amundi contributes to the thought leadership on
emerging topics or provides contacts and resources. As aparticipant, Amundi has the opportunity to gain insights
into new and emerging problems or advise the group on
the feasibility of proposed methodologies to prepare for
eventual active engagement.

Direct Engagement
Within direct engagement, there are two distinct types:
Thematic and Ongoing.

Thematic Engagement
Thematic engagement refers to cross-sectorial
engagement on key topics such as climate andenvironmental transition, social and employee matters,
respect for human rights, anti-corruption and antibribery matters.

Emerging Thematics
Emerging thematics are themes that are important for
the transition towards a sustainable, inclusive low carbon
economy but where awareness of the issue might belimited at the issuer level and best practices are still
emerging. With emerging themes, one of the key aims of
the engagement is to raise awareness and help identify
best practices for companies and sectors.

Established Thematics
Established themes are those that are well discussed
and well researched, such as climate and water risks, butwhere practices still need to improve. These topics may
not be completely solved but companies and sectors
are likely to have a strong level of awareness around theimportance of the topic.

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Engagement Report 2020

Ongoing Engagement
Ongoing engagement is typically company or sector
focused engagement (also sometimes called company
dialogue). Ongoing engagement can cover multiple
issues or themes (and by consequence result in a varietyof performance benchmarks for companies to meet).
Specific reasons for ongoing engagement include:

Sustainability Challenges, Risks,
and Opportunities
Ongoing engagement can be triggered by specificchallenges or sustainability risks faced by the issuer
or its sector. Sometimes engagement can be aimed at
highlighting sustainable opportunities that could deliver
additional benefits to companies and stakeholders.
Whatever the subject, the aim is to encourage overall
improved performance as wellas to encourage companies
to meet specific performancebenchmarks.

(small-medium enterprises) or companies in emerging
markets. In these cases, Amundi may work closely withthe company to encourage improved performance byhelping the company identify short-term and longerterm targets that will lead to improved ESG performance.

Engagement with Laggards
Companies might demonstrate poor performance on one
or many ESG criteria. For these companies, engagements
target specific areas where companies lag behind andengagement could help them improve.

Engagement around Amundi Policies Prior to
Possible Divestment
Amundi Exclusion Policies
Certain Amundi policies such as those around thermalcoal, tobacco, and controversial
we a p o n s m ay n e c e s s i t a t edivestment now or in the future.
At Amundi, divestment is serious
so it is important to engage
with companies at risk for futuredivestment to make sure ourpolicy is clear and they have time
to make the necessary changes
before a possible exclusion.

Certain Amundi
policies such as thoseEngagement around
Controversies
around thermal coal,
Controversies can happen if acompany fails to properly manage
tobacco,sustainability risks. When aand controversial
controversy occurs Amundi will
undergo ongoing engagement
For companies near a threshold
weapons may
to encourage proper remediationfor exclusion, engagement is also
and ensure that changes to thenecessitate
divestment
a way to ensure provider data is
management and strategy willin case of discrepancies
prevent repeat controversies.
now or in the future. correct
due to differing calculation
Engagement with Leaders

Ongoing engagements can include discussions withleading issuers with strong ESG performance to offer
them positive encouragement and incentivize themto remain a leader through continued improvements.
“Best in Class” is a moving target so it is importantto recognize leaders with strong performance but
continue to encourage them to keep up the good work.
In addition, engaging with leaders can help Amundi
get a better sense of current strong practices and the
direction the sector is going to manage specific risks.
These key insights can help to set feasible benchmarks
for companies who may lag behind.

Engagement with Improvers
Some companies that lag behind express a desire to
improve; however, they are in the early stages of their ESG
journey. This could be the case for companies who have
limited knowledge of ESG best practices such as SMEs

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methodologies. Engagement inthis sense can also help Amundi make informed decisions
prior to possible divestment.
Coal
For coal, Amundi has a constant yearly dialogue withany companies near the exclusion threshold. This helps
to make sure provider data is absolutely accurate. For
example, there can be some discrepancies for mining
assets on the mix of thermal and metallurgical coal (asour coal policy concerns thermal coal, not metallurgical).
Engaging with companies on the data we have, helps
ensure that provider assumptions on asset breakdowns
are correct. These conversations also let issuers know ifthey are nearing divestment thresholds for Amundi (orfor particular clients) and can provide incentives for themto accelerate their transition. (For more information on
Amundi coal engagement please see page 29).

Controversial Weapons
Concerning controversial weapons, dialogue can also
help Amundi make informed decisions. Sometimes
public disclosure is not enough for investors to assess
a company’s investment in controversial activities. For
example we engaged with a German conglomerate on
their possible involvement in depleted uranium weapons.
The use of depleted uranium in munition and weapons
is controversial because of concerns over long-term
health effects. Amundi’s definition of involvement inthese weapons is broad and encompasses the suppliersof key elements. Whilst the company stated that it does
not produce, develop or distribute these weapons, it
could not confirm to us that they do not supply key
components. This led to our divestment.
UN Global Compact Violations
In some cases, companies are at risk for divestment due
to suspicion of severe violations of UN Global Compact.
In these cases we aim to engage with the issuer tomake improvements, but if the case is too severe andif the remediation plan is insufficient the company will
be proposed for exclusion at the Amundi ESG Rating
Committee.

Engagement Through Pre-AGM Dialogue
Amundi may undergo pre-AGM dialogue to encouragesounder corporate governance in line with the Amundi
Voting Policy. Our voting reflects our overall approachto stewardship, meaning that we are committed to longterm relationships with the companies in which we invest,
and strive to have active dialogue with them. Amundi
is committed to transparency and, where possible, it
informs issuers of planned negative votes.
For underlying ESG issues, sometimes the Amundi
Engagement and Voting teams will conduct jointcompany dialogue. These engagements can befor specific issues on the environmental, social, orgovernance pillar where joint engagement could enable
greater impact. 

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Voting: From Words to Actions
The Amundi Corporate Governance TeamThe Amundi Voting & Corporate Governance team consists of 5 people
who analyze resolutions and organize ongoing dialogue that Amundi
wishes to have with companies pre and post AGM’s with the aim of better
understanding their strategy and pushing for continuous improvement inpractices.
These dialogues are also an opportunity to exchangewith issuers on practices that foster progress. We
recognize that companies’ approaches take time to
evolve and we look for progress and momentum as muchas achievement; our dialogue with companies aims toencourage ongoing improvement over time. By applying
the general voting policy principles, Amundi is able tocast votes consistent with the shareholder dialogue.

Integrating Voting and Engagement
The voting team is integral to the Amundi global
engagement effort. Apart from the themes specific to asound corporate governance, as well as a strong voting
practice, we insist on board accountability in terms ofsocial responsibility and climate strategy. We did also
highlight the need to include ESG KPIs in the executive

compensation in line with the global strategy and if
possible some KPIs related to climate. Social cohesion,
wage balance, and employee involvement in thecompany’s growth have long been engagement topics forAmundi. Since 2019, we have reinforced our voting andengagement efforts on these topics. The socioeconomic
inequalities have been exacerbated by the Covid-19
crisis as all around the world, vulnerable populations,companies and countries, are extremely sensitive toshocks. Therefore, since the Covid-19 crisis, we havereinforced our dialogues with companies concerning thecritical need to focus on the long term while balancing
the different stakeholders‘ efforts. More specifically thiscan be done with a conservative approach on dividend
payment and temperance in executive compensation.

Ongoing Engagement through Pre‑AGM Dialogue
2020 Pre-AGM Dialogue Statistics
The Amundi Corporate Governance team conducteddialogue with 489 issuers in 2020. Of this, 322 alerts weresent out concerning the Amundi voting exercise which

triggered 70 dialogues. We also conducted dialogue
with 167 issuers off season.

Statistics on Shareholder Dialogue

2020

2019

2018

2017

Alerts and dialogues with issuers

489

164

202

233

of which Europe

295

159

196

214

of which International

194

5

6

19

19

Engagement Report 2020

Company Dialogue: 2020 Highlights
Barclays
Climate change represents a systemic risk and we areconvinced that the financial sector has a key role to playin supporting the transition to a low carbon economy
and the alignment with the Paris Agreement. Phasing out
coal is paramount to achieve this goal, and we believethat the adoption of climate strategies by companies isa critical investment factor for which shareholders should
be fully informed. Accordingly, we publicly supported
shareholder resolutions coordinated by the ShareAction
initiative in 2020, asking Barclays to phase out theirfinancing of coal companies. We had a constructive
dialogue with the company on both resolutions (onebacked by ShareAction and the otherby management). We acknowledge
that Barclays has taken a step in theright direction, but as the ShareAction
resolution was a good complement, wevoted in favour of the corresponding
resolutions, in line with our global
commitment to support banks’ energy
transition policy in general and banks’coal policy in particular.

including in Russia. We subsequently decided to vote tosupport a shareholder resolution asking to include a Paris
Agreement 1.5-degree Celsius Target in the Articles of
Association.

Deutsche Bank
In 2019, we alerted the German bank of our intention
to vote Against the discharge given to the Supervisory
Board (Board of Directors) and to the Management Board
at the AGM of 05/25/2019 due to the disconnection
between the remuneration paid to executives (which
seemed excessive) and the economic and financial
performance of the Bank, which had just faced a major
restructuring. As the remuneration policy and report were
not submitted to the shareholders' vote at the 2019 AGM,
we wanted to express our disapprovalof DB's practices by opposing thedischarge to the Supervisory Board andthe Management Board (as there was no
ESG criteria in the remuneration policy).

Support thetransition toa low‑carbon
economy andalignment with
the Paris
Agreement.

We further discussed with Barclays on
their ambition to be a net zero bankby 2050, covering capital markets
and lending activities while peers
have developed methodologies only
related to lending so far. As companies with a higher
coal exposure have difficulties reducing that exposure
quickly, we will follow up on their coal policy and coal
exposure thresholds.

FortumFortum, a Finish state owned utility company, faces anincreased transition risk after the acquisition of the utility
company Uniper, which has substantially increased theformer’s exposure to fossil fuels. The de-carbonizationof both companies’ assets in Russia remains a question.
A large share of Fortum’s fossil fuel based generationis concentrated in Russia for which the company does
not have a de-carbonization strategy or relevant targets.
Fortum acquired a majority and controlling stake in
Uniper thereby deteriorating its own environmental
profile by exposing its portfolio to significantly higher
shares of lignite, coal and natural gas operations.
Following the acquisition of Uniper, and because of
the lack of a clear coal phase out plan aligned with theParis agreement, Amundi did participate to a collective
engagement with Fortum Oyj. We addressed a letterto the company and had a call with the CEO to discuss
their strategy of emission reduction across the company,

20/

Following the shareholder dialogue with
the Chairman of Deutsche Bank, wechanged our vote in AGM from “Against”
to “Abstention on the Discharge”, taking
into account the recent appointment of
a new CEO (not previously taken into
account) to lead the new strategic planof the Bank and the issuer's intention tochange its practices.

In 2020 shareholder dialogue was conducted twice
during the year: Before the AGM in order to present the resolutions
submitted to the next AGM and the discussions
underway on the evolution of the compensation
policy by integrating ESG criteria into the variable
compensation

 At the end of the year to present to us the new
remuneration policy, submitted to a vote at the 2021
AGM. The ESG criteria will represent up to 20% of
the long-term variable remuneration and will notably
include diversity and climate. The equity pay ratio
will be published in 2021.

JP Morgan
We engaged with JP Morgan, a US bank, on theirclimate change strategy as it lags behind peers. During
dialogue, JP Morgan had stated they were undergoing areflection phase concerning climate policy; however, we
did not believe the bank would announce any ambitious
targets in the near future. Subsequently, Amundi voted
in favor of shareholders proposals concerning a policy
on unconventional oil and gas and to establish targets
for emission reduction in line with the Paris Agreement.

Ongoing Engagement Through Voting
Amundi Voting Policy
Amundi regards the considered and intelligent exercise of investor voting rights asa central aspect of our role as a responsible investor. Our voting policy responds toour holistic analysis of all the long-term issues that may influence value creation,
including material ESG issues. Amundi intends to fully exercise its responsibility
as an investor by voting at general meetings according to Amundi's voting policy.
This policy is reviewed on an annual basis and available for view on the Amundi
website. (2)Good governance practices are paramount to protecting the interests of minority
shareholders. Exercise of voting rights at the Annual General Meeting is therefore
key to expressing an opinion on the company's main orientations. This means
being able to vote in proportion to the ownership of the capital and not being
faced with limitation or protection mechanisms that would allow the company
to circumvent the decision making power of its shareholders.

The Key Elements of the Amundi Voting Policy include: Shareholder rights: a corporate governance regime must protect andfacilitate the exercise of shareholders’ rights and ensure fair treatment of allshareholders, including minority and foreign shareholders

 Boards, committees and governing bodies: boards have strategic authority

and their decisions affect the future of their company, both in the shortand long-term; all board members have individual responsibility. Boards
are accountable to the company and its shareholders, but must also have
due regard to, and respect the interests of, other stakeholders. In particular,
employees, creditors, customers and suppliers. Compliance with social andenvironmental standards is also a board responsibility. Amundi is fully backing
the 8 principles of the World Economic Forum’s Climate Governance Initiative
Financial structure: unless the company sets out a clear and substantial plan,
cumulative capital increases should not represent more than 60% of thecapital Compensation policy: we analyze executive compensation holistically andvote based on two main criteria: the CEO’s compensation must be reasonable,
and also economically justified. Further, we are vigilant to ensure that thecompany’s pay approach, and more broadly its sharing of value overall, do
not generate unacceptable situations of social inequality. Amundi is vigilant
on the inclusion of ESG performance criteria in the variable remuneration.

One of our ESG ambitions set out in 2018 and due for completion by the end of2021, is to integrate ESG issues into our voting policy. It is in this context that
we further tightened our voting approach for the 2020 season, requiring theinclusion of ESG factors in executive pay and becoming much more likely to votein support of shareholder resolutions (leading us to support fully 86% of climate
resolutions and 79% of those in relation to social & human rights issues).
In 2020, due to the Covid-19 crisis and the need to focus on long term growth aswell as balancing the different stakeholders’ efforts, Amundi has been particularly
vigilant about the balance of executive compensation, the level of dividend paid
and the inclusion of ESG criteria in the variable remuneration.

(2) https://www.amundi.com/int/ESG/Documentation

21

Engagement Report 2020

2020 Voting Statistics
In 2020, Amundi voted in 4,241 AGMs, for around
50 000 proposals. The voting campaign was disrupted in
the spring of 2020 by the Covid-19 situation and the numberof AGMs per issuer was higher than in previous years. For
example, a certain number of AGMs were cancelled at thelast moment, where votes had already been placed, and it
was therefore necessary to vote again later in the season.
In addition, companies had removed proposals concerning
dividends from their agenda during their AGMs andpresented them at an EGM at the end of the year.

Voting statistics

2020

2019

2018

2017

Number of Meetings Voted

4 241

3 492

2 960

2 540

Meetings Voted with at Least One Vote "Against Management"

71%

55%

65%

71%

Number of Proposals Voted

49 96841 42935 28532 443

Percentage of Vote "Against Management"

20%

13%

15%

15%

Number of Votes
in General Assemblies
by Continent

29%

34% 33%

3%

1%
Votes

AfricaAmericas

59

1 230

Asia

1 439

Europe

1 396

Oceania117

Key Outcomes of the 2020 Voting Campaign
Amundi had a 20% opposition rate globally, demonstrating the inclusion of ESG in the voting criteria and thus reinforcing
Amundi’s ESG policy and strategy.
Our voting policy for remuneration resulted in voting
against 31% of resolutions. We often voted against Long
Term Incentive Schemes that did not have ESG KPIs. In
2020, due to the Covid-19 crisis and theneed to focus on long term growth as well asbalancing the different stakeholders‘ efforts,
Amundi was particularly vigilant about thebalance of executive compensation.

We were also particularly vigilant on the amount of thedividends paid, in particular, for companies having accessto state resources such as unemployment benefits. Where
the information was available: in practice, we
voted against 21% of dividend proposals.

20%

Opposition
Rate Globally

22/

Thematic breakdown of votes"against management"

12%

47%

Other

Structure of the board

5%

Shareholder Resolutions

20%

Capital transaction

16%

Remunerations

Thematic Breakdown of Votes "Against" by Category
Board Structure

19%

Compensation

31%

Financial Structures

28%

Shareholders' Proposals (*)

49%

Other

11%

(*) does not include votes for which there were no management recommendations

Climate Strategy

Voting Against Resolutions

We also increased our support for shareholder resolutions
calling for more transparency and information on ESG andclimate strategy. This was recognized by ShareAction's"Voting matters 2020" report in which Amundi ranks amongst
the top performing asset managers in terms of voting on
climate change, climate-related lobbying, and social issues.
We voted in favor of 86% of climate-related proposals.

The 2020 season was generally characterized by
opposition votes for three main reasons:

In 2020,
Amundi supported 86%
of climate‑related shareholder
resolutions presented
at the General Meetings
in which it participated.

 Questionable remuneration practice.
 Unsustainable dividend during a global pandemic Overboarding, as the importance of the Chairman of
the Board, the Chairs of the various committees, theLead Director as well as directors implies to devote
sufficient time to these functions.
Where possible, Amundi endeavors to alert issuers ifthey intend to vote in opposition. Usually, by sending anemail prior to the meeting.

23

Engagement Report 2020

Executive Compensation

Social, Health & Human Rights Related Resolutions

Amundi considers that the alignment of the interestsof managers with those of shareholders is a key part ofcorporate governance. The remuneration policy within
the company must participate in this balance and include
ESG KPIs. In 2020 we were particularly demanding in thiscategory due to the need for executive wage moderationin light of the Covid-19 crisis.

A new trend we have observed is the increase in
the number of social, health & human rights related
resolutions at General Meetings.

In 2020,the opposition rateon compensation
was 31%.

In 2020, Amundi supported
79% of social, health& human rights relatedshareholder resolutions
presented at the General
Assemblies in which it
participated.

Dividends
We strongly believe, especially in the current pandemic
situation, that dividend policy should balanceshareholders needs for remuneration in cash, with theneed to preserve financial strengths of the company aswell as the long-term interest of employees to pave theway for future earnings growth.

In 2020,the opposition rate
on dividends
was 21%.
Board Structure
Amundi expects to have a full understanding of thefunctioning of the governance bodies including: the level of independence.
 existence and operation of specialized committees.
 skills and background balance.
 adequate availability of directors (absence of "over‑boarding").

In 2020,the opposition rateon these themes
was 19%.

Voting Campaign: 2020 Highlights
Social: Product Responsibility, Health & Human
RightsMicrosoft Corporation: Vote in Favor of a Report on
Employee Representation on the Board of Directors
Amundi is in favor of employee involvement in corporate
governance and employee share ownership, because
these practices help align the interests of shareholders
and employees over the long term. Amundi thus
promotes the appointment of employee Directors as aprinciple of good governance.
The TJX Companies, Inc.: Vote in Favor of a Report on
Animal Welfare
Increased reporting and transparency on animal welfare
will overall help ensure the Company respects customer
preferences over animal welfare and labelling (including
cosmetics and animal testing in addition to fur andleather) which could reinforce customer retention.
Walmart Inc.: Vote in Favor of the report on Supplier
Antibiotics Use Standards
This proposal would enable shareholders to assess how
the company's policy on the matter operates. Antibiotic
resistance is a major health concern and contribution to it
would be very detrimental to the company's reputation.

Climate-Related Shareholders Resolutions
Tepco: Vote in Favor of an Amendment Article to
Withdraw from Coal Fired Power Generation
Amundi does not support the construction of new
coal-fired thermal power stations and is in favor of theclosing of the existing ones, to be aligned with the Paris
Agreement, by 2030 in OECD countries.

24/

Chevron Corporation: Vote in Favor of a Report on
Alignment of the Company’s Lobbying Activities with
the Paris Climate Agreement

Dividends

While Oil & Gas companies can argue that a “well-below”
2°C scenario is not the most likely given existing climatechange mitigation policies, we believe that it is key froma reputational risk perspective that they do not support
lobbying activities that aim to block more stringent
carbon policies.

We voted in favor of the dividend resolution after a
discussion with the company. The company proposed
to distribute a dividend while reporting a net loss for2019 and 2018. Amundi strongly believes that dividends,
especially in the current pandemic, should reward
shareholders only if company’s financial strength ispreserved. The reason behind is that we do not think
depleting company cash and resources are in the longterm interest of any of its shareholders, employees andother stakeholders. In a pre-AGM alert to Television
Broadcasts Limited we have clearly stated that ourvoting intentions were not in favor of this resolution.

Some European oil & gas majors (Shell, BP, Total) havetaken steps to cut ties with trade associations that are
not aligned with their own positions on carbon policies.
We expect from other oil & gas companies that they
conduct similar assessments and take remediation
actions whenever needed.
We note that Chevron is a member of the AFPM, withwhom Shell, BP and Total said that they would cut ties
due to divergent positions on carbon pricing policies.

Executive Compensation
Macquarie Group Limited: Vote Against the
Remuneration Proposal
Macquarie Group, a diversified financial company,
proposed a 10% increase in the annual base salary of
the CEO compared to the previous year, from a level
amongst the highest in its peers. Amundi generally
believes that the level and evolution of compensation
should not be susceptible to forming the basis for
hostile reactions harmful to the company, its image andtherefore its development. 2020 has been a difficult year
for companies, employees and countries who have had
to deal with extreme economic challenges. Therefore, wewere vigilant regarding executive wage moderation.
3M Company: Vote in Favor of a Proposal Requesting
CEO Compensation take into Account All Employee
Salaries
For 3M, an industrial conglomerate, Amundi voted infavor of a proposal that requested the Compensation
Committee take into account all employee class salaries
when setting CEO compensation targets.
Amundi recommends the chief executive’s compensationmust be “reasonable” & ensure the alignment of interestsof the managers with those of the shareholders and thoseof the company’s other stakeholders, within the scopeof social and environmental responsibility. Executive
compensation must be “acceptable” from a societal
point of view. The level and evolution of compensation
should not be susceptible of forming the basis for
hostile reactions harmful to the company, its image andtherefore its development. The analysis of the pay equity
ratio contributes to the assessment of this acceptability.

Television Broadcast Limited: Voting in Favor of
Dividend Resolution

Nestlé: Vote in favor of the Dividend Resolution
After a discussion with Nestle from the food products
sector, we voted in favor of the dividend resolution,
as Nestlé outlined the package of measures taken to
maintain employee compensation and provide healthcoverage to those working in non-benefit jurisdictions.

Overboarding
Hindalco Industries Limited: Vote Against theNomination of Rajashree Birla as Non-Executive Director
While we fully support the need for a better gender
diversity of boards, we think that board members
should dedicate sufficient time to their role in order forthe boardroom to fully benefit from the positive impact
gender diversity can have. For Indian mining company
Hindalco, the nominee held eight directorship roles andthe nominee had failed to attend at least 75 % of board
meetings.

Controversies
Swedbank: Vote Against the Discharge of Board
Members
Swedbank, the Swedish bank, has faced major
controversies around malpractices regarding its antimoney-laundering policy, which resulted in heavy fines.
We voted against those members of the board that were
present at the time of the misconduct: the Swedish FSA
concluded that board members failed to keep themselves
sufficiently informed about the Baltic operations anddidn't request the information they would have needed
to understand the risks of money laundering. Parallel tothis, our ESG banking analyst engaged with peers on
their remediation plan.
The board's negligence has resulted in reputational
damage and the FSA issuing a warning and fine of SEK
4 billion. 

25

26/

Participatingin the Energy Transition
The energy transition is a key theme for Amundi. Climate change represents asystemic risk and we are convinced that the financial sector has a key role toplay in supporting the transition to a low carbon economy and alignment with
the Paris Agreement.
Phasing out coal is paramount to achieving this goal,
we believe that the adoption of climate strategies
by companies is a critical investment factor for whichshareholders should be fully informed. In addition, as partof our global commitment, we support banks and otherfinancial institutions in developing their own transition
policies. Minimizing the negative social impacts of atransition to a low‑carbon economy is also key for thesocial acceptability of this move. Therefore, it is important
to ensure that the transition is timely with the ambitionsof the Paris Agreement.

Transition Towardsof which isa Low Carbon Economy

253
183
36

472

SBTi
Energy & CO2
Coal Policy

Green Bonds are an integral part of the energy transition.
References to Green Bonds can be found on page 71.

Achieving Alignment
with the Paris
Agreement throughScience Based Targets
In 2020, Amundi wrote to 253 companies in different
sectors to invite them to commit to or upgrade their
Science Based Targets (SBTs) to fight climate change.

(3) https://www.wri.org/our-work/project/science-based-targets-initiative(4) www.sciencebasedtargets.org

The Science Based Targets initiative was created in theaftermath of the COP21 in Paris; it is a collaboration
between the United Nations Global Compact, the Carbon
Disclosure Project (CDP), the World Resources Institute(WRI) and the World Wide Fund for Nature (WWF) to
make companies set ambitious and meaningful GHG
reduction targets. The SBTi defines and promotes
best practices in a Science Based Target setting andindependently assesses companies’ targets to ensurethat they are in line with what the latest climate science
considers necessary to reach the goals of the Paris
Agreement. These targets specify how much and how
quickly a company needs to reduce its greenhouse gas
emissions to limit global warming to well below 2°C (3)and to pursue efforts to limit warming to 1.5°C.
Amundi considers the standards used by the SBTi to berobust and credible for companies and investors alike forthe simple reason that they are based on science. As of
March 2021, more than 1,200 companies across diverse
sectors have joined the Science Based Target Initiative (4).

The Step-by-Step
Approach to Setting
Science Based Targets
Companies adhering to SBTs typically:
1. Express their intent to set a Science Based Target bycommitting to the SBTi
2. Develop an emissions reduction target in line with the
SBTi’s criteria
3. Present their target to the SBTi for validation
4. Announce the target and inform stakeholders of thetarget5. Report annually on their progress towards thesetargets.

The Benefits of Science Based Targets
The transition towards a low carbon economy shouldfavor the emergence of new technologies and operational
processes and Amundi believes that companies who set
ambitious reduction targets will be at the forefront of27

Engagement Report 2020

innovation. Setting Science Based Targets should also
help companies reduce costs. Companies that lead intackling climate change also boost both their credibility
and reputation amongst their stakeholders, including
customers, employees, NGOs and investors. It should also
reduce regulatory risk and uncertainty for companies andencourage them to anticipate change (if action is delayed,corporates will have to make more important cuts to their
GHG emissions which could prove disruptive to them).
Amundi’s objective in this engagement campaign is toinvite companies to set validated Science Based Target
objectives to reduce their GHG emissions in line with the2015 Paris Agreement, so as to limit global warming towell‑below 2°C, above pre‑industrial levels and pursue
efforts to limit warming to 1.5C°.

Clear and Tangible
Engagement Objectives

 Ask 203 companies that have not committed to
Science Based Targets to do so.

 Invite 31 companies that have made the commitment
to submit targets for validation.

Amundi supported CA100+ in a collaborative engagementwith four corporates in 2020: a Japanese capital goods
company, a US construction materials company, a Brazilian
Oil & Gas company and a Japanese auto manufacturer.
We were encouraged to see some positive developments(as highlighted in our focus on Petrobras below for
instance), but also note that some points of concerns
have not yet been resolved.
We notably firmly believe that corporate lobbying andpublic affairs practices should refrain from providing
direct or indirect support to regulatory initiatives thatrisk slowing down the energy transition. We therefore
maintain our full support to the CA100+ investor groupefforts to make a Japanese auto manufacturer evolve on
its position in support of the roll‑back of greenhouse gas
emissions and fuel efficiency standards for new cars at
the US federal level, for instance.
With regards to the Japanese capital goods company, it
is necessary to keep a close eye on whether the next mid‑term action plans will be continuously aspirational andachievable to pursue the net zero target for 2050.

Amundi believes Highlights of the 2020Engagementthat companies Amundi Engagements
As a lead CA100+ investor for a US
who set up
This campaign will last 3 years. Emails
construction material company,
were sent in 2020 and we have alreadyambitious reduction we are encouraged to see the firststarted engaging with respondents.
disclosure of group‑wide scope 1
We will further contact companies iftargets will be at emissions and CO reduction targets.
and when our recommendations have
However, we will keep pushing to open
the forefront of
not been taken into consideration
the dialogue over wider low‑carbon
to try to and convince them to dotransition challenges. Since the end
innovation.
so. We will track the progress of thisof last year, we have also decided to Encourage 19 companies that havevalidated 2°C targets to voluntarily
upgrade their target to more
ambitious 1.5°C aligned targets.

2

engagement and assess/monitor the companies that havechanged their status. Should companies still consider it
not necessary to commit to SBTs, Amundi might express
its concerns at companies’ AGMs. Whilst it is too early
to draw conclusions for this 3‑year campaign, at thetime of this report, Amundi had received more than 60
responses, representing a response rate of 25%. A numberof companies are in the process of committing to the SBTsor considering it.

Accelerating theEnergy Transition with
Climate Action 100+
Our contribution to the Climate Action
100+ investor initiative (CA100+)
Climate Action 100+ is an investor‑led initiative to ensure
the world's largest corporate greenhouse gas emitterstake necessary action on climate change.

28/

join the group of investors collaborating on engagementwith two other large oil & gas companies.

FOCUS
on Petrobras
During the investor call in August 2020, Petrobras
provided an update on its energy transition journey.
Positive development
The company reported further positive progress in2020 with regards to the implementation of the TCFD
recommendations with the publication of its oil priceassumptions, and how they compare with scenarios
drawn by the International Energy Agency (IEA), andof the valuation sensitivity of its assets to the IEA
Sustainable Development Scenario (SDS). We see thisstep as a pre‑requisite to generating sound strategic
decisions that integrate energy transition risks. We notethat Petrobras’ revised oil price assumptions appear
conservative by 2040, even compared to the IEA SDS.

Comparison of IEA's and Petrobras' oil price assumptions($/bbl)120
100
IEA - Stated Policies

80
60

IEA - Sustainable
Development

40

Petrobras - 2020-24
Strategic plan

20

Petrobras - 2020
Revision of key
assumptions

0
2018

2025

2030

2035

2040

Source: International Energy Agency (IEA), WEO (2019) - average price of oils imported by the IEA members. Petrobras: Brent price, PE 2020-24 Strategic Plan.

Next steps
Although Petrobras already reports on its value chain
emissions (including scope 3 related to the use of its
products), the company was not yet ready to take a
reduction target on this indicator and asked for investor
expectations on the preferred type of target (intensity vsabsolute emissions). Both approaches have pros & cons.
In our view, systemically important energy suppliers
like Petrobras have a role to play in developing lowcarbon energies: something that can best be capturedby an intensity-based metric. The dialogue will therefore
continue notably on this matter.

Going Forward
For 2021, we are committed to increase our efforts insupport of the CA100+ initiative.

Putting Pressure
on Coal: Amundi Coal
Policy Engagement
Our Coal Policy for the Energy Transition
In 2019, Credit Agricole (the parent company of Amundi)
announced a new Climate Strategy aimed at curbing
the global rise in temperature to well below 2°C. In
accordance with the International Energy Association’s(IEA) recommendations for alignment with the Paris
Agreement, Crédit Agricole has pledged that coal mustbe phased out by 2030 for European and OECD countries
and by 2040 for the rest of the world. It is a key convictionat Amundi that companies must organize their own
energy transition, and that engagement is essential toachieve this Paris Agreement aligned coal exit.
In this regard, we have asked companies to provide
us with a detailed phase out plan of their thermal coalmining and generation operations by 2021, in accordancewith the 2030/2040 timetable. Companies that have yet
to announce a clear coal exit strategy or companies that
do not demonstrate a coal exit strategy in line with theParis Agreement, have been the focus of our engagement
efforts. While one goal of the engagement campaign isto communicate this Amundi policy, the other is to push
for an accelerated energy transition with companies thatare at risk of divestment.
In 2020, an email campaign was sent out to 31 OECD
domiciled companies recognized to have had the highest
coal exposure based on a combination of the most recent
Urgewald (a German NGO that has open source coaldata) and provider data. By the end of 2020, we received
replies from 33% of the companies we had reached out
to, equivalent to 10 issuers, with four of them confirmingthat their coal policy is in line with a 2030 exit.
Some companies required a more detailed engagement
such as RWE, a German utilities company, BHP, andan Anglo-Australian mining company. These werecompanies that may not have communicated a coalexit policy or have one that is not in line with the 2030
timeline.

A Thermal Coal Exit for BHPThe Amundi ESG Research team conducted a joint
engagement alongside the Amundi Equity team on
the topic of climate strategies, a material issue for thefinancial teams. At the time of engagement in May 2020,
BHP had not yet announced a formal coal exit strategy,
which was a key point of concern for the Amundi team.
They had previously stated that thermal coal had a“low long-term attractiveness” and that there was “noappetite for growth” but no formal commitment or
target had yet been published. By September 2020, BHP
had announced not only a thermal coal exit in the next
few years but finally a medium term target to reduce29Engagement Report 2020

operational emissions by at least 30% from adjusted 2020
levels by 2030. BHP had expressed a commitment to set
a medium term Science Based Target but at the timeof engagement there was no public target. Amundi cancertainly not take sole credit for the positive engagement
resulting in BHP meeting our desired outcomes; however,the success of the engagement demonstrates the
positive influence that the financial community can haveon encouraging companies to commit to a Paris Aligned
Transition.

Pushing RWE to Reach a 2030 Coal Exit
The Amundi ESG Research team engaged with RWEseveral times during 2020. Amundi’s emphasis on
climate change and its de-carbonization efforts,
including the 2030 coal phase out from OECD domiciled
companies, was communicated to RWE. While RWE
is on a de-carbonization journey, the speed of thistransition has been a subject of conversation between
the two companies throughout these engagement
conversations. By the end of 2020, Amundi saw two
sizeable developments:
1. RWE participated in the first German auction todecommission hard coal fired power plants, in H2 2020.
The company won compensation to close both, the 800
MW Unit E of its Westfalen power plant in Hamm, andthe 800 MW Unit B of the Ibbenbüren power plant. With
the success of these tenders, RWE closed all its hardcoal plants in Germany by the 31st of December 2020
(the plants are scheduled to be decommissioned once aformal notification from the grid agency comes through).
2. RWE expanded its de-carbonization targets fromjust Scope 1 to include both Scope 2 and 3. The
company commits to achieving a 50% reduction in
specific greenhouse gas emissions from Scope 1 and
2 by 2030 measured against the year 2019. RWE also
aims to reduce Scope 3 emissions by 30% by 2030
measured against the year 2019. These targets havebeen certified by the Science Based Targets initiative(SBTi), to be aligned with the Paris Agreement, andaim to curb global temperature rise to well below 2°C.
We aim to continue the discussion on Amundi’s 2030 coalexit plan and RWE’s coal exit strategy. However RWE’s
move in the right direction with the aforementioned
points, is welcomed by Amundi.

30/

global warming to 1.5°C, we can no longer afford to build
any new coal projects and need to phase out existingcoal operations.
As a result, we have dialogued with insurers on theirfossil fuel exit strategies. We have chosen insurers, as we
believe that a change into this sector’s policies towards
best practices will significantly contribute to the energy
transition.
The industry has two levers to contribute to the energy
transition: its investment guidelines and its underwriting
policies.

An Insurer’s Coal Policy would be consistent
with the IPCC’s 1.5°C pathway if it stipulates an: Exit from coal related investments
 End to underwriting new coal projects and coalcompanies End to insurance cover of existing coal projects andcompanies, unless the latter are engaged in a rapidtransition process away from coal to clean energy.
As of November 2020, 23 insurance companies had
committed to end or limit the underwriting of coalprojects, according to research from “Insure our Future”,
a coalition of NGO’s. Additionally, at least 65 insurancecompanies had adopted a policy to divest from coal or
to end further investments in the coal industry.

Engagement targets
We have been asking insurers to announce a fossil fuelexit policy and for this policy to be specific. We believethat the sole announcement by an insurer to exit coal is
not sufficient.

A robust Fossil Fuel Policy should contain thefollowing: A clear definition of coal mining and coal-fired
power plants (a relative threshold based on revenues
or electricity generation and an absolute thresholdbased on annual thermal coal production or coalcapacity) A date for the full exit from coal (which should be
effectuated at the latest by 2030 in EU and OECD
countries, and by 2040 worldwide, in order to stay
below the 1.5°C limit - as determined by the IPCC)

 The exclusion of coal developers.

Inspiring the Insurance
Sector to set their own
Fossil Fuel Policies

We also would like the fossil fuel policy to apply to theinvestment side (own assets and third party assets) as
well as the underwriting activities of the business.

Energy transition and climate change mitigation was
selected as one of Amundi’s two key topics for its 2020
engagement & voting policy. The single biggest sourceof CO2 emissions remains the burning of coal. If we follow
the recommendations from the IPCC whom aim to limit

In the following table, we summarize the state of the fossil
fuel policies of the companies we engaged with: policy
in place at the beginning of 2020, measures announced
during the year and remaining recommendations we have
put forward to bring policies in line with best practice. Engagement ResultsCompany
nameMain points of fossil fuel policy
at the start of 2020

What has been achieved
during 2020

Recommendations

Company A(US)

No policy

Coal policy is being discussed
internally.

 Formally publish a coal exit

Company B(UK)

No policy

Currently working on a group-wide
coal definition and policy.

 Formally publish a coal exit

Company C(Japan)No policy

Announced a commitment “inprinciple, [to] not provide insurance
for, nor make investments in new coalfired power plants.”

 Remove reservation on thepolicy.
policy.

exclusion of new coal plants.

 Adopt an exit policy forexisting coal plants andcoalmines.

 Clearly define a full phaseout plan.

Company D No policy(Hong Kong)

Announced a review of its investment
exposure towards coal mining andcoal-fired power plants.

 Further details on the

management of its
investment exposure to coal.

 Clearly define a full phaseout plan.

Company E(US)

Exclude underwriting of andinvestments in companies with>25% of extraction, production orrevenues from thermal coal.

No developments

 Earlier phase out of existingrisks.

 Introduction of an absolute
threshold.

Phase out of existing risks by 2023.

 Exclusion of coal developers.
 Clearly define a full phaseout plan.

Company F(Italy)Generally, exclude investments incompanies deriving >30% of revenues orenergy production from coal, producing >20m tons /year of

No underwriting of companies
generating >5% of revenue from tar
sands and operators of controversial
pipelines dedicated to the transport oftar sands.

 Remove the exception forheavily coal-dependent
countries.

 Extend the coal policy to its
third party assets.

 Clearly define a full phasecoal, orout plan.

 actively involved in building newcoal facilities or plants.
Policy includes exceptions forheavily coal-dependent countries.
Engaging with the six coalcompanies remaining.

No longer investing in companies
generating >5% of revenue from tar
sands and operators of controversial
pipelines dedicated to the transportof tar sands.
Company G

Exclusion of companies with

(theNetherlands)

 >20% revenues related to coal

No developments

 Introduction of an absolute
threshold.

 Lower the 50% threshold forand lignite, orcoal-fired power plants.

 >20% revenues related to tar Clearly define a full phasesands and oil shale, orout plan.

 >50% revenues related to coalfired electricity production.

Company H(Germany)

Exit from and no new investments in For investments and underwriting:commitment to a full exit of thermal coalcompanies
by 2040, with a 35% emissions reduction
With
>30%
of
revenues
from
coal

for thermal coal targeted by 2025 (7).
extraction or coal-fired power
A phase out plan for oil & gas:
generation,

 With >10% of revenues from oil Reduce emissions from oil & gas New coal power plants, mining

 Reduce emissions from the insurance

sands.
No insurance (5) forand related infrastructure (6), New and existing oil sand sites
and related infrastructure (6).

 Noneinvestments with 25% by 2025 andreach net-zero emissions by 2050.
of oil & gas production with 5% by2025 and reach net-zero emissions
by 2050.

(5) Direct & facultative reinsurance and primary business. Not including treaty reinsurance business, for which no such guarantee can be given.
(6) Minor exceptions apply such as sites in countries with <90% electrification rate.
(7) Except for treaty reinsurance business, for which no such guarantee can be given.

31

32/

Preserving Natural Capital:
The Environmental Transition

At Amundi, we engage on natural capital preservation
holistically, meaning we engage on the specifictopics that result in natural capital destruction andenvironmental degradation. This includes specific driversof biodiversity loss (such as waste and deforestation) andnew opportunities to find solutions like circular economy.

Natural Capital Preservation(Ecosystem Protection& Biodiversity Loss)378

of which is

We rely heavily on our surrounding
environment. The earth’s biodiversity
provides economic and social values
such as material benefits (i.e. foodand fuel) and ecosystem services(climate regulation, pollination
services). Unfortunately, biodiversity
is in a state of rapid decline due
to human activities such as waste& pollution, overconsumption of
resources and habitat degradation.
This is in addition to climate change.
A growing human population andincreased human activities arealtering the natural world at an
unprecedented rate.

67

Circular Economy(including Plastic)

96

Biodiversity(including
Deforestation)

215

Other
(including water,
pollution, etc)33

Engagement Report 2020

This method of consumption is no longer sustainable.
Every year, the Earth Overshoot day – the day on whichhumanity’s demand for ecological resources and services
exceed what Earth can regenerate in that year – occurs
even earlier. In 2019, the Earth overshoot day was July,
29th, which means that 1.75 planets were necessary tosatisfy all our needs without borrowing from the next
generation. By comparison, only 1 planet’s worth ofresources was needed in 1969 (8).
3 Questions to Lorna Lucet,
ESG Analyst and Circular
Economy expert

The consumption of resources is expected to growfrom 85bn to 180bn tons by 2050, which is notsustainable. Unfortunately, recycling capacities remain
underdeveloped, with only 40% of materials being
recycled in the EU.

Circular Economy:
Turning Theory into Reality

This is why we must change our model from a linear
model to a circular one, as defined by Ademe (9):Why are We Talking about
the Circular Economy so Much?
The reason is quite simple: our world is one of finite
materials but we do not live as if this was the case. The
linear system – the way we take, make, consume anddispose – governs our way of life.

“Circular economy can be defined as an economic
system of trade and production which, at all stagesof the product lifecycle (goods and services), aims toincrease the efficiency of use of resource and reduce
environmental impact while developing the well-beingof individuals”.

The Circular Economy:
3 domains and 7 pillars

Economic
players’ offer

Waste
management

 Extraction/exploitation andsustainable procurement Recycling Cradle to cradle Eco-design Economy of functionality

Consumer demand and behaviour Life Extension
Reuse - Repair34/ Responsible consumption
Buyings - Collaborative consumption - Use(8) Because of Covid-19 and the lockdown, 2020 was a non-standard year and the date was back to August, 22nd.
(9) The French Agency for an Ecological Transition, https://www.ademe.fr/

Consequently, we must:
Reduce resource consumption
Promote reuse
Recycle.
Realizing a circular economy will be supported by a
growing awareness of environmental and social issues
as well as possible legislation. The European Green Deal
aims to make Europe the first climate-neutral continent
by 2050 and the New Circular Economy Action Plan
aims to decouple economic growth from resource use.
This means that we will use fewer resources per unit ofeconomic output and reduce the environmental impactof any resources used or economic activities undertaken.
It is now up to companies to play their role.

year of engagement with companies and provide themrecommendations which will be the foundation of ourengagements in the following years.

What are the main results at the end of yearone?
At the end of the first year, we can highlight 5 key
conclusions:

The EU’s New Circular Economy Plan focuses onseven key sectors: Electronics & ICT (Information &Communications Technology); Batteries & Vehicles;
Packaging; Textiles; Construction & Building; Food,
Water & Nutrients.

1. Despite varying levels of maturity, three sectors
are clearly ahead: Electronics & ICT, Textiles andAutomobiles. The construction sector lags behind.
Considering the context the varying levels of maturity
make sense. Electronics & ICT has faced many
controversies regarding planned obsolescence of
their products. For textiles, heavy consumer andmedia scrutiny over the impacts of fast fashion as
well as flouring new business models including thesecond-hand market have encouraged the sector
to innovate. However, for many companies, circular
strategies remain limited to small pilots. By contrast, forConstruction & Building Products, we see that circular
economy is only at a nascent stage: while change ismandatory translating it into action is difficult.

We have decided to launch a three-year engagementwith four out of these seven: Electronics & ICT; Batteries& Vehicles; Textiles; Construction & Building. In total,
27 companies have accepted to answer our questions
on this subject, based all over the world (North America,
Europe and Asia).

2. Upcoming European legislation is accelerating the
Circular Economy. Ambitious legislation will force
companies to turn away from decades of cheapand easy-to-replace products, and finally take into
account environmental considerations including GHG
emissions and product longevity and recyclability.

The goals of this first year of engagement was tounderstand:3. C
 ircular economy is still little known by senior
management. Corporate social responsibility strategy
incorporate the concept increasingly. However, if theshift is understood by some people, it is still difficult
to make it penetrate all the business lines and to makeit a driver for the new production.

How did Amundi Conduct Engagement Around
Circular Economy?

Company’s implementation of circular economy inpractice and the main issues
Viable solutions tested by companies for a circular
economyBest practices for each sector.
To achieve these goals, we have developed a proprietaryevaluation tool assessing companies through four criteria:
1. How key is the circular economy in the governancebodies and in the company’s strategy?
2. How ambitious are the company’s commitments on
the circular economy?
3. How is the circular economy implemented in the dayto-day business?
4. How is the company trying to make its products last
longer?
This tool has allowed us to assess all companies andto compare them within their sector to highlightmega trends, define best practices and identify areasof improvement. We will share the results of this first

4. Recycling is more developed for Electronics & ICT and
Automobiles, while eco-design is favored by Textile andConstruction. Recycling is a quick-win for the first two
industries to save money and resources. By contrast,
for the textile sector, using recycled feedstock is not yet
completely feasible so efforts are more focused aroundeco-design. Construction & Building Products is similar as
materials must be upgraded to eventually be recyclable
so the industry’s focus is primarily on innovation.
5. A
 ll sectors have their own specific multi stakeholder
initiatives (MSIs) to find solutions collectively. This
could be in preparation for upcoming legislation orevidence that “unity is strength” for major sustainability
issues the world has yet to solve.

35

Engagement Report 2020

What is Amundi expecting from companies as a
responsible investor for the following years?

Circular Economy: Increasing in Importance but not yet
Strategic

Companies are still trying to only marginally adjust
their business-model but a true circular model may
require a more radical change. Companies need to start
implementing the principles of a circular economy acrossthe value chain, from eco-design to the end-of-life.

Circularity is part of the environmental strategy: Circularity
was integrated into the environmental strategy but nothandled specifically. For example, circular economy ismentioned in most materiality matrixes but is not always ahigh priority.

Upcoming legislation, including the fight against climatechange will accelerate this transition. The Circular
Economy presents a major opportunity if done right. It
is estimated that circular economy can cut CO2 emissions
by 56% by 2050.

Waste management is a major focal point: Companies
have been managing their waste impacts for quite awhile, though, with various maturity levels.

In 2021 we will focus our engagement only on key areas
and define specific recommendations for each company
in each sector. The areas of priority will vary between thetype of company and level of maturity within each sector
to ensure our engagements have the highest impact.

Construction & Building Materials: Circular
Economy, a Concept that Lacks Reality
The Construction Sector is Under Pressure by
the EU Legislation to become more Circular
The construction sector uses a vast amount of resources
and accounts for about 50% of all extracted material.
The sector is responsible for over 35% (10) of the EU’s
total waste generation and the overall rate of recoveryof building waste varies, depending on different sources,from 48% to 64% (11).
The European Union has been working on a set of
regulations to tackle GHG emissions with one of its
focus - amongst others - on buildings notably throughits EU Green Deal and Renovation wave. The potential
for greater material efficiency will help reduce climate
impacts so the EU has launched a comprehensive
strategy for a sustainable built environment based on
existing policies linked to climate, energy & resource
efficiency, management of construction, and demolition
waste. The strategy promotes circularity principles
throughout the lifecycle of the buildings by addressing:
Introduction of recycled content for certain
construction products
Treating sustainability performance of construction
products, orPromoting measures to improve the durability andadaptability of safety and functionality.

The Construction Sector Must Rethink its
Business Strategy
Amundi spoke to 8 European construction companies
covering all the range of activities of the construction
sector: from building products, to construction material
producers, to construction and engineering companies.

36/(10) Eutelsat data from 2016(11) https://www.ecologie.gouv.fr/dechets-du-batiment

Recyclability is key but is mainly applied to new materials:
Recyclability is either linked to material scarcity and/or islinked with the companies’ general environmental policy.
Circular designs are mostly applied to new materials andis accessed in terms of the lifecycles of the materials andthe buildings.
Carbon Neutrality is the Priority: Circular economy is a
way to reduce GHG emissions. All companies focusedon CO2 reduction as well reducing energy consumption,
notably fuels through use of alternative energies.
The Construction Sector Seems stuck in its Old Ways
The Circular economy still lacks investments as for mostcompanies adapting means a change in their businessmodels and that implies specific investments. For mostit remains a challenge. The Circular economy is not yet acriterion in the R&D processes: Innovation and sustainable
construction or eco-design often go hand in hand but
without specific projection relating to circular economy.
Circular Economy: not yet seen as a Competitive
Advantage but Legislation Could make things Change
Circular products are not seen to be a competitive
advantage by customers. It is still a challenge for thecompanies to convince customers to choose the recycled
or reusable materials over new ones. All companies are
involved in on-going legislation. All companies are incontact with officials to discuss regulations regarding
sustainability and the circular economy. For some, theseregulations are viewed as opportunities.
The sector is very active in working groups: allcompanies in the panel take part to initiatives whether
at international or local level by working with academics
or governments or taking part to local initiatives.

Continued lack of Concrete Solutions
All the companies interviewed have circularity policies,
however, the maturity on circularity varies. Not allelements of a circular economy are being addressedby most companies and there is a lack of ambitious
quantification. Nevertheless, the topic is still managed
to some extent and the awareness in the sector is rising.
We expect progress in the years to come in this area.

What are the Consequences on the Companies?

3 Questions to Fatima Benamira,
ESG Analyst - Construction
and Building Materials

The European Renovation Wave
Why is the Renovation Wave Important?
Though responsible for over 35% of greenhouse gas
emissions (GHG), only 1% of buildings are renovated eachyear. A much faster rate of renovation is needed to reduce
GHG with the 2050 goal of achieving carbon neutrality. In
consideration of these figures, on 14 October 2020, theEuropean Commission published its Renovation Wave
Strategy aiming at improving renovation rates by 2030
through renovating 35 million buildings and creating
up to 160 000 additional green jobs in the construction
sector.
What are the Key Actions to be Carried out by European
Commission?
These goals will be carried through some key actions
such as (list is non exhaustive): Stronger regulations, standards and information onbuildings performance in terms of energy and CO2

 Increasing capacity to prepare and implement
renovation projects, from technical assistance tonational and local authorities through the training
and skills development for workers in new green jobs

 Expanding the market for sustainable construction
products and services, including the integrationof new materials and nature-based solutions, andrevised legislation on marketing of construction
products and material reuse and recovery targets.

Though it is too soon to foresee the consequences on
the companies, there are some potential consequences.
First, stringent regulations are likely to promote a pushtowards promoting investment in less carbon intensive
products or technologies especially in the near futurewith Phase IV of EU ETS. Thus, there is a noticeable risein CCUS projects. Second, companies are likely to go
beyond pure product strategy and develop services totheir customers to benefit from the Renovation Wave.
Some companies are already doing this and it is likely
to increase in the future. Finally, there are likely to be
increases in digitalization and platforms processes
and become construction 4.0 companies meaning
construction companies will modernize to integrate
digital technologies.

The Automobile Sector: On the Road to a
Circular Economy
Increasing legislation around the Circular
Economy for over 20 years
The automobile sector is a heavy consumer of natural
resources and is responsible for approximately 80% of
all rubber consumption, 25% of all aluminum and 15% of
all steel (12). Cars contain 1.4 tons of material on average.
The European Union has long regulated the use ofresources by automobile manufacturers. In 2000, thedirective on End-of Life Vehicles (13) (currently underreview) aimed at reducing the waste arising from end-oflife vehicles and achieving reuse, recycling and recovery
targets. For instance, it sets reuse and recycling targets
at 85% of the weight of the vehicle.

Navigating between new constraints and major
opportunities
The Circular Economy covers a vast array of practices inthe sector. Across the value chain, it covers the sourcingof sustainable, recycled and reusable products, the ecodesign and the end-of-life. For electric vehicles this alsomeans offering a second life for batteries which containprecious metals.

 Promoting the de-carbonization of heating andcooling, which is responsible for 80 % of energy
consumed in residential buildings, in particularthrough revisions of the Renewable Energy andEnergy Efficiency Directives and the EU ETS in 2021,
as well as making full use of the existing provisions of
the Eco-design Framework Directive

 Creating a New European Bauhaus, an interdisciplinary
project co-steered by an advisory board of external
experts including scientists, architects, designers,
artists, planners and civil society.

(12) www.wbcsd.org(13) https://ec.europa.eu/environment/waste/elv/

37

Engagement Report 2020

The circular economy model can reduce manufacturingcosts (commodity prices can be very volatile), strengthen
customer loyalty, increase operational efficiency andobviously reduce the overall environmental impact ofautomobile manufacturers. By investing in R&D in design
and improving end-of-life management, the industry cancapture economic value and reduce its environmental
footprint. For example, collaboration with suppliers
for sustainable raw material management, efficient“waste” management and product life extension should
help the OEM (Original Equipment Manufacturer) stayahead of ever more stringent regulation and customer
expectations.

The Most Advanced Companies have Business Units
Completely Dedicated to CE.
These business units oversee the circular economy
strategies of companies. They also develop andconsolidate new business streams with the objectiveof using a company’s industrial, technical, logistical
capacities and strengths to offer clients a broad rangeof parts and services.

Circularity: Already a Key Consideration in the
Auto Sector
Amundi engaged with seven automobile manufacturers
globally, to better understand their approach to circular
economy and how advanced they are in terms ofgovernance, strategy and innovation.
Top Management Already Familiar with Circular
Economy3 Questions to Patrick Haustant,
ESG Analyst - Automobiles

Circular Economy is well known by the top management:
all the companies under engagement have a clear Circular
Economy strategy endorsed at the highest level of thecompany. This can be explained by several reasons:

Case Study: Renault, a Leader on Circular
Economy1. Strong EU legislation since 2000 and in major markets

Why are you engaging with this company?

2. The desire to reduce costs that compel the sector to
reinvent itself, including reducing the amount of costly
raw materials and eco-designing

Renault is a French multinational automobile manufacturer
that produces and markets a large range of cars and vans.
Renault is a strategic partner of the Ellen MacArthur
Foundation whose mission is to accelerate the transition
towards a circular economy. It has a clear and welldeveloped strategy on CE. Renault states it has three main
ESG challenges: climate change and the reduction of GHG
emissions, health (reducing pollution) and the preservationof resources which encompasses CE.

3. The rise of electric vehicles that questions the entire
way a car is designed.
Policies are well-structured and efficient with precise
objectives and quantifiable targets. All of the respondents
display objectives and targets. One company set
ambitious targets to have vehicles by 2025 contain atleast 25% recycled or bio-based plastics, 25% recycled
aluminum and 40% recycled steel.
Closing the Loop is Key to their Environmental Strategy
All companies reported on their willingness to decouple
resource consumption from growth by closing material
loops and all are at least in the process of developing
closed loops, with some being more advanced thanothers. Several companies have created closed loop
systems with some of their aluminum suppliers. One
company has set the target of 40% closed loop returns on
aluminum sheet from manufacturing operations by 2025.
Companies are also looking for new ecosystems for EV
batteries and are in the process of creating businessmodels that extend the life of EV batteries, extend theiruse and recycle them.

38/

Can you describe Renault's Circular Economy strategy?
Renault’s circular economy strategy revolves around:
Keeping recycled materials use for new cars (withrecycled plastics for instance)
Recycling materials in closed loops, reusing parts,
extending product life
Intensifying product use.
Renault strives to increase recycle material use in newcars and has disclosed ambitious targets (+50% of
recycled in 2022 vs 2013). They also recycle materials
such as copper or platinum metals (rare and expensive)in closed-loops.

E-Waste: A fast Growing Waste Stream with Low
Recycling Rates

Renault prides itself on having set its own circular
ecosystem to recycle and reuse materials. With French
company Suez, it operates Indra, a joint venture
specializing in end-of-life vehicle dismantling andsecond life parts. Indra collects end-of-life vehicles fromcar dealers, insurers, garages and individuals. Cars are
dismantled and then reintroduced into the supply chain
for the production of new vehicles. As for spare parts,
they are reused for vehicle repairs in the company’s
post-sales network through Gaia which is a fully-owned
subsidiary. Remanufactured parts are then sold at a
reduced price (-40% in average) and have the sameguarantees in terms of qualities and warranties. The
system set up by the manufacturer is totally integrated
as Renault has heavily invested through partnerships
and holdings in the development of recycling channels
to secure materials supplies and reduce its impact on
resources.

For many years the sector has been experiencing strong
growth resulting into one of the fastest growing waste
streams known as e-waste. E-waste has a low recycling
rate and in 2019 only 17% of global e-waste was collected
and properly recycled. (16) The remaining 44 million metrictons of e-waste, was either placed in landfill, burned
illegally, traded, or treated in a sub-standard way. In theEuropean Union, it is estimated that less than 40% ofelectronic waste is recycled. (17) To improve the situation,
the European Commission is set to introduce a ‘CircularElectronics Initiative’ to ensure that products sold in the
EU are designed to contain more recycled materials andhave longer lifespans.

Like many peers, Renault seeks to extend the life of its
products. This is the case of EV Lithium-ion batteries.
After their life in electric vehicles, batteries still havearound 60%-70% of their previous charge-storing
capacity. (14) Renault has set-up various partnerships todevelop stationary storage and mobile applications forsecond hand batteries.

2. E-waste is difficult to repair because of poor design
with welded or glued components that damage otherkey parts when you open up the device.

What sets Renault apart in your opinion?
The company’s circular economy activities and recycling
channels enabled the company to generate a turnover of
EUR562 million in 2019. Renault has also announced thatits historical Flins factory will become the first European
center/factory dedicated to circular economy inbetween 2021 and 2024. The Re-FACTORY will refit, andrecycle vehicles. Renault intends to set a “competitive
industrial model based on the potential for value creation
generated by the vehicle throughout its life”. (15)The Electronics & ICT Sector: the Sector
Fears the Upcoming and Ambitious EU
Legislation
The EU wants to set a new global standard after decadesof waste generation and insufficient recycling rates.
In the context of the 2020 European new circular
economy plan, the Electronics & ICT value chain has been
identified as one of seven key targets for action given its
environmental impact and circularity potential.

E-Waste is defined by three key characteristics
1. E arly obsolescence many products made by theindustry are not designed to last, contributing torobust sales while generating huge streams of waste.

3. E
 -waste is difficult to recycle as the recycling industry
fully developed and some technical difficulties such as
hazardous substances need to be safely managed forboth operators and the environment.
New and more restrictive legislations are about to comeat the EU level and national level
The European Commission aims to make the Eco-design
framework applicable to the broadest possible range of
products and make it deliver on circularity as up to 80% of
products’ environmental impacts are determined at thedesign phase. (18) The revised EU Ecolabel for electronic
displays aims, in particular, at promoting products thatare energy efficient, repairable, easy to dismantle, have aminimum recycled content and which may only contain alimited amount of hazardous substances. France became
the first country to use an official reparability index since
January 2021. Displaying the reparability index is now
mandatory at the point of sale for all smartphones,
laptops, televisions, washing machines and lawnmowers.

(14) HSBC, More than just missions September 2020(15) www.group.renault.com(16) https://weee-forum.org/publications-papers/(17) https://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=t2020_rt130&plugin=1(18) EC Circular Economy Action Plan

39

Engagement Report 2020

Improving Durability and Reparability is Key for the
Sector... However, these Actions need to be Heavily Expanded
to meet the Upcoming Legislation

Improving product durability and reparability remains
likely the best lever to not only reduce the amount ofe-waste generated by electronics devices but also to
reduce the need for newly mined mineral resources
and incremental carbon emissions. We consider thisstrategy to be aligned with the long-term business casegiven resource extraction comes with growing risks ofconstrained supplies of rare earths and metals while theindustry has now committed to carbon neutrality in the
coming decades in line with the Paris agreement.

Inclusion of recycled materials does not yet include rareearth materials. Closed-loops are still limited to plastics
parts. However, metals such as steel and iron are used inlarge quantities and the value chain for these recycledmaterial already exists.

Confronting our expectations with the industry’s
current reality
During the first year of engagement and based on theupcoming new European regulation, we have focused onfour areas we believe are key to the transition to a circularbusiness model – design for durability, reparability,
circularity-friendly business-model, partnerships andcooperation with suppliers - and compared the actual
companies’ practices against what we consider to be
the industry best practices. We engaged with 7 global
electronics and ICT companies, headquartered in the US
and Asia, in this campaign to assess where they standin the transition of their economic model from linear tocircular.
Circular Economy is Well-Known and Actions havealready been put in Place…
The circular economy is well identified. Most companies
have clearly identified the circular economy as a key
pillar of their business strategy with proper board ormanagement oversight and support; integration in thebusiness differs notably depending on the number ofbusiness lines.
Large number of multi stakeholder initiatives exist
for the sector. Most companies in our panel take partin numerous collaborative initiatives with partners orcoordination bodies at the international and local level.
Actions are taken to meet the challenge but they need
to be expanded. Eco-design is a fast-developing area,
where product differences clearly exist. Life Cycle
Analysis (LCA) are usually used but they need to cover
impacts beyond energy efficiency which has been thefocus until now. As of today, eco-design initiatives areoften limited to a few products and pilot projects in somecases. We would like to see this area grow faster.

40/

Product as a service has a long way to go. While
operational in some cases, mostly for B2B (Business
to Business) and B2C (Business to Customer) it is still
at a nascent stage. Regardless, overall, both types ofcustomers show resistance to new models as they
seem to value ownership. Improved communication tocustomers on the benefits of new models is needed.
The upcoming legislation will oblige companies to movefaster. The lack of economic incentives has prevented
progress on the CE so far. Most circular economy
initiatives were often put in place to comply with thelaw. The recycling of plastic is an example where theeconomic incentive is more established, hence its wide
adoption. The situation seems poised to improve as theEuropean Commission wants to reward products basedon their different sustainability performance namely, by
linking high performance levels to incentives.

Going Forward in 2021
At the end of this first year, we would like to highlight
three areas for improvement:
1. Quantitative goals must be defined by companies tobetter follow the improvements, i.e. number of devices
or percentage of revenues with attached circular
economy traits, such as reparability or recyclability.
2. Companies should keep focusing on their products- whose impact is most often higher - rather than on
packaging.
3. T hird-party assessments - or labels at product level- need to be developed and used extensively to help
consumers identify the best ecological offers andbuild trust around second-hand devices.

3 Questions to Pierre Gielen,
ESG Analyst - Technology,
Media and Telecommunications

Case study : US Based Computer
Hardware Company
Why are you Engaging with this Company?
This company is a key player in its sector and its
commitment to the Circular Economy started back in the
90’s with its Chairman being vocal on this subject. The
circular economy fits into the social impact the company
wants to have. In 1996, an asset recovery program waslaunched and since then, 2.1bn pounds of IT assets havebeen recovered.
In Dec 2019, the company set its “2030 moonshot goals”:
For every product sold, the company will recycle or reuse
one equivalent product. In addition, 100% of its packaging
will be made from recycled or renewable material (vs85% today). Also, more than half of its product content
will be made from recycled or renewable material.

Furthermore, the company carries out extensive LCAs
(Life Cycle Assessments) and material studies ofkey metals such as steel, aluminum, copper, or glass.
Plastics are also given a lot of attention and analysis,
notably in terms of comparison between virgin plastic
and recycled plastic. On specific projects, they havedeveloped an approach to measure the net benefit forother environmental impacts (e.g. human health, air andwater pollution, eco toxicity) of the closed-loop plastic,compared to traditional plastic.
What are you expecting from the company in the
coming years?
We would like to see further development of theirpilot projects concerning rare earth metals despite thescaling challenges. For example, the company pioneereda closed-loop process for recycling gold from e-waste
back into new motherboards in 2018. In another pilot
program, the company continues to explore ways torecycle rare earths at scale. As the range of products thatuse rare earth metals are rising, finding a way to recycle
them could become a competitive advantage.
We also encourage them to deepen their partnerships
with peers and stakeholders for cradle-to-cradle
products. While the company is a believer in crossindustry cooperation both pre-competitively within the
sector and in conjunction with other sectors, we believe
they can go even further with partners to achieve cradleto-cradle certified products.

What are the main highlights of the Engagement?
The company’s strategy is two-fold: at the product level,
the company uses reused plastic in computers andaccessories but this varies depending on the productrange. The highest rate is 50% of closed-loop plastic for
one product range. At the business level, the company
offers part of its products through leasing. However,customers are somewhat resistant for the time being.

41

Engagement Report 2020

Circularity in the fashion industry: making
circular the new black
The problem of a linear system
More than 50% of the fashion produced is discarded thesame year
The fashion industry is a USD 1.3 trillion dollar industry
and in the last 15 years, clothing production has doubled
to more than 100bn units a year. Sadly, more than 50%of the fashion produced is discarded in the same year.
Clothing is estimated to be worn, on average, only sevento ten times. This decrease in utilization rate is partly
due to a growing middle class that has increased per
capita revenues coupled with the rise of ‘fast fashion’,fashion brands characterized by quicker turnaround of
new styles, increased collections, and lower prices.

A linear system has an environmental cost
In addition, more than 50% of fast fashion produced isdisposed in under a year. Unfortunately, less than 1% ofmaterial used to produce clothing is recycled into new
clothing representing a loss of more than USD 100 billion
worth of materials each year (19). The 73% that is landfilled
or incinerated represents a significant cost, for example,
in the UK, the cost of landfilling clothing is estimated at
GBP 82 million (20).
This high production of clothes makes this industry
highly polluting. Clothing production requires significant
environmentally harmful inputs such as energy, water,
and pesticides. Fashion is currently a linear system (seefigure below) that puts pressure on resources, pollutes
the environment, degrades ecosystems and leaves
circular economic opportunities untapped.

Linear Fashion System:

Environmental Impacts throughout the Life Cycle of a Garment

Fiber
Production

Clothing
Production

A circular model presents opportunities
A circular business model can present opportunities forthe industry such as untapped sources of raw materials.
If the fashion industry were to address the environmental
and societal impact of the current industry status quo,
the overall benefit to the world economy has been
estimated to be about EUR 160 billion in 2030.

How to create a circular model for fashion?
In a perfect closed loop model, textiles and fibers remain
at their highest value after use and re-enter the economy,
never ending up as waste.
Circular economy for fashion: three key principles:
1. Design out waste and pollution: designing products
without the negative impacts including GHG emissions,hazardous substances, pollution, and excessive water
consumption.
2. Regenerate natural systems: avoiding the use of
nonrenewable resources and preserve or enhance42/(19) Ellen MacArthur, 2018(20) Pule of fashion industry report

Consumer
Use

Post
Consumerrenewable ones such as by using nutrients to support
soil regeneration or using renewable energy as
opposed to fossil fuels.
3. K eep products and materials in use: designing products
for durability, reuse, remanufacturing, and recycling tokeep products, components, and materials circulating
into the economy. Circular systems will ideallymake effective use of biologically based materials
and encourage multiple uses before nutrients are
eventually biodegraded. To do so this includes:

 Phasing out substances of concern and microfiber
release Transforming the way clothes are designed,
sold and used to break free from the disposablebusiness model Radically improve recycling by transforming
clothing design, collection, and reprocessing.
A circular economy for fashion is not simply adjusting
activities to reduce negative impacts. It requires asystemic shift to build long-term resilience, generatebusiness and economic opportunities and provide
environmental and societal benefits.

Engagement scope
The engagement campaign included seven European
companies as North Americans companies declined toparticipate, indicating that Europe is likely more aheadon the circular economy.
Two key elements: designing out waste & pollution andkeeping products and materials in use
We focused on these two aspects of a circular model
because they rely on a more systemic shift in thebusiness model. Regenerative systems is also essential
but a general observation is that more work was being
done to ensure certified materials (i.e. certified viscose
and BCI/organic cotton) than actually transitioning to amore circular model, taking into account the lifecycle ofproducts including disposal and end of life.

Engagement Conclusions : The Path to Scaling
Circular Economy
No distinct strategy at the board level
While half of the analyzed companies do discuss Circular
Economy at the board level, the circular economy isstrongly assimilated into sustainability overall, rather thanbeing addressed as a distinct strategic topic. This does
not enable companies to address the entire spectrum ofopportunities offered by a circular model.
Commitments are often ambiguous
All companies under analysis had some type ofcommitments to increase sustainably sourced materials:
however, many of these commitments are shrouded in
imprecise and unregulated terms such as “sustainable
polyester” or “responsibly sourced materials”. This
indicates that they are more often riding the circular
economy trend for marketing reasons, without truly
delivering. We acknowledge that a true circular economy
is not yet completely possible but stronger commitments
will inspire increased investment in areas that still requiredevelopment, such as fully cradle-to-cradle products,
which no company had clear commitments on.
Some concrete solutions are still at a nascent stage:
Reparability and longevity
Efforts around longevity, reparability and end of life
are limited. Only two companies in our study had any
type of pilot project around reparability of products andalmost no company had any type of communication
with customers on how to extend the longevity of a
product they have purchased. Furthermore, customer
engagement around CE including campaigns aroundresponsible consumption, maintenance and disposal of
products was very limited. Increasing this communication

could help companies forge stronger relationships withcustomers and open them up to new business models,such as second hand clothing markets and productpersonalization. Only one luxury company in our study
demonstrated relatively strong performance as they had aproject to enable customers to “refresh” purchased itemswith personalization and patch solutions if clothing had
any breaks or tears. These types of projects help extend
the longevity of the product while also encouraging
customers to make repeat trips to stores.
Managing end of life
Managing the end of life of products is limited. Veryfew companies had any clear strategy about managing
the end of life of their own products. While numerous
companies in the study had some sort of garment
collection system, only one comprehensively reported
on what precisely happened to the garments that werecollected and, more specifically, how many were being
made into new clothes or resold on a secondary market(a more viable strategy for the luxury sector).
Partnerships between suppliers and industry peers are
essential
Strong supplier partnerships
Strong supplier partnerships are essential to realize
a Circular Economy. Companies in the study withthe strongest overall scores also had the strongest
performance on supplier relationships. This makes
sense because achieving circularity requires the fullparticipation of suppliers so that they can invest inenvironmental improvements with a guarantee ofcontinuous orders. Strong practices include quantitative
targets for suppliers on environmental targets as well ascomprehensive supplier training on CE with targets or
KPIs. This is a win-win situation for both suppliers andbrands in improving their offer.
Multi-stakeholder initiatives
Companies are active in joining multi stakeholder
initiatives (MSIs) to support a circular economy including
initiatives around micro plastics, chemical safety, and R&D.
Collective initiatives enable companies to pool resources,
share knowledge and collectively find solutions where
none might exist. However, involvement with collective
initiatives has to coincide with actual changes in businessmodel and strategy.

43

Engagement Report 2020

Going forward, are there any recommendations foradidas?

3 Questions to Molly Minton,
ESG Analyst - Appareland Consumer ProductsCase study: adidas
Why did you chose to highlight adidas?
adidas was one of the top performers in our study but
there were a few particular points that made the adidascase so interesting.
adidas has a clear strategy specifically on the Circular
Economy. Discussed at board level, they have three
clear strategy loops representing different avenues andopportunities of CE (scaling polyester loop, R&D loop,
and regenerative loop). adidas has clear goals aroundcircular polyester and aims to replace all virgin polyesterwith recycled products where a solution exists. By theend of 2020, 60% of all polyester used for apparel andfootwear ranges were recycled polyester demonstratingthat circular thinking is already starting to scale.
What made the adidas case so unique?
Concerning the end of life of their products, adidas isaiming to implement a global product take back program
to all key cities and markets where they will incentivize
customers to bring in old adidas clothes (in exchange
for vouchers) so that the clothes can be re-made into
new products. The adidas strategy is to take back theirown clothes - where they have certainty over the inputs
and assembly - to make them into new products, thus
creating a perfectly circular system.
What was so unique was their vision for this takeback
program. Other companies in the study had muchlarger clothing collection programs, but the adidas
strategy is less about marketing and more circular instrategy. Being sure of the quality of the products will
help adidas transform old products into new products
which is difficult if they know the exact inputs including
fabric and chemical composition. While the global takeback program is being implemented incrementally (as it
takes time to scale), in the long term this could mean the
difference between a marketing ploy and a real circular
economy.

44/

While adidas is proactive in advancing the circular
economy, they currently have limited programs aroundpromoting longevity and reparability of products.
Quality is a key element to sportswear and there could
be opportunities to more clearly integrate longevity
and reparability into the value proposition of adidas
products. Furthermore, while they have ambitious
goals concerning the circular economy, some of thesegoals could use more granularity. For example, while
it is understandable that adidas cannot yet commit to
making certain products circular if there is currently no
viable solution, it would be helpful to have a sense ofwhat percent of the products do not have a solution atpresent.

Increasing
Accountabilityon Plastic
Looking back: 2019 engagement
Plastic is a cheap, versatile material with particularproperties that makes it attractive such as durability,
flexibility, and ability to withstand corrosion. Due to theseparticular qualities, it can be found in a wide range of
products from packaging to car bumpers, water pipes,
and medical equipment.
At Amundi, while we think plastic is vital for someproducts, we also believe plastic pollution is an issue forthe environment and there is a need for in-depth thinking
by companies who use it heavily. This is the reason why
we launched a three-year engagement that aims to
examine companies’ plastic exposure and how they are
managing plastic in the context of increasing regulationand public pressure. However, limited alternatives andviable technologies currently exist to rapidly change
existing operations. The engagement focused on 3 sectors:
household personal products, automobile components,and healthcare/pharmaceuticals with the aim of not only
looking at sectors that are the most visible in the public eye
but also at sectors that overall have exposure to plastics.
Last year Amundi provided specific recommendations
for each sector and each company with the aim to follow
performance over the following years:
Household & Personal Products: more granular reportingon the impacts of a company’s own plastic packaging
including breakdowns of the recycling rates as well as
breakdowns by geography with a focus on impacts inareas with poor recycling infrastructure.

Healthcare Equipment & Pharmaceuticals: Making
plastic a higher priority in environmental managementwith an increase in focus, transparency, and reporting
to better shape a strategy on plastic that focuses on thespecific needs and concerns of the sector.
Tires & Automobile Components: Increased transparency
and reporting on how companies work with their suppliers
to address plastic issues as well as increased reportingon environmental impacts of components. We will follow
up more closely on company specific KPIs related toreporting that were highlighted in the 2019 report.

2020 Updates:
FOCUS
on the Healthcare Sector
In the context of Covid‑19 the concept of balancing
public health with environmental impact is now more
important than ever. Disposable and reusable masks,
essential to curbing the pandemic, are ending up in theworld’s beaches and oceans where they can take up to
450 years to degrade (21). The UN estimates that 75% of
all coronavirus related plastic could end up as waste inoceans and landfills (22).
While this was not the focus of our engagement with thehealthcare equipment sector, it nevertheless highlights
the need for an improved strategy around the impactsof plastic medical waste including information andengagement.

The Evolution of Novo Nordisk’s Plastic Strategy
In 2020 we observed a particular positive development
at Novo Nordisk, a global pharmaceutical company
specializing in chronic diseases such as diabetes. Asa reminder, Novo Nordisk is significantly exposed toplastics through injection devices (such as insulin pens),of which they produce more than 550 million per year.
We recommended Novo Nordisk to:
1. Include the topic of plastic in their sustainability
communication.
2. Expand their “circular‑mindset” to the managementof their plastic pens, for instance by making the end‑of‑life of these devices more environmental friendly
through more proper disposal and ideally recycling.
Novo Nordisk’s accomplishments in 2020

challenge” as part of its aspirational strategy to have zeroenvironmental impact. They have also taken concrete
actions with the recent launch of two pilot initiatives
related to better management of its plastic pens. The firstconsists of recycling pens discarded after production into
chairs (for the plastic parts) and lamps (for the glass part).
The group is now looking into how to scale‑up the solution
to use insulin pens. The second initiative, which is required
for a large‑scale recycling of the pens, was launched in2020 in a pilot take‑back program to effectively collectused pens. First tested in Denmark, this pilot program isdue to be further expanded to other countries.
Going Forward: Recommendations for Novo Nordisk
As Novo Nordisk takes its plastic exposure more seriously,
we encourage the group to expand its communicationon this topic going forward by providing more KPIs andtargets (including KPIs around packaging, internal plastic
use, and end‑user products).

Pushing for Increased Reportingwith the CDP
Non-Disclosure
Campaign
What is CDP?
The CDP reporting platform provides the investor
community with a reliable source of self‑reported
corporate environmental data, in a consistent andcomparable manner, and is fully aligned with the Task
Force for Climate‑Related Financial Disclosures’ (TCFD)
recommendations.
To feed this reporting database, CDP requests annually
over 7000 of the world’s largest companies to discloseon their impact and management of climate change,
forests and water security. Unfortunately, despite thegrowing reputation of CDP’s reporting metrics amongst
investors and other key stakeholders, a large number ofcompanies (about 60% in 2019) still does not submit the
information requested by CDP.
Since 2017, in order to bolster their efforts in building thisreporting platform and enhance corporate environmental
disclosure, CDP has coordinated a global investor‑
led engagement campaign called the Non‑Disclosure
Campaign (or NDC).

Our conversations have borne fruits in many ways andconfirmed the company’s nascent ideas on the issue.

How does Amundi support CDP?

In mid‑2020, the plastic issue was addressed on thecompany website from where it was absent before. The
environmental section of Novo Nordisk CSR website
describes how the company plans to tackle its “plastic

At Amundi, we strongly support CDP’s initiatives and haveactively participated in the NDC since its launch in 2017,as we place great value in bringing together information
on key environmental issues across sectors and regions(21) https://www.theguardian.com/environment/2020/jun/08/more-masks-than-jellyfish-coronavirus-waste-ends-up-in-ocean(22) https://news.un.org/en/story/2020/07/1069151

45

Engagement Report 2020

using a single, consistent approach. Such information,collected through CDP’s standardized questionnaires, isof great help in the assessment of investment portfolios
and of the exposure to environmental risks of ourinvestees. Whilst many companies produce their own
sustainability reports, they are often too high level,lacking in metrics and comparability for investors tomake a proper assessment of a company’s trajectory toa low-carbon, water-secure future. CDP’s methodology
aims to bring all companies to the same, most granularand most useful level of disclosure.

2020 updates on the CDP non-disclosure
campaign
Overall results
The 2020 edition of the NDC (non-disclosure campaign)
was considered a success. CDP calculated thatcompanies engaged in the campaign were over twice as
likely to disclose, than companies who were not selectedby investors for engagement: amongst previous nondisclosers, the response rates in 2020 reached 20% in
the NDC, vs 9% in the group of companies that were notpart of the NDC (23).

Amundi’s results
Amundi performed particularly well in this 2020
campaign with an above average response rate of
31% amongst the companies with whom we engaged.
Companies Amundi convinced to disclose through CDP’squestionnaire include a German chemicals company anda Ukrainian agricultural products company concerning
forests disclosure, alongside a German life science
services company and an Austrian insurance company
on climate change disclosure.

Biodiversity:
The New Frontier in
Sustainable Finance
Why is Biodiversity important?
Biodiversity provides significant economic and social
value. This value includes ecosystem services including
climate regulation, water purification, and pollination,material benefits including food, energy, and medicines
alongside a source of cultural value and psychologicalwell-being (24). However, biodiversity is in a state of rapid
decline due to human activities. A growing humanpopulation and increased human activities such as urban

46/

development, farming, overfishing, logging, and mining
are altering the natural world at an unprecedented rate (25).
The WWF reported that the population sizes of species
has dropped on average 68% since 1970 globally (26).
Around 25% of species assessed are threatened, whichindicates that over 1 million species may face extinction
within a decade (27).

Biodiversity loss is a risk that can no longer beignoredAccording to the World Economic Forum’s 2020 annual
survey, biodiversity loss has now been cited as one of the
top 5 global risks for the next ten years along with otherenvironmental risks such as extreme weather and climate
action failure (28). However measuring and accounting forbiodiversity risks and impacts is incredibly complex. With
biodiversity, there is no one-size-fits-all metric (such as
CO2 equivalent emissions for climate change) or longterm scenario analysis. Furthermore, a wide variety ofcorporate actions (from waste to overconsumptionof resources) impacts biodiversity loss. Finally, theimplications of biodiversity loss are not uniform, withcertain geographies and species being particularly more
vulnerable.
Corporate disclosure is limited with only a handful ofcompanies demonstrating efforts on robust biodiversity
disclosure. While there are some initiatives to boost
nature related disclosures such as CDP forests, we area long way off from a clear investment framework on
biodiversity reporting.

Engaging to increase the quality of
biodiversity data
To increase the quality of biodiversity data, investors
must engage on the topic. This can include engagementwith corporates on specific biodiversity related topics
such as deforestation or a more general engagement
on how a company is reporting on biodiversity risks andimpacts to push for overall more robust and granular
reporting.

Amundi Biodiversity engagement activities in
2020
In 2020, Amundi engaged with 96 companies on the
topic of biodiversity (a combination of email campaigns
and dialogue with corporates). This included a wide
variety of sectors from extractives to consumer sectors.
For many of these engagements the key priority isgetting companies to better understand and report on(23) https://www.cdp.net/en/reports/downloads/5502(24) IBPES, 2019(25) PBES, 2019(26) WWF Living Planet Report, 2020 https://livingplanet.panda.org/en-us/?utm_campaign=living-planet&utm_medium=media&utm_source=report(27) https://www.un.org/sustainabledevelopment/blog/2019/05/nature-decline-unprecedented-report/#:~:text=from%20GlobalGoalsUN&text=The%20Report%20finds%20that%20around,ever%20before%20in%20human%20history.&text=%E2%80%9CThis%20loss%20is%20a%20direct,all%20regions%20
of%20the%20world.%E2%80%9D(28) https://www.weforum.org/press/2020/01/burning-planet-climate-fires-and-political-flame-wars-ragebiodiversity related risks and impacts, as most sectors
are rather embryonic when it comes to understanding
and addressing biodiversity. As an example, certain
consumer companies with strong forestry practices
for paper products have not begun thinking aboutbiodiversity related risks. By contrast the extractive
sectors such as metals & mining are far more advanced
on biodiversity (e.g. ICMM guidelines on biodiversity) but
there is still a long way to go towards more granular asset
level reporting.
Due to the overall weak disclosure on biodiversity
reporting, a current KPI on the subject is quite simply,
increased reporting. Greater reporting on biodiversity
is needed across all sectors; however, what thatmeans differs considerably by sector (i.e. supply chaintransparency for palm, soy, cattle versus more asset
level biodiversity data at mining sites). Regardless ofthe sector, it is clear solving the issue requires morecollaboration with experts and stakeholders to address
the reporting difficulties and reporting needs.

Amundi Forest Reporting campaign
Organizations like CDP can help provide a starting point
to assess corporate performance around biodiversity.
Pushing for further collaboration with experts such as
through CDP’s Forests questionnaire is key to encouragecompanies to find solutions to biodiversity reporting until
a clear standard emerges. CDP’s Forests questionnaire
provides a framework of action for companies to measureand manage forest‑related risks and opportunities,
transparently report on progress, and commit to proactive
action for the restoration of forests and ecosystems.
To encourage disclosure through CDP’s Forests
questionnaire, Amundi started an email engagement
campaign to encourage companies who have large
deforestation exposure according to Forest500 and
Canopy. This engagement campaign was not officially in
conjunction with CDP such as the CDP Non‑Disclosure
Campaign but nonetheless had the same aim to push forincreased reporting with CDP Forests as CDP Forests has
the lowest participation rates (compared to CDP Climate
Change and CDP Water Security).

1200

120

1000

100

800

80

600

60

400

40

200

20

0

Investors participating

Companies engaged

Non-Disclosure Campaign 2017-20

0
Climate Change

Forests

Water Security

Companies

2017

2018

2019

2020

Investors

2017

2018

2019

2020

Distinct Count

Source (1) https://www.cdp.net/en/reports/downloads/5502

Included in the 96 engagements on biodiversity,
Amundi emailed 32 companies on the topic of CDP
Forests disclosure, of which eight replied in 2020. The
low response rate is further indicative that biodiversity
related reporting currently remains a blind spot for mostcompanies. Going forward in 2021, we will commence
deeper engagement on the topic of limited biodiversity
disclosure including further engagement to push forincreased reporting with CDP Forest. 

47

48/

Protecting & Developing
Employees in Companies andSupply Chains
Inequalities fuel social divisions
and foster political and financial
market instability. Covid‑19 has
exacerbated inequalities making
equitable sharing of added value
more significant than ever. The
nature of the commitments madeby companies on social issues
is gradually integrated into ourvoting decisions.

Social cohesion through theprotection of Direct & Indirect
Employees and promotion of
Human Rightsof which is447

Promoting Diversity
and Non-Discrimination:
The 30% ClubInterview with 30% Co-chair
Virna Valenti,
ESG Analyst ‑ Banks

What is the 30% Club?
The 30% Club is a global campaign to take action
to increase gender diversity at board and senior
management levels . The campaign was launched in the
UK in 2010 when there were just 12% of women on the
FTSE100 boards (compared to 34.5% in 2020).

307

When it was launched, the club originally set 30% as
an aspirational target in comparison to the 12% in the
UK at the time. This figure was confirmed by researchwhich has proved that 30% represents a critical mass
form which point minority groups can impact boardroom
dynamics. However, the target is a floor not a ceilingwith the ultimate goal being to strive for overall more
equitable gender and diversity balance.

101

Companies will have to address imbalances in their talentpipelines and strategies to drive long‑term progress andthis ultimately must come from top management.

Employees (including
diversity & inclusion)

Supply chain
Due Diligence

39

Human Rights

At Amundi, we share the 30% Club beliefs that genderbalance on boards and senior management encourages
better leadership and governance. We also believe thatdiversity and inclusion further contribute to all‑roundboard performance and ultimately increase corporate
performance for companies and their shareholders.
This is the reason why Amundi participated in thecreation of the French Club in 2020.

49

Engagement Report 2020

What will the scope of the 30% Club inFrance be?
The French Investor Group had two main
objectives in 2020:
1. Conduct a soft email engagement campaign with the
SBF 120 to communicate the launch of the initiativeand investor expectations on gender diversity. The
group received numerous responses, many of which
communicated their support for
the initiative and their current
efforts.

female managers can be ambiguous, as there aremany levels of management and will not necessarily
indicate how many women fill the most influential
roles at the company.

Going Forward
Going forward in 2021 the initiative will develop a list of
KPIs divided into themes and begin evaluating companies
based on this disclosed list of indicators. This will enable us
to create a proprietary dataset shared
between investee members and pushfor more robust and granular reportingon the topic. Furthermore, the groupwill expand the pool of investee
companies under engagement
and begin monitoring and tracking
progress of those companies over thecourse of the following years.

As of early 2021,
the French investor
group currently has
11 members with an
AUM totaling over Facilitating a Just
How is the Club selecting
5.5 trillion euros
Transition
engagement targets?
which it is expected
To identify the worst offenders, theinvestor group evaluated the ratio
to grow further
between % of female executive
managers vs % of females employed.
during the year.
Just Transition: leaving no
Using this ratio helps to better compare
2. Launch an engagement campaign
targeted at the top “worst
offenders” in the CAC40. This
campaign started in 2020 andengagements continue in 2021
with the list being expanded as
new members join.

the performance between sectors(with the aim of having at least a 1:1 ratio) because some
sectors such as STEMs (Science, Technology, Engineering,and Mathematics) have had historically lower rates ofwomen compared to consumer sectors that tend to have alarger pool of female talent.

% female executive managers% females employed
The Group has decided to focus on the
Executive Committee for two reasons: In France the Loi Coppé-Zimmerman or Zimmerman
Law, requires French boards to be composed ofat least 40% women however, the law does not
currently cover the executive committee level whichmeans it is a stronger indicator of companies with agender imbalance The percentage of females in executive manage­
ment is a relatively concrete indicator available incorporate reporting. By contrast, the percentage of50/(29) https://unfccc.int/sites/default/files/english_paris_agreement.pdf(30) Deloitte, Electric vehicles, setting a course for 2030

one behind

The concept of Just Transition aims to ensure thebenefits of the transition to a greener, low carbon
economy are shared by all alongside finding solutions
for those who, in the process, might suffer economicallysuch as countries, regions, industries and workers. The
concept is acknowledged by the Paris Agreement
which mentions “the imperatives of a just transitionof the workforce and the creation of decent work andquality jobs” (29). The Just Transition consists of: Minimizing the negative social impacts of a transition
to low-carbon and environmentally friendly businessmodels, for example the loss of jobs in industries inneed of conversion
 Maximizing the positive aspects of such a transition.
It has several dimensions: workers, consumers, local
communities and societies at large.
Before the Covid-19 pandemic and its dire economic
implications, the automobile industry was alreadygoing through considerable structural changes, namely
automation and electrification. As CO 2 emissions
regulations continue to tighten globally, it is estimatedthat electric vehicles (EVs) will represent 32% of the total
market share for new car sales in 2030 (30) compared toa 2.5% market share in 2019. This major shift will haveimportant and disruptive consequences. One suchconsequence will be the social impact felt by employees
due to electrification. In Europe, the automobile
sector employs 14.6 million people (6.7% of total
employment) (31). Manufacturing EVs requires fewer andless complex components than cars with combustion
engines. A typical EV powertrain (32) has around 100 times
fewer electromechanical parts than that of an internal
combustion engine (20 vs. 2000). The shift to EVs is
likely to reduce employment in engines, transmissions,exhaust, and conventional fuel systems. The assembly ofan EV would require around 30% less work than an ICE(internal combustion engine) vehicle (33).
In the automotive industry, the just transition implies
the need for companies to ensure that their workforce
remains employable and to minimize, as much as
possible, any redundancies.

Engagement Objectives
The objective of this engagement is to assess the capacityof companies, to guarantee the employability of theirworkforce, to support them in the evolution of the sector,
and finally, to anticipate any structural changes that theindustry might face. We enquired about the companies
training and career management policies, and asked
companies about their social dialogue processes to help
prevent social conflicts and production disruption.
We contacted eleven automobile companies thateither have ambitious targets for the manufacturingand marketing of EVs for the years to come and two
automobile components companies that are heavily
involved in combustion engine parts. The former willneed their workforce to adapt; the latter will need tochange their business models to adapt. Three companies
replied to our engagement. As social cohesion and thejust transition are of key importance for Amundi, we
continue to push for increased company participation inthis engagement campaign.

FOCUS
on Volkswagen
Volkswagen, which employs more than 660,000 staff
worldwide, has pledged to spend EUR 33 billion on its
electric vehicle business over the next few years. The
company recognizes that a large proportion of theworkforce will be impacted by the electrification of its fleet
and that some relocation of employees will be required
within their regions. However, it reported that there areno major redundancies planned until 2029. There will be
job reductions but mostly through retirements. This is

the result of the Future Pact agreement reached by theunions and the board of directors in 2016.
Volkswagen, which has historically shown relatively
strong employee development programs, considers
itself well prepared for the electrification of its fleet
and recognizes that employees need very different
qualifications for the new era of car manufacturing.
Employees are continuously trained for the challengeof the transformation through targeted programs. Over118,000 training courses totaling 16.3 million hours of
training were completed across the group in 2019. For
example, the company has initiated a comprehensive
qualification program for around 3,500 employees forthe successful ramp-up of the new electric models at thepilot site for e-mobility in Zwickau in Germany.

Going forward
We will continue to engage with automobile companies
to encourage a just transition for their employees. As
the subject is very topical, we might also expand thisengagement to other sectors that are undergoing similar
structural changes.

Fair
Compensation:
The Case for the
Equity Pay Ratio
It is a conviction at Amundi that companies must
participate in the social and societal cohesion of thecountries in which they operate and one way they do sois through their wage and profit-sharing policies. Morespecifically, Amundi prioritizes a fair equity pay ratioor the gap between CEO pay and the median pay level
among employees (often known also as the CEO pay
ratio). The equity pay ratio is a useful ratio as it is able
to highlight inequalities at some companies between
median pay level and CEO pay.
In 2020, Amundi started with a focus on the United States
for two reasons. First, in the United States, publicallytraded companies are required to disclose the pay ratio
between CEO and median employees making it easier tocollect this data. Second, in the United States CEO pay
has outpaced increases in worker pay. The CEO worker
pay ratio was 21-to-1 in 1965, 61-to-1 in 1989, and 320-to-1
in 2019. CEO pay grew by 337% between 1978 and 2018
whereas typical worker pay grew by just 13.7% between
those same years (34).
Companies’ compensation strategies need to put more
focus on finding a fair pay ratio, in particular in sectors
where median salaries are far below a living wage.

(31) www.acea.be(32) The whole mechanism by which power is generated and transmitted to the road(33) HSBC, More than juste missions ; 2020(34) https://www.epi.org/publication/ceo-compensation-surged-14-in-2019-to-21-3-million-ceos-now-earn-320-times-as-much-as-a-typical-worker/#:~:text=Changes%20in%20the%20CEO%2Dto,%2Dto%2D1%20in%202018.

51

Engagement Report 2020

Factoring living wage considerations into remuneration
schemes has been observed to decrease turnover rates
and increase productivity (35). Furthermore, a fair equity
pay ratio can indicate that the company prioritizes highwage job creation and sees investing in employees as key
to the long-term health of the company.
Using data collected and made public by AFL-CIO, afederation of 55 national and international labor unions
that represents 12.5 million working people, Amundi
carried out a ‘soft engagement campaign’ with US
companies that demonstrated some of the most unequal
CEO-pay ratios. These companies were, for the most part,companies in the retail, food retail, and consumer services
sectors and had median pays well below a living wage.
The equity pay ratios of companies targeted were wellover 1,000:1 with median salaries often below $15,000 ayear. It is important to note that median pay rates canalso include part time workers; however, we consider
prioritizing full time employment practices necessary
for a living wage and thus do not consider part time
contracts a valid argument for low worker pay rates.
The aim of this campaign was to encourage companies toaddress a more equitable pay ratio, particularly relevantin the time of Covid-19 where many companies sufferedfinancial difficulties. We encourage remuneration
strategies that ensure a living wage for the lowest paid
employees in addition to incentivizing sustainable longterm value creation. While overall these aims are broad,the initial goal of the campaign is to begin dialogue on
this particular issue and set up particular benchmarks
for targeted companies going forward in 2021. So far,the engagement has had a 25% response rate, which we
consider a positive start. We will continue to push for amore equitable pay ratio in 2021, meaning a ratio thatencourages sustainable long term value creation but is
not at the expense of adequate pay and benefits for thelowest paid workers. If we do not see any developments,
companies could be subject to votes against CEO pay inaccordance with the Amundi Voting policy.

Living Wage for Direct Employees:
A Matter of Social Cohesion

living wage is a human right outlined by both the UN
Declaration of Human Rights and the International
Labour Organization (ILO). In order to better assess
the concept in companies’ strategy, we have decided tosupport the Anker definition that says “the remuneration
received for standard workweek by a worker in aparticular place sufficient to afford a decent standard ofliving for the worker and her or his family. Elements of adecent standard of living include food, water, housing,education, health care, transportation, clothing, andother essential needs including provision for unexpected
events” (36).
Consequently, living wage is different from minimum
wage. Minimum wage is the amount set by law whereas
living wage is determined by average cost of living in a
specific geography. What we currently see is an increasing
dissociation between living wage and minimum wage.
According to a report by the Resolution Foundation in
the UK in 2013, 4.8 million UK workers or roughly 20%
of all employees were earning below a living wage in the
UK. This figure was up from the 3.9 million reported in2009 (37) (while most countries have living wage issues,
the UK has done significant studies on the subject andthus more UK statistics are available).

A lack of Living Wage impacts on Workers,
Companies and Society
Workers
Working multiple jobs can lead to feelings of “total
desperation” which impacts both mental and physicalhealth.
Companies
Companies feel the consequences in the form of reduced
motivation and retention, diminished reputation and poor
relationships between top management and employees
for companies.
Society
Obligation for the State to take the place of the companies
by giving financial aids to the most precarious employees
and possibly social division and political instability.

Year Two of Living Wage Engagement
For this reason, Amundi launched in 2019 an engagement
primarily with the food retail sector.

52/

Living wage is often mixed up with minimum wage andneeds more comprehensive on-the-ground analysis.

Companies still need to concretely measure if theiremployee wages are a living wage or just minimum
wage

One of the two ESG values Amundi wants to promote
is social cohesion. Social cohesion is possible only
if companies distribute fairly the value they create,
which includes a living wage to its employees. Indeed,

At the end of this second year of engagement for the
food retail sector, we see that companies are well awareof the difficulties linked to remuneration and try toaddress these issues.

(35) The case for a living wage was explained in depth in Amundi’s 2019 engagement report); https://www.epi.org/publication/bp170/(36) https://www.globallivingwage.org/about/what-is-a-living-wage/(37) https://leftfootforward.org/2014/04/its-time-to-be-bold-on-the-living-wage/

However, it still seems difficult for them to make aclear difference between the minimum wage, which isa law requirement, and the living wage, which allows
employees to live decently. Even when the difference ismade, there is still a lack of concrete results or surveys
on the ground. For example:

 How do the companies validate that employees’
wages allow them to live correctly?

 How do the companies verify the effectiveness ofcollective bargaining systems, especially in certain
areas that present greater risks (such as urban areas
where the cost of living is higher)?

 How can employees speak up regarding wage abuse(whistleblowing systems, grievance mechanisms etc)?
Fortunately for food retail, unions play a prominent roleand focus significant attention to this issue. However, thehigh turnover rates and high rates of unskilled employees
at the bottom of the pyramid means compensation canbe limited.
Accounting for Covid-19
In year two, we also paid attention to how companies
managed the Covid‑19 crisis, especially regarding
employees who were on the front line. Most companies
we engaged with have had supportive actions, suchas maintaining wages, increasing health insurance,
providing adequate sick leave, limiting bonuses of
the top management, and reducing dividends so thatcompanies can support their employees. We will remainvery cautious during 2021 to make sure that theseadvantages remain.

FOCUS
on Carrefour
Why Focus on Carrefour?
Carrefour is one of the biggest food retailers in the world
with more than 12,000 stores and 320,000 employees in
30 countries. With a large employee base, wage related
matters are a significant issue for the company.
Carrefour has formalized its responsible remuneration
policy and made it public on its website, which is abest practice and overall the company demonstrates
relatively robust remuneration policies. However, it stilllacks impact assessment studies in at risk geographies
which would help assess if global employees are in fact
earning a living wage.
What are the main highlights of the year?
Carrefour has developed a well‑structured system of
remuneration through specific measures on payroll
management and ensuring that the remuneration iscompliant with local/regional laws and regulation andwith breach agreements.

The company has a strong union presence whose role isto protect employees. Carrefour has an agreement with
UNI, the global union, which covers 100% of employees
worldwide. This is a strong practice in the sector andnot often seen with many peers. A dispute management
procedure has been incorporated into the UNI Global
Union agreement, enabling complaints made by a tradeunion representative or a Carrefour employee to bereported to the UNI and Carrefour’s management, withassurance that the matter will be dealt with.
In the time of Covid, it is worth highlighting thatexceptional bonuses were paid to front‑line employees,
for a total amount of €128m in H1 2020. The CEO,
Alexandre Bompard, decided to give up 25% of his
fixed compensation for a period of two months and the
Executive Committee decided to reduce their directors’fees by 25%. The amounts have been used to financesolidarity action for group employees. The dividend was
also reduced by 50%.
What are you expecting from the company in thefollowing years?
For remuneration, Carrefour demonstrates many strong
practices; however, we would like to see continued
improvements in the form of wage assessments to ensurethat Carrefour’s “fair remuneration” scheme is equal or
above living wage in all the countries. In addition, moredetails regarding the whistle‑blowing system and the key
outcomes would help provide additional granularity into
employee concerns around Carrefour policies.

The Platform Living Wage
Financials and Covid-19
Furthering our efforts to address the nonpayment of living wages

The year 2020 marks Amundi’s second year in the
Platform Living Wage Financials (PLWF). The PLWF isa growing alliance of currently 15 financial institutions
that encourages and monitors investee companies
to address the non‑payment of living wage in global
supply chains. As an investor coalition with over€3.2 trillion of Assets Under Management (AUM) andadvice, we use our influence and leverage to engage
with our investee companies. The PLWF engages withover 30 listed garment and footwear brands, 11 foodproducing companies, and 10 food retail companies
with new additions every year. The PLWF evaluatescompanies based on an externally assured living wage53

Engagement Report 2020

assessment methodology that is aligned with thereporting framework of the UNGPs. This methodology isopen source and can be found on the PLWF website (38).

Summary of Living Wage 2020 engagement
For garment and footwear, overall progress has been
observed to embed the relevance of living wage within theindustry, however, no company has yet been able to guarantee
a living wage in own operations or operations of suppliers.
Only one company has demonstrated a comprehensive
process to ensure widespread implementation of living
wage in the supply chain. More observations and historicalresults can be viewed on the website.

Assessment Results 2020
Garment & Footwear

over a million Bangladeshi garment workers either losing
their jobs or being furloughed without pay (39).
Amundi shared the PLWF’s idea that Covid-19 has
reinforced the need to accelerate the payment of living
wages in global supply chains but that Covid-19 also
required specific investor focus in 2020. Consequently,
the PLWF created a supplementary methodology
to evaluate how investee companies under PLWF
engagement were responding to Covid-19 in their global
supply chains while taking into account the businesschallenges posed by the economic situation.
The core foundation of the methodology was based on
the ILO Call to Action. This statement created by the
ILO called on actors including brands, retailers, financial
institutions and other stakeholders to take immediate
actions to protect garment workers’ income, health,and employment to survive during the Covid-19 crisis.
The PLWF publically endorsed the Call to action andsent out an investor expectation letter to brands underengagement between April and May 2020, emphasizing
our expectation that brands should publicly commit to arange of actions outlined in the ILO statement including: Paying manufacturers for finished goods and goods
in production

 Maintaining effective and open lines of communica‑tion with supply chain partners about the status ofbusiness during the pandemic

 Direct financial support to factories when possible
 Promoting core ILO labor standards as well as a safeand healthy workplace

Covid-19 and Living Wage
The efforts of the PLWF in 2020 cannot be discussed
without examining the impact that Covid-19 has hadon the garment industry and as a consequence, theirglobal supply chains. The impact of Covid-19 on theapparel sector has meant store closures and changes
in consumer preferences away from discretionary
spending. This has had a direct impact on global supply
chains with companies re-shuffling their inventories,
slowing down production, and canceling orders to
suppliers.
Global suppliers have felt the consequences of theseactions and, in particular, areas of low cost manufacturing
where workers lack appropriate social protections.
Workers in global garment supply chains have been
exposed to sudden termination, lack of severance pay, as
well as inadequate social security and health insurance. For
example, in Bangladesh alone, over £2.4bn worth of orders
were cancelled or suspended in March 2020 leading to54/

 Continuing to strengthen social protection systems
for workers globally.

The PLWF Covid-19 methodology
The supplementary methodology was divided into
four categories: financial situation, prioritizing health& safety, supply chain management & protection ofworkers’ rights, and involvement/engagement in multistakeholder initiatives (including the ILO Call to action).
While this methodology was specific to Covid-19, manyof the actions are also strong practice for living wage
such as strengthening social protections and maintaining
strong supplier relationships.
50% of the brands under engagement publicallyendorsed ILO’s Call to Action. In addition, 77% of brands
responded to the PLWF’s Covid-19 response letter. It
was observed that companies scoring ‘Embryonic’ inour 2020 living wage assessment provide significantly
less disclosures on their COVID-19 response compared tothose in the ‘Developing’ & ‘Maturing’ categories.

(38) www.livingwage.nl(39) https://www.unido.org/stories/will-covid-19-accelerate-transition-sustainable-fashion-industry

Key Observations
Financial situation
Concerning the financial position of investee companies,
none of the companies under the PLWS scope had severe
liquidity issues and 72% of the companies assessed
implemented measures to safeguard their financial
position such as reduced dividends and/or reduced
executive compensation. This means that poor practices
on living wages cannot be explained by extreme financial
difficulties during Covid-19 as no companies in our study
demonstrated extreme financial difficulties resulting
from the Covid-19 pandemic.
Health & safety
89% of companies disclosed something about Health& Safety for their own operations and supply chain.
However, several failed to disclose whether H&S measures
are being implemented by their suppliers.
Supply chain management & protection of worker rights
In the study, 83% of companies implemented some of
the aspects we consider strong practices in terms ofsupply chain management, but the breadth of measures
implemented varied significantly. For example, a large
majority of companies publicly disclosed that they paid
their suppliers for orders in production or completed andmany claimed to provide clarity to their suppliers on theirbusiness strategy during the pandemic. However, mostbrands did not disclose details on whether there werechanges in the payment conditions with their suppliers.
Furthermore, only a few brands managed to confirm
that discounts were not being requested to the suppliers(53% of brands) and that they maintained the existing
payment times (40% of brands). Unfortunately, 20% of
the companies assessed actually extended payment
terms which can put additional financial burden on
suppliers who likely had their own cash flow concerns.
Direct employees
Also, concerning direct employees, 60% of brands
furloughed or dismissed part of their own staff, with
only 40% of those disclosing that they provided legally
mandated benefits. The remaining 20% had implemented
measures detrimental to workers like unpaid furlough.
Suppliers
Some companies did disclose how they supported
their suppliers. Of the brands under our study, 13% of
the brands disclosed providing financial assistance totheir suppliers if their employees had been furloughedor dismissed, to ensure they received legally mandated
benefits. Furthermore, 66% of brands disclosed that they
provided financial assistance to some of their suppliers

when their business was under severe financial distress(such as by acting as guarantors for commercial credits).

Conclusions and overall observations
Overall, companies that demonstrated more robust
measures to reduce the impacts of Covid-19 in their
supply chains also ranked higher in our living wage
study demonstrating a strong link between companies
implementing appropriate practices to improve wage
levels in their supply chain and strong management
practices to account for Covid-19 impacts. These practices
include building long term, resilient relationships
with manufacturers and greater collaboration withstakeholders such as global unions to facilitate workers
in achieving collective bargaining.
Covid-19 might have been a wakeup call for someon the systemic issues with sourcing practices in thegarment and footwear industry, but not for the PLWF.
Covid-19 simply broadened the scope of the group’s
work to include the pandemic impacts. The fundamental
practices that the PLWF members have pushed for toachieve living wages, are the same practices that canbetter address the ramifications of Covid-19 on workers.

Engaging for Increased Social
Reporting with the Workforce
Disclosure Initiative

If you can’t measure it you can’t improve it
Amundi is a signatory of WDI or Workforce Disclosure
Initiative. WDI is an initiative run by ShareActionthat has produced a universal reporting system forsocial disclosures that is in line with DJSI (Dow Jones
Sustainability Index), GRI (Global Reporting Initiative),
the UNGP (UN Guiding Principles), and SDGs. The WDI
platform allows companies to demonstrate to theirinvestors, clients and other stakeholders how they
manage their staff and supply chain workers, and show
how their approach to workforce management aligns
with their business strategy. WDI indicators cover a wide
variety of workforce related categories such as training &development, collective bargaining, health & safety, anddiversity and inclusion. While the list of questions is rather
comprehensive, the questions are classified into tiers sothat companies can start at the foundational tier andwork to build up social reporting disclosure every year.

55

Engagement Report 2020

Pushing for the social data we want

Engaging to support WDI

One of the main problems when addressing a wide
variety of issues pertaining to the “S” in ESG is the lack ofconcrete data. ESG is a quickly evolving field and every
year incremental improvements in data and reporting are
observed. It is essential to push for the data we want to
see in the future and the best way to do this is throughcollaboration with groups such as WDI to help achieve
uniform, granular data that can benchmark company
performance across and between sectors.

For the aims of WDI to be achieved, companies must
be convinced to begin reporting with WDI. To support
the initiative, Amundi helped to send out investor lettersto over 10 target companies identified by the WDI todemonstrate our support to the initiative. Among theAmundi list, only one confirmed their support for the
initiative, but Amundi will continue to engage with theothers in the following years to help increase support
for WDI reporting. Overall though, 141 global companies
took part in the WDI initiative in 2020 which was a 20%
increase from 2019. There is clearly a long way to go,
but the initiative has had significant momentum with key
companies beginning to report. Going forward Amundi
will continue to help promote WDI disclosure amongissuers with the goal of one day having a comprehensive
dataset of ESG social indicators. 

Why support a Global
Social Disclosure System
A uniform method of data collection such as WDI also
has other benefits. For issuers there is the burden ofreporting. Corporate investor relations and Corporate
Social Responsibility departments often have to spend
countless hours for similar requests from investors. Thattime could better be spent on actually addressing theconcerns raised by investors. In addition, corporates allreport differently and often data collectors have to spend
far too much time finding the data they need in company
reporting. Supporting an initiative such as WDI that calls
for uniform reporting on social data could:

 Help relieve the reporting burden for companies sothey can focus on performance Enable investors collectively engage on key subjects,
sectors, or companies where reporting is poorly
addressed and engagement could have a positive
impact.

56/

57

58/

Addressing Client,
Product & Societal Responsibility
At Amundi we consider that client, product and societal responsibility issues
are of paramount importance. Treating customers and society at large rightis a prerequisite for long-term sustainable growth. That is why we engage
with companies to encourage them to create and keep sustainable long-term
relationships with these stakeholders.
Within this theme, we have three sub-themes: access tobasic needs, client & product responsibility, & ethics. To
address these key themes, we have engaged on a variety
of initiatives with the end goal to foster greater rights forall stakeholders.

Product, Client & Societal
Responsibilityof which is

251

31

Data Privacy& Cyber Security

25

Access to Basic Needs

99

Product
Responsibility

96

Societal Responsibility(including Business Ethics,
Community Development,
and Tax Practices)

Access to Basic
Needs: the Access to
Medicine Foundation
Since 2010, Amundi has been an active supporter of theAccess to Medicine (ATM) Foundation, an independent
non-profit organization with the mission to guide andstimulate pharmaceutical companies to do more forthe people who live in low andmiddle-income countries (thusbetter addressing SDG 3 Good
Health and Well-Being).

The Access to Medicine Index
Every two years, the Access to Medicine Foundation
publishes the Access to Medicine Index, a ranking of 20
of the world’s largest pharmaceutical companies, basedon the steps they take to improve access to medicine.
It assesses their actions in 106 low and middle-income
countries and in relation to 82 diseases, conditions
and pathogens. The Index is based on a frameworkof 33 indicators that together capture the core rolefor pharmaceutical companies to improve access to
medicine, as confirmed through a wide-ranging multistakeholder dialogue.

Driving a collaborative engagement since 2019
The Index is viewed by investors as one of the mostcredible sources of information for assessing how
pharmaceutical companies strengthen their license tooperate globally and expand in international markets.
It is endorsed by a group of more than 100 signatory
investors, including Amundi, which have signed theAccess to Medicine Index Investor Statement andcommitted to using the Index in their investment analysis
and engagement with companies.
Since the launch of the 2018 Access to Medicine
Index, numerous investors expressed strong interest

59

Engagement Report 2020in a collaborative engagement with pharmaceuticalcompanies based on the Index results. This engagement,
which effectively started at the very end of 2019, is along-term project for tracking and encouraging the

progress of pharmaceutical companies towards SDG
3 by 2030. As part of this initiative, Amundi was lead
investor for two companies, Sanofi and Astellas.

2021 – Access to Medicine Index – Overall Ranking (40)1GlaxoSmithKline plc

4.23

2

Novartis AG

4.18

3

Johnson &Johnson

3.76

4

Pfizer Inc

3.65

5

Sanofi

3.47

6

Takeda Pharmaceutical Co, LTD

3.31

7

AstraZeneca plc

3.30

8

Merck KGaA (Merck)

3.09

9

Roche Holding AG

3.07

10

Novo Nordisk A/S

2.96

11

Eisai Co, Ltd

2.87

12

Boehringer Ingelheim GmbH

2.84

13

Bayer AG

2.63

14

Astellas Pharma Inc

2.33

14

Gilead Sciences Inc

2.33

15

Merck & Co, Inc (MSD)

1.88

16

Daiichi Sankyo Co, Ltd

1.80

17

AbbVie Inc

1.73

18

Eli Lilly & Co

1.59

19

Bristol Myers Squibb Co

1.55
0

Source: 2021 – Access to Medicine Index

1

Evidence of progress with Sanofi and Astellas in
the 2021 Edition of the ATM Index
The 2021 edition of the index, published on January 26th,shows that companies are doing better at integrating
access to medicine into governance structures, R&D
processes, and monitoring efforts (41). We believe theincreased engagement on the topic between investors
and the pharmaceutical companies contributed to thisprogress.
Improvements are particularly obvious for the twocompanies where Amundi was lead for engagement:

60/

2

Governance of Access3
Research & Development

45
Product Delivery

Sanofi
Sanofi has progressed by 2 notches to 5th position
thanks to multiple new initiatives resulting in a stronger
performance in research & development planning and in
product delivery management. An example of improved
practice from Sanofi is a better disclosure of patentstatus information for products considered essential
medicines in low and mid-income countries.
AstellasAstellas has jumped 5 notches to 14th position, thanks to
improved governance of access (including through theimplementation of access-related incentives for senior(40) hhttps://accesstomedicinefoundation.org/access-to-medicine-index/2021-ranking(41) https://accesstomedicinefoundation.org/access-to-medicine-index

level executives) and the launch of a couple of dedicatedinitiatives. In addition, Astellas is creating a corporatewide access to medicine strategy for 2021, which is very
encouraging.
While improvements were made in 2020, yet there is
scope for further improvement, as initiatives to address
access to specific needs remain focused on too few
products and countries.

Consumer Protection: Navigating
the Complexities of Content
Moderation for Social MediaThe New Complexities of Content
Moderation
Over the past decade, the business model for companies
operating social media products, has been to pursue
scale. Their strategy has been underpinned by expanding
into dozens of countries and expanding the user base on
a global basis. This strategy for scale has brought withit a large social risk: when a platform’s growth depends
on its number of users, it becomes more vulnerable tomalicious use. A heart-breaking example is the volume of
misinformation around Covid-19 vaccines which appears
to have circulated in the course of 2020 through social
media.
As many regulators around the world now seem to realize,
this open business model has become a conundrum
that many social media companies struggle to properly
address.

The risks of social media are two-fold: The misuse of social media means that harmful
content and misinformation can thrive and find large
audiences while the deletion of this content is often
uneven The arbitrary deletion of accounts of private citizens
may become a violation of the right to freedomof expression and could threaten their license tooperate.
The financial and social materiality of what we call the“content moderation” issue continues to increase witheach new national government seeing the need forfurther regulation, yet we found that the issue is still notadequately assessed and under-addressed by most of
the companies.

Engagement Targets
In our engagements, more specifically, we have been
asking social media companies to define a clear

governance and strategy when it comes to human rights
and content moderation by:

 Committing to global norms: A clear commitment
and formal public policy on human rights including
freedom of expression

 Making it clear to users, advertisers and stakeholders
what types of harmful content are not tolerated andenforce this policy consistently.
In 2020, we engaged with companies operating social
media products, but also with advertising agencies who,
we believe, have also a critical role to play in order tobuild a better digital advertising ecosystem. Leading
advertisers are indeed at a risk to inadvertently financethe spread of harmful content on social media platforms
and share a responsibility to care.

Engagement & Results
FOCUS
on the Social Media Industry
In our dialogue with one major American social media
company, we found that the recognition of the impactof services and products on human rights has increased
in recent years. Some mitigation measures have beentaken such as development of AI-based algorithms tovet content or buying the service of external so-called‘moderators’, consultants charged with vetting harmful
content based on terms of service, which happens to
be a very demanding job. However, we also found thatthe approach is often piece-meal and lacks a proper
oversight by the company’s board of Directors, whereexpertise in terms of human rights is often lacking.
Most of time, social media companies continue todeny that their business models requires human rights
monitoring at the board level. We do not agree with thatview and will continue to advocate for board oversightof this critical issue.
Given the scope and the complexity of the task, we willcontinue to ask companies to invest more into content
moderation as loopholes and the risk of significant
human rights violation remain.

FOCUS
on the advertising industry
In our dialogues with one advertiser, we conveyed
the importance of their responsibility with regard to
inadvertently financing harmful content through their adbuys. That is an aspect which is traditionally monitored
under the brand protection programs and is key to theservice provided to their customers. We stressed the61Engagement Report 2020

importance of strengthening audits in this regard and thepossibility for increased transparency on breaches. Just
like the social media companies do publish transparency
report with the number of occurrences of violations of
their terms of service, and how much content they had
to remove, we believe the advertising industry should
build a proper framework to report on this critical facetof their business model. This would also reduce the risk ofany negative externality in this area, thus fostering theiroverall sustainability profile.

Going Forward
Considering the major role of “information gatekeeper”
social media platforms are now playing in our society,
Amundi will continue to engage with the industry andits value chain on the topic of content moderation while
respecting rights to freedom of expression. There is a
growing recognition that the sector needs an updated
framework of laws and norms to best operate, yet theability of social media companies to improve moderation
tools and provide transparency on how they are enforcing
them remain critical for the long‑term sustainability of
their business model.

Product Responsibility:
Tackling the Agricultural
Transition with the FAIRR Initiative
The Problem with Animal Proteins
Animal Protein remains a major ESG concern for boththe climate and impacts to health. In the next ten years
demand for global meat consumption is expected to riseby 13% and by 80% in 2050. Meeting future demand foranimal proteins (meat, fish or dairy products) will require
an unfeasible amount of natural resources (water andland) as well as a boom in GHG emissions.
Furthermore, the Antibiotics’ use in intensive farming
is responsible for the emergence of antibiotic‑resistantbacteria, which threaten the effectiveness of antibiotics
in human medicine. However new consumption habits
are already emerging due to animal and health concerns,
in particular in developed countries prompting the rise offlexitarian and vegetarian diets.
An ecological transition, as desired by Amundi, will
not be possible without an agricultural transition.
This agricultural transition must focus i) on proteinsreductions and raising meat alternatives, especially in theWestern world, ii) on animal welfare and iii) drasticallyreducing the number and the quantity of antibiotics
given to animals.

62/(42) https://www.fairr.org/

What is FAIRR?

As an actor of the ecological transition, Amundi became asignatory of FAIRR in July 2019 (42). FAIRR is an innovative
peer network for institutional investors, who use theirinfluence to help global livestock, fish & dairy companies
change their behaviour and build a more sustainableglobal food system.
Amundi has Signed onto Three of FAIRR’s Engagements
The Sustainable Proteins Engagement
This engagement will ask companies (food producers
and food retailers) to publicly disclose informationon their long‑term approach to transitioning protein
portfolios that include plant‑based/alternative proteinsto support a dietary transition in line with a 2‑degree
world (started in 2019).
The Global Meat Sourcing Engagement
This initiative will encourage restaurant companies
to develop a strategic, forward‑looking approach to
managing the climate and water risks in their meat anddairy supply chains (started in 2019).
The Investor Action on Antimicrobial Resistance initiative
This initiative is supported by investors managing
over $4.8 trillion worth of assets and backed by the
UN‑Supported Principles for Responsible Investment(PRI), the Access to Medicine Foundation and the UK
Department of Health and Social Care. The coalition
has committed to assessing and integrating risks,
opportunities and impacts related to antimicrobial
resistance when making investment decisions andengaging with investee companies. The coalition aims
to take a ‘One Health’ approach when considering theimpacts of AMR, which requires a holistic and multi‑
sectoral approach that recognizes the interconnection
between humans, animals and the environment. By doing
so, the coalition considers it will contribute to a moresustainable future for the planet, whilst reducing long‑term risks for investors.

Ethics and BusinessConduct: The Fight Against
Money Laundering
Anti‑Money Laundering (AML) remained a high priority in2020 as an engagement topic for banks. The activity has
been twofold. We worked alongside equity analysts andportfolio managers to better understand the results of theongoing investigations and the remediation plan details of
the Nordic banks involved in the AML scandal in the Baltics.
In addition, we participated in a collaborative engagement
project with another leading asset manager with the aim
to encourage companies to improve their disclosure on
Anti Money Laundering performance, goals and approach.
The collaborative engagement aimed to improve quantityand quality of AML information into banks’ regular
reporting, to give investors the means to assess ex-ante
the risk exposure and to assess the risk management
effectiveness of the various institutions. We found that, ingeneral, disclosure in the area of AML is very limited anddoes not allow for a proper discrimination on the part ofinvestors the part of investors. AML policy is generally
touched upon within companies’ communication,
while reporting on exposure assessment and on key
performance indicators is almost uniformly absent.
Furthermore, clear communication on the governanceof this function is often absent.
The initiative aims at encouraging
banks to give a clear representationof the governance of the AML
function, of the comprehensive AML
policy and the strategic objectives
identified in order to improve its
effectiveness. We would want to see
regular disclosure on financial crime
risk assessment, with an indication of
the main sources of AML risks. It isalso important to see a description of
the assessment process and a disclosure on businesses orgeographies that may not be covered by the centralized
approach, and why. Banks should identify meaningful KPIs
for AML risk management and include them in the regular
reporting such as annual report, together with information
on recent improvements and investments in the area.

and accounting for a major portion of the gross world
production. Often operating in difficult environments,
SMEs are highly vulnerable to corruption in all its forms,
although they may be less likely than large companies tobe involved in large-scale influence-peddling scandals,
owing to limited clout. At the same time, SMEs typicallylack resources, knowledge, and experience to implement
effective anti-corruption measures and conduct theirbusiness in compliance with international standards andthe applicable legal rules.

FOCUS
on how Strengthening Internal
Controls to prevent bribery
In 2020, we have engaged with a SME company basedin Europe operating business services. The company
has experienced several years of strong growth acrossseveral markets, reaching a point where its governancehad to evolve accordingly in terms of structures andhiring of new skilled individuals.
Nowadays, the focus is moving to thestrengthening of its existing internal
control systems to prevent ethics
issues such as fraud, corruption ormoney laundering.

These measures
are in line with theOECD Guidelines
for Multinational
Enterprises.

We engaged European banks that were involved inmoney laundering controversies in the past and needto rebuild their reputation with customers, investors
and society at large, hoping they build a new class ofbest practice that, then, may be requested to all relevant
peers. The next releases of annual reports may be thefirst chance to see if and how this engagement activity
starts delivering tangible results.

Ethics & Due Diligencewith SMEs
SMEs are Highly Vulnerable to Corruption
Small and Medium-sized Enterprises (SMEs) play a keyrole in the global economy employing millions of people

In this context, Amundi stressed
the importance for the company
to extend its bribery and anticorruption controls to third parties
such as partners and suppliers
to help shore up the credibility of its governance.
The company understands the acute need of such
improvements which should be implemented as soon
as practically possible. The strengthening of internalrisk procedures around anti-corruption policy for thirdparties as well as the establishment of a formal whistleblower mechanism with legal protection for employees
are two steps that we consider necessary for a robust
anti-corruption framework. These measures are in linewith the OECD Guidelines for Multinational Enterprises.

Going Forward
Considering the importance of the issue and its
recognition as a principal adverse impact to beconsidered in the framework of sustainability investmentsin the European Union, Amundi will continue to regularly
engage with companies on this topic to make sure thatfraud and corruption risk is being properly assessed
and addressed. By doing so, Amundi is hopeful it cancontribute to the further strengthening of the long-termsustainability of companies, large enterprises and SMEs
alike. 63

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Promoting Good Governance
The efficient governance of companies has always been a matter of focus forAmundi and we are continuously looking for ways to help investee companies
improve to help investee companies to improve theirs governance. Good
governance is not only an end in itself: it protects the rights and interests ofinvestors.
Governance also influences the overall corporate
behavior of companies and the advancement of asustainable agenda and ESG strategy. While we conductongoing engagement on corporate governance acrossall sectors and sometimes in conjunction with our voting
or investments teams, some of the most interesting
examples to demonstrate the importance of good
governance come from our team in Japan.

Strong Governance
Practices that Strengthen
Sustainable Developmentof which is

341

170
138
33

Board
Composition
Remuneration
Shareholders
RightsGovernance in Japan
What Makes Japanese
Governance so Different?
One of the distinctive features of corporate governancein Japanese companies is that it has historically been built
on the basis of long-term relationships of trust between
companies and their employees, financial institutions,customers, and business partners, rather than between
management and shareholders.

However, governance in Japan is often characterized
by family controlled companies with low board
independence, lack of diversity, leadership uncertainties,
and insufficient performance-linked remuneration. It is
common in Japanese governance for families to retain
key leadership positions in companies giving family
members direct control of operations. Even when aleader steps down from the board they often continue tohold “special advisory positions”. This can lead to serious
concerns regarding board effectiveness and weak
governance practices. Even in widely held companies,
low board independence is fairly common. Non-majority
independent boards raise concerns that they may not
be able to provide effective oversight of management
and they may be associated with other governance risks,such as a lack of diversity and leadership issues (43). On
diversity, the average percentage of Female directors per
board remains rather low at 7.5% however, the average
female participation increases yearly demonstrating
a positive trend (44). Finally, Japanese boards often
lack sufficient performance-linked remuneration. Thismeans that in Japan, company executives can receive asubstantial amount of remuneration without making any
managerial effort, which may cause an agency problem
with shareholders (45).

Amundi’s role in the Japanese Context
The Amundi Japan team is uniquely positioned to takeAmundi ESG philosophy and strategy and apply it to
the cultural and historical context of Japan. Ongoingengagement within the Japanese context, often focuseson these key issues, pushing for overall improved board
quality, independence, diversity, transparency, andaccountability. Often the Amundi ESG team collaborates
on engagement with fund managers to engage with
top management of Japanese companies to push for
improved practices. Overall Amundi Japan, sees anopportunity in helping target companies clarify what
key ESG issues are and improve their reporting on these
topics to be better aligned with global best practices.
However engagement can be a slow process and results
are not always immediate.

(43) MSCI, 2020(44) According to the Japan IMI Top 500 Index, the average percentage of female directors per board increased from 4.9% to 7.5% in 2019(45) Daiwa, 202065

Engagement Report 2020

FOCUS
on Shionogi : Evidence that
Engagement Pays Off
Shionogi & Co., Ltd. is a leading pharmaceutical company
with expertise in infectious and Central Nervous
System diseases. The company considers it a key partof corporate governance to constantly interact withall its stakeholders including shareholders/investors,
customers, societies and its employees by maintaining
an optimal balance of stakeholder interests. This isimportant for a pharmaceutical company because thecompany believes it is their social mission to continually
discover, develop, and supply useful and safe medicines,
to promote proper use of medicines. To carry out thismission they believe that the interests of their four key
stakeholders must be taken into account: shareholders &investors, customers, society, and employees.
Amundi Japan Engagement started engagement withShionogi in 2017. Historically, Amundi Japan has raisedquestions to Shionogi regarding:Governance structure
Separation of supervision and management
Introduction of a succession plan
Board independence
Board diversity
Remuneration linked to midterm business performance.

Engagement Outcomes
Since 2017, Shionogi has achieved key reforms anddelivered strong financial and ESG performance. We
believe our continuous engagement over the years
helped support and fuel company actions and resulted
in strong improvements to ESG practices.
Board of Directors
Shionogi had an independent director appointed aschairman in 2020. Mr. Shiono, previous chairman andfounding family member, stepped down and the seat wasfilled by an independent chairman. This was a changethat Amundi had long campaigned for at the company.
Considering that approximately 95% of the MSCI Japan
Index lacks an independent chair, we consider this strong
achievement.
Independent directors became a majority
In 2020, the independence of the board increased from
50% in 2019 to 60% in 2020. As, 86.9% of companies in
the MSCI Japan Index lack a majority independent board,
Shionogi is now leading most peers in the context ofboard independency.

66/

Gender Diversity
The percentage of female directors increased from 16.7%
in 2019 to 40% in 2020. Since women consist of onlyaround 10% of Japanese boards, Shionogi has becomea clear frontrunner in the Japanese market for gender
diversity on boards.

External recognition
As evidence of the strong developments in Shionogi
governance over the past few years, Shionogi has
publicly been recognized as one of the companies
with the best corporate governance by external thirdparties. Shionogi received “2020 Award for Excellencein Corporate Disclosure” for four Consecutive Yearsfrom the Securities Analysts Association of Japan(SAAJ). Shionogi was also selected, among about
2,000 companies listed with first section of the Tokyo
Stock Exchange, to receive the award of Grand Prize
Company for the Corporate Governance of the Year Prize
2019 conferred by the Japan Association of Corporate
Directors.

Going forward
While the recognition for Shionogi is well deserved,
going forward Amundi will continue to engage withthe company to push the company to ensure theeffectiveness of the Board of Directors as well andtransparency of remuneration. More specifically Amundi
will encourage an increase in the ratio of performancebased remuneration linking it to material ESG issues tobetter align with stakeholder interests.

FOCUS
on a Japanese Manufacturing Company:
Still Room for Improvement
Looking Back at 2019
In 2019, Amundi Japan met with the external directorof a Japanese manufacturing company with a poor ESG
rating in particular on governance. The ageing chairmanof the company had recently stepped down and his son
was appointed as CEO. It was thought that the change
in leadership would encourage greater transparency
concerning ESG and in particular, governance practices.
Amundi requested that the board ensure the balance ofall stakeholder interests through enhanced disclosure of
key material ESG issues.

Engagement in 2020
While the change was welcomed, there were still
significant concerns about board effectiveness. In 2020,
Amundi continued to engage with the company to pushfor more effective corporate governance. The company
board currently exhibits a low rate of independence(20% as of the end of 2020), no gender diversity andlittle to no disclosure on relevant ESG information. Dueto these reasons company maintains a low ESG rating(particularly on the governance pillar).

While the company did demonstrate some intention to
improve in shareholder focus such as share buyback,the changes have not yet met our expectations. Amundi
will continue to push for improvements as an improved
rating could mean the company might be eligible for
SRI funds. So far, as no changes to board composition
and ESG transparency are observed, the company willremain excluded from SRI funds for the foreseeable
future but Amundi will continue to engage and push for
improvements. 

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Other Engagements & Activities
In ESG and Responsible investment there are many new and emerging topics,
thematic, geographies and products that require engagement, exploration,
investigation, collaboration, and testing. For these topics, Amundi is often
active in engagement initiatives that may be cross-sectoral or cross-thematic.
In addition some collective initiatives do not include
corporate engagement. Certain collective initiatives
involve significant preparation and planning before
actual engagement can occur. These specific initiatives
begin with information gathering or pilot phases
to gain additional insight or expertise and test new
methodologies. On occasion, Amundi may actively
participate in working groups that do not necessarily
involve engagement but rather help build frameworks
and standards on new and emerging topics. Supportingand participating in these types of working groups thatenhance frameworks ultimately help encourage overall
greater transparency, reporting, and standardization for
ESG and responsible investing.

Emerging Markets: pushingfor improved ESG practices
In 2020, there was a conscious and concerted effort
across Amundi to initiate a dialogue with emerging
markets companies on Environmental, Social andGovernance topics. Over eighty issuers were contacted
across multiple sectors. These issuers were domiciled invarious countries spanning Asia ex. Japan, Africa andLatin America. This engagement stream was a joint
effort between the ESG team and the Emerging Markets
investments team (portfolio managers and financial
analysts) and had two main objectives: to increase the
ESG awareness and level of disclosure on ESG issues of
emerging markets companies, while projecting Amundi’svalues. This is one of the results of collaboration between
investment professionals and ESG experts, that has
made possible significant increase in our impact oncompanies and has resulted in better integration of ESG
in our investment practices.

Emerging Markets engagement drives value
After extensive collaboration between the ESG teamand Amundi Emerging Markets team, Amundi hascome to the conclusion that ESG engagement can drive
value enhancement for Emerging Markets in a mutually
beneficial way. Through joint engagement efforts, theAmundi teams create a positive circular feedback loop
where the market assessment of these companies
improves over time.
The benefits of this collaborative approach with theEmerging Markets team (both equity and fixed income)are twofold: companies will have more opportunities
for funding due to higher ESG performance while their
negative environmental and social impacts will diminish
over time.

Two approaches to Emerging Markets
engagement at Amundi
Top Down engagement
The first approach was top down in nature, aimed atunderstanding a company’s practices on sector specificmaterial issues; for example, with utility companies, allthose engaged were asked to elaborate on their decarbonization efforts and strategies to manage transition
risk, irrespective of their current practices, among otherissues.

Bottom Up engagement
The second approach was more bottom up in nature,
focusing on company specific material issues as
identified using Amundi’s proprietary ESG tool. These
focused engagements were curated on topics that we,at Amundi, deemed most material to assess at that point
in time for a particular company. Bottom up engagement
included a mix of questions across Environmental, Socialand Governance themes, tailored to a specific company.
For example, Company A could be asked about board
independence and minority shareholder rights alongwith questions on the company’s water policy andassociated metrics, as well as what it was doing tocombat biodiversity loss, and finally on labor unions
and the company’s relationship with the same. It must
be emphasized here, that these were not standardized
questionnaires but rather customized (using certain
criteria) to each company. A majority of the engagements
carried out were done using the bottom up approach.

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Engagement Report 2020

Conclusions and observations concerning
Emerging Markets engagement
ESG is a relatively new concept in emerging markets,and is still in its nascent stages. However, at Amundi, we
believe that there is immense value to be captured withregard to sustainable development in these economies,
which will represent a major share of global population
growth and GDP over the coming decades. We received
a set of mixed responses from the above engagements,that ranged from issuers asking us to define what wemean by ESG to those that were well on the path toadopting best practices for certain ESG issues. The
year 2020 marked the commencement of a sizeable
engagement effort in these markets, which Amundi aims
to sustain going forward. We will continue to discuss ESG
risks and opportunities with emerging markets issuersand encourage them to adopt best in class practices formaterial E, S and G issues.

Fondation de la Mer:
Promoting Greater Corporate
Reporting on Ocean Impacts
Why Oceans Cannot be
Forgotten in ESG
One aspect of Amundi’s overall work on biodiversity is
specifically SDG 14, “Life Below Water”. Oceans face many
threats including climate change, acidification, pollutions(including plastic pollution), overfishing, destruction ofmarine biodiversity, etc… mainly due to human activities.
According to PWC, SDG 14 (Life
Below Water) least prioritizedof all 17 SDGs by businesses
worldwide (46). One explanation
for this is likely the difficulty ofreporting to effectively assess
biodiversity impacts when these
impacts are often indirect ‑ forexample, plastic packaging often
ends up in oceans but companies
are not directly dumping their own
plastic packaging into the oceans.

and investment institutions to help protect marine
ecosystems, fight pollution, support ocean related
research, encourage innovation, and educate audienceson protecting the oceans. The FDLM wanted to develop
a reporting framework in collaboration with the French
Ministry for the Ecological and Inclusive Transition
based on the goals of SDG 14 (Life Below Water) to help
corporates better assess their impact on the ocean. The
FLDM worked with scientists and experts, to create acomprehensive methodology, which is freely available
for French companies (48).
Amundi participated in the preparatory phase of the
project to advise on the feasibility and content of theframework and also by engaging and encouraging French
corporates to participate in and test the feasibility of themethodology. Going forward in 2021, Amundi will further
promote the framework to both French and international
companies. Amundi will also begin using the frameworkon selected corporates to begin impact assessments
pertaining to SDG14.

Advancing a Harmonized
Framework for Social Bond
Reporting with the ICMAThe ICMAICMA (International Capital Market Association) is theglobal trade association for the international capital
market that has been leading the financial industry’s
efforts to develop sustainable finance for years,
through creating and/or updating
relevant resources for market
participants, above all the Green
Bond Principles (GBP) and theSocial Bond Principles (SBP), andthrough coordinating the work ofseveral contributing institutions.
With around 600 member firms
in more than 60 countries, theICMA performs a central rolein the market by providing
industry‑driven standards andrecommendations for issuance, trading and settlement
in international fixed income and related instruments.

One aspect ofAmundi’s overall workon biodiversity is
specifically SDG 14,“Life Below Water”.

Amundi and the Fondation de la Mer
For Amundi, preserving the oceans and their biodiversity
is key part of addressing biodiversity loss and climatechange. Oceans are vital for climate regulation, forfood, and for the air we breathe (oceans create 50% of
the oxygen we breath) (47). This is why, in 2019, Amundi
started a close collaboration with the Fondation de laMer (FDLM). The FDLM is a French NGO that works
with civil society including sailors, corporates, scientists,

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Amundi’s role as an ICMA Executive Committee
MemberSince 2017, Amundi has been part of the ICMA supported
Executive Committee of the Green and Social Bond
Principles. Amundi has also been participating to therelevant Working Groups organized on different topics,
ranging from improving Green Bonds’ impact reporting(46) https://home.kpmg/cn/en/home/news-media/press-releases/2020/12/the-time-has-come-survey-of-sustainability-reporting.html(47) www.foundationdelamer.org(48) http://www.fondationdelamer.org/referentiel-ocean/)practices to strengthening the development of the market
for Sustainability‑Linked bonds (SLBs). Amundi has
committed to supporting the ICMA’s work on sustainablefinance, as it believes that there are specific hurdles tothe development of sustainable finance markets thancan be addressed only with collaborative efforts fromseveral parties. Furthermore, exchanging with diverse
kinds of institutions such as issuers and investment banks
as well as development banks or non‑governmentalorganizations (NGOs) allows Amundi teams to expand
their perspectives and improve internal practices.

Focus on ICMA Social Bond Working GroupThe 2020/2021 edition marks the second year Amundi isco‑chairing the ICMA Social Bond Working Group, withincreasing responsibilities. The objective of the Working
Group is to accelerate the development of the social
bond market through the expansion and promotionof resources for issuers, investors and other market
participants.
Social Bonds and theOpportunities for a Positive
Impact in the era of Covid-19
Despite the social bondmarket’s remarkable growthover 2020 brought about bypandemic‑related financing
needs, challenges for bothissuers and investors still
remain. Amundi, as one of
the first asset managers
to have launched a social
bond fund, firmly believes inthis asset class as a sourceof financial performanceand social impact, and is committed to support its
development.
Impact Reporting Sub-Working Group
During the 2019/2020 edition, one of the most relevant
contributions of Amundi teams had been throughthe Impact Reporting Sub‑Working Group, aiming at
improving the resources available to guide the impact
reporting process for issuers. Indeed, the requirement
to report on impact can scare away issuers, especially
corporates, thus increasing the importance of providing
all the support possible.

Working towards a Harmonized Framework for
Impact Reporting for Social Bonds
In the ICMA document “Working Towards a Harmonized
Framework for Impact Reporting for Social Bonds,”
Amundi teams have included a clear and “user‑friendly”
definition of the different kinds of impact indicators ‑namely output, outcome and impact ‑ that a social bondissuer should consider including in their impact reporting
documentation. Moreover, a thorough analysis of several
available impact reports from social bond issuers wasundertaken, in order to put together a comprehensive
list of the most used impact indicators. This list was thenre‑organized in a table with columns indicating whether
that indicator should be considered of output, outcome
or final impact of the social bond. Amundi plans toimprove even further the impact indicators list in 2021.
Inconsistency in impact metrics and difficulty inmeasuring the “final” impact of the projects beyond
numerical outputs were cited by issuers as among thebiggest impact reporting challenges that could hinder
them from issuing a social bond or from reporting on
impact in line with market expectations. Thus, Amundi’s
endeavors to develop impact reporting best practices
for social bonds can be expected to support the market
development of this new sustainable fixed income
segment.

Setting the Standard for Green
Bond Reporting
At Amundi, we consider that green bonds offer a
specific license to engage, not only on the transparency
over the assets financed by the proceeds but also on
the alignment of the wider issuer strategy with theenvironmental goals pursued by their green financing
framework. The Covid‑19 crisis somewhat hamperedinteractions in the first semester, but we still held 34 one‑to‑one meetings with issuers last year, more than 85% of
which were concentrated in the second half of the year.
We reached out to 5 other issuers by email to explain our
expectations on impact reporting.

The EU Taxonomy and implementation
challenges for Green Bonds
Corporate reporting needed
The EU is about to implement its taxonomy of green
activities and the associated reporting requirements thatencompass green bond funds. Our taxonomy alignment
case study submitted to PRI last year allowed us tounderstand all the implementation challenges, and led
us to the conclusion that it would be more efficient tohave green bond issuers themselves providing investors
with an estimate on the level of alignment of their
allocated proceeds. Indeed, issuers have better accessto the required level of detailed information on projects
and we believe that it would serve the normalization
objective behind the taxonomy. This is a point that we
repeatedly raised during our discussions with issuers

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Engagement Report 2020

last year. With the draft EU Taxonomy still in thestakeholder consultation phase, many issuers were in theprocess of assessing the implications and had not yet
considered publicly reporting this data. The dialogue wasconstructive overall though with only one issuer opposedto this idea. A few issuers had already been proactivein adjusting their framework to better align with the EU
taxonomy and shared some confidence on their ability
to claim a 100% alignment. Some raised the challenges
related to the testing of the Do No Significant Harm
criteria notably. This will remain a topic of engagementfor 2021 as reporting requirements loom.

Advocating the adoption of the ICMA
Harmonized Framework for Impact Reporting
Over the years, it is encouraging to see that the lion shareof green bond issuers hold to their pledge to provide
post-issuance green bond reports in general and CO2
impact indicators in particular. Impact data neverthelessoften rely on different calculation methodologies
and reporting approaches that still heavily hamper
comparison and consolidation at portfolio level. Just likeour efforts to support the ICMA harmonized framework
on social bonds, we strive to contribute to reporting
standardization for green bonds in line with the ICMA
harmonized framework for Impact Reporting.
Amundi notably contacted three issuers last year to
ask them considering the adoption of the Harmonized
Framework for Impact Reporting, as we came to theconclusion that CO2 impact data was not reported prorata to the share of the projects actually financed by thegreen bond. A meeting is being organized with one ofthem at time of writing. We also reminded two issuers
about their pledge to disclose impact indicators which
we found were missing: a persisting lack of reply would
drive an escalation this year.

FOCUS
on Financial Institutions Continued
Financial institutions (FIs) are a main sector issuinggreen bonds. As they finance rather than develop green
projects, we particularly expect these issuers to explain
their own impact. In the continuity of our engagement
campaign of the last two years, we further discussed
our expectations on best practices associated to green
bond issuance for FIs, such as offering dedicated green
loan products with preferential conditions attached, andsteering the credit portfolio towards green activities
while restraining the financing to assets that put Paris
objective at risk.

72/

We were notably encouraged by the developments at
a Norwegian Bank: their 2021 materiality analysis will
highlight the growing importance of energy transition
issues, and although the bank is not ready to set a broad
commitment to reduce its lending portfolio exposure to“brown” activities, it will start reporting on the trend in theCO2-intensity of its shipping portfolio in the context ofits commitment to the Poseidon Principles. A particularly
important point for an issuer of green covered bonds, theNorwegian bank already offers a green home mortgage
product offering a 10bp discount. Any cost advantage
in their green covered bond funding would increase thissubsidy.
We also requested a meeting with an emerging market
bank to discuss the evolution of its coal financing
practices. As the meeting did not bring the expected
positive outcome, we were forced to remove our support
to its green bond.
As part of our engagement, we expect issuers in our
portfolio to restrict their overall lending to coal projects
and not only with regards to their green financing projects.
As soon as it came to our attention that one of the green
bond issuers in the portfolio was about to sign a loan thatwould finance the development of the Carmichael thermal
coal mine in Australia, we engaged with them to assess thefacts. We expressed deep concern on the environmental
and carbon impact of this project, which in our view,
would erase the positive impact of the renewable andclean transportation projects financed by their green bondissuances. Our engagement with the issuer did not resultin the desired outcome given their intention to continue
financing this project. As a result, and in accordance with
the ESG policy of our fund, we divested our entire holdingof the issuer’s bonds from the portfolio. performance objective in addition to their financial
objectives. In parallel, we will significantly enhance ourengagement and voting capabilities put ESG criticalissues at the forefront. In 2021, Amundi will extend
the perimeter of its voting scope and aims to vote at
5,000 general assemblies. Amundi will also go further
on its two key themes, the energy transition and social
cohesion, as these themes require continuous efforts
a for significant transformation to materialize. We will
strengthen our efforts to encourage corporates toadopt best practices in these areas, among other key
sustainability topics.
Caroline Le Meaux
Global Head of ESG Research,
Engagement and Voting

Conclusion
In 2020, we accelerated our
engagements with 1411 companies
engaged and around 50 000
resolutions voted to further
promote a transition towards asustainable, inclusive low carbon
economy, an ambition that we sharewith our clients.
Our aim is to be demanding, because of the need toact promptly especially on climate and social cohesion
issues, two systemic risks for our global economy. We
wish to contribute to a healthy emulation that will
drive a better integration of sustainability factors in ourinvestees’ operations and business models. We truly
believe that we all, individually and collectively, could act
to support this transition, and Amundi is determined to
do so in partnership with its clients and with the issuers.
The year 2021 will be the year where all our actively
managed opened-ended funds fully integrate ESG

More Specifically we will:
1. Continue to engage with companies to push them todeclare a Paris aligned climate objective under the
Science Based Targets framework.
2. Continue to support shareholders resolutions thatstrive to implement better reporting and transparency
on companies’ climate-related strategy.
3. E
 ngage with companies to understand how they
develop practices that also address the social impactsof the energy and ecological transition.
4. E
 ngage with companies in sectors that are highly
exposed to the energy transition to include climate
KPIs in their corporate compensation packages.
5. S trengthen actions on targeted “laggards” that could
end-up with a vote “against” management as soon as
2021, for corporates that: have been contacted on their coal phase out plan
according to our Coal policy but did not answer toany of our requests

 operate in sectors which transition is paramountfor the alignment with the Paris agreement, andthat have been either lobbying in climate sceptic
associations or have not started to align theirstrategy with Paris-aligned objectives

 are excluded from the Amundi active investment
universe but could be present in passive funds.
These key objectives will support Amundi’s long-term
conviction that the energy and ecological transition,
together with social cohesion, are fundamental challenges
in today’s society. While the societal challenges we aim
to tackle are tough, we believe in the role Amundi plays
in helping to accelerate the implementation of bestpractices and new solutions. 73This document has not been reviewed by any authority, it is communicated solely for information purposes and neither constitutes an offer to buy, an investment advice nor a solicitation to sell a product. This material is neither a contract nor a commitment of any sort.
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