The independent investment group SILEX, an expert in asset allocation through its asset management activities and structured solutions, offers decarbonization of client portfolios. Interview with Andre Zilio, Managing Director of SILEX SAM.
Institutional and private clients are asking for concrete solutions that allow them to decarbonize their portfolios and thus fight against global warming. How do you respond?
In order to decarbonize a portfolio, we must first be able to evaluate it. And for that, robust, independent, indisputable data is needed. In terms of carbon data, one supplier stands out thanks to its methodology, developed by Jean-Marc Jancovici, one of the partners of Carbon4 Finance. This company provides investors with complete and rigorous data on climate, carbon and biodiversity issues. It builds, enriches and regularly updates a database of over 124,000 ISINs and 8,000 listed companies worldwide.
For each of them, it provides several indicators that take into account the usual scopes 1, 2 and 3 (CO2 emissions directly produced by the company's activities, as well as indirect emissions related to the energy used and all other indirect activities). But the methodology also includes avoided emissions, which reflect the efforts of a company in the energy transition phase. Notably because of this completeness and robustness of the methodology, the ESCB European System of Central Banks has recently announced that it will use Carbon4 Finance data for the regulatory activities necessary to fulfill its missions and responsibilities.
Why did you choose to work with Carbon4 Finance data?
Because our objective is to offer, for the first time, non-financial indicators on our investment vehicles (structured products, portfolios and AMCs) and thus to guide our clients' investments.
We drew on our expertise in financial engineering and quant analysis to develop a simple tool to measure the carbon footprint of products, inform our partners and meet their expectations in terms of portfolio decarbonization. For a structured product, for example, we take the entire value chain into account when establishing this carbon assessment. The quantification includes not only the level of CO2 emissions generated by a company and adjusted for its size and sector, but also the avoided emissions, as well as its temperature trajectory in relation to the +2°C target set by the Paris Agreement. The analysis includes every feature of the product: the underlying, the bond component, the terms of the product.
So it's a concrete decision-making tool for investors, who can then compare supports?
Not only. It also makes it possible to propose the best sustainable alternatives for a given set of specifications and to open the dialogue towards conviction-based asset management products. This innovation reinforces SILEX's vocation to support our partners by providing them with investment solutions, but also with the tools and information necessary to make the best possible decisions.
What will this extra-financial indicator bring to Monaco's financial centre?
The Monaco financial market as a whole seems to have become aware of environmental issues and is looking for concrete solutions. Our Monegasque partners are increasingly concerned about the meaning given to their investments; we had to provide this essential tool to help them achieve their objectives.