2024-02-03 11:45:17
Published on: 02/03/2024 – 12:45 Modified on: 02/03/2024 – 12:44
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For an investor sensitive to environmental criteria, it is not easy to navigate the myriad of economic, social and governance (ESG) indicators offered by multiple rating agencies, noted Vincent Auriac, president of the firm specializing in finance Axylia.
“What does an ESG rating of 5.2/10 mean when there are hundreds of criteria? Nobody tells me ‘I don’t want to invest if the rating is less than 6/10 but they express needs precise, such as “not investing in Ephads” or banking on companies capable of adapting to the new climate situation, he explains.
In response, his firm publishes the “Vérité 40” index every year with a simple method: subtract from the operating profit of a company the cost of its carbon emissions as it should be for the IPCC, i.e. 127 euros per ton in 2024.
“A bridge”
Applied to the 120 largest French companies listed on the stock exchange, the calculation shakes up the hierarchy: goodbye Airbus, Carrefour, Saint-Gobain or TotalEnergies, so many companies which despite their profits in 2022 would be unable to pay their “carbon bill”.
“And many do not improve” in the coming years, in particular because the price of a tonne of carbon increases in the IPCC scenario, assures Mr. Auriac.
LVMH, Sanofi or even Thalès would pass the test without problem while smaller companies like Eiffage, Gecina or even Ubisoft would be promoted in the flagship CAC 40 index.
This approach is little emphasized today among Parisian managers. But Europe’s leading asset manager Amundi has also started to develop its own measure.
More complex, however, it includes the same principle of subtracting the cost of carbon emissions from the profit. This is calculated with a slightly less extensive scope and by applying different prices depending on the sector – data kept internally – explains Piergaetano Iaccarino, who participated in developing the formula.
This data is then compared to the company’s capital, to which is added “environmental capital”, defined as the additional contribution necessary to achieve the carbon emissions reduction objectives that the company has set, explains Mr. Iaccarino.
This calculation actually reduces the return on investment for shareholders, with an impact that is all the greater as the efforts required are significant.
This “environmental capital” is “a bridge between a concept understandable for investors and a scientific approach” two areas which do not usually speak the same language, he maintains.
He acknowledges, however, that it is still difficult to extend this research beyond carbon, for example with the impact on biodiversity, due to the lack of reliable and comprehensive data to cover the subject.
Externalities
Since January 1, companies must collect a much greater number of extra-financial data due to a European law, but the first publications will be for 2025.
This will finally make it possible to better take into account “externalities”, a concept born in the 1920s to designate the consequences of the activity of an economic agent on its environment but without it paying the cost directly, like the pollution of a river by a factory explains Mr. Auriac.
From the point of view of companies, putting a price on all environmental or social impacts also allows them to make better choices, says Laurence Barrère, director of sustainable finance at Kering.
When wondering what material to use for a bag and where to produce it to limit its footprint, “it is easier to exchange on a component in euros than in cubic meters of water”, she explains. .
“It’s a compass to unify the language,” adds the manager, who specifies that the different variables were calculated with the help of scientists.
The environmental income statement published for several years by the group makes it possible to compare developments and set objectives, even if they are not designed for investors, she emphasizes.
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