Present since 1976 in the principality, private banking international subsidiary of the Mediobanca Group, at the initiative of the launch of the first alternative management fund in the Principality, and leader in the Monaco law fund market, Wealth Monaco interviewed Mr Eric Tournier – Fund Manager at the Compagnie Monegasque de Banque (CMB), to present the ESG approach of the monegasque Private bank.
What does ESG involvement for CMB entail?
CMB has long demonstrated its commitment to ESG (Environment, Social, Governance) issues. Our environmental product capabilities date back to the mid-2000s with the launch of a specialized equity fund in partnership with the Government of the Principality of Monaco. A range of investments implementing ESG solutions was subsequently expanded into various products, such as customized funds combining equities and bonds. More generally, it is really the integration of ESG criteria to analyze the risks and investment opportunities that characterize our method today.
CMB also recognizes that it is everyone’s responsibility to ensure a sustainable environment for future generations and supports the United Nations Sustainable Development Goals through the actions of Mediobanca Group.
In practice, the CMB’s strength in the ESG field comes primarily from its know-how developed through a long experience of investments on these themes. Knowing the environment in which we invest allows us to develop a strong knowledge and sensitivity to the companies and financial flows that make up the market, and are all factors that contribute to the success of our investments.
Close relationships with professionals with proven ESG skills have been developed over time and enrich our databases and research in this area. Our expertise is complemented by access to different data providers and guaranteed by the stability of our teams, whose accumulated experience allows us to develop robust management processes.
But beyond the ethical aspect, the ESG action at the CMB is part of a financial approach, long-term investments, in order to create value. Financial analysis and performance therefore remain central to all our ESG investments and are fundamental in our proprietary investment processes that incorporate a “best in class” discipline on the ESG or, more specifically on the environment, our approach to the “fortress balance sheet”.
Are ESG criteria addressed to certain customer profile?
Sensitivity to the ESG theme is now strong among all customer populations.
It is especially professional investors and institutional investors who show a quasi-systematic attitude on these subjects. This type of investor spends considerable time on environmental, societal and governance issues when it comes to financial investments. This is related to the fact that they may be exposed to reputational risks or a willingness to convey certain values. However, generally, this interest comes primarily from financial reflection and yield research: ESG investments have been more profitable than general indicesin recent years.
For individuals, female populations and young people, regardless of gender, have traditionally distinguished themselves as having a certain propensity to seek meaning in their investments, beyond performance. Individuals in these categories tend to behave similarly and generally show a greater interest in ESG issues.
Nevertheless, this “border” is becoming less and less obvious. CMB’s clients are particularly knowledgeable and aware of these issues, and categorizations are difficult, even risky, to achieve.
Do you think performance and ESG are compatible?
It should be noted in this regard that the CMB has an ESG philosophy of supporting its clients in a holistic approach. We adapt and implement environmental and ESG principles in line with our responsibilities and our clients’ financial expectations. The client must not sacrifice wealth creation to promote values that he believes in and identifies to. Environmental and ESG products at the CMB are primarily an opportunity to make money for our customers, an opportunity created by growth companies that seek to continue their development within a virtuous framework and on which we invest.
Is Covid-19 challenging ESG strategies?
The health crisis of Covid-19 naturally raises social and economic fears. Faced with the scale and intensity of this unprecedented event, investors are confused. The economic and community impacts are virtually unknown. However, it is interesting to note that in the short term, environmental and ESG issues in which the CMB invests are not undermined by the pandemic. In fact, this crisis could even accelerate the beneficial effects of some of them.
However, the deep fears of the current crisis and the economic recession raise questions. For example, can extremely cheap oil block the energy transition? For the time being, this is not the case and, despite the fall in equity markets in March, ESG thematic funds have attracted capital and recorded positive investment flows, unlike general funds.
Why?
First of all, and by nature, the fund trend corresponding to the ESG is not challenged by sporadic shocks. Investors saw this market downturn as an opportunity to invest in the ESG theme at a good entry point.
Second, the crisis has led to increased government intervention in economic and social affairs. This may lead to stronger regulation of corporate behaviour and a preponderance of collective approaches that could benefit environmental, social and governance issues.
Finally, huge stimulus packages led by governments and central banks are expected until economies recover. Major projects and development axes will therefore emerge and these will have to have a fundamental orientation based on the theme of the preservation of the planet and respect for humans. Companies sensitive to ESG themes will therefore be the beneficiaries of these market movements.
Technically, the expected low growth environment also means that high-growth companies will benefit from a scarcity premium.
In the end, given the very good relative performance of ESG products, investors confirmed the strength of the ESG trend and the need to look far ahead.
Source: Mr Eric Tournier – Fund Manager at the CMB