FFA methodological note on data collection
The results reported for insurers at the Sustainable Finance Observatory are based on a declarative survey conducted by the FFA in 2020 on a panel of 20 insurance groups managing €2.261 trillion in assets, i.e. 86% of total assets managed by French insurance companies at the end of 2019 (€2.616 trillion).
The survey covered amounts invested in property and life insurance business lines: general funding, life and non-life funds as well as unit-linked products are therefore taken into account. On the other hand, funds managed on behalf of third parties are excluded.
More specifically, the coverage rate of the general, life and non-life funds is thus 86% and the coverage rate of unit-linked funds is 90%.
The insurance groups comprising the panel for 2019 are as follows: AG2R La Mondiale, Allianz France, Assurances du Crédit Mutuel, AXA France, AVIVA France, BNP Paribas CARDIF, Crédit Agricole Assurances, CNP Assurances, COVEA, Generali, Groupama, HSBC Assurances vie, MACIF, MACSF, MAIF, Natixis Assurances, groupe SMA, Sogecap, Suravenir and SwissLife France.
The insurers replied with respect to the situation of their French entities (insurance companies under French law or French subsidiaries of foreign groups).
Unless otherwise stated, all data indicated are given as at 31 December 2019.
Breakdown by number of insurers: the percentages reported represent the number of insurers concerned by the indicator, as a proportion of the total number of insurers in the panel (20 insurance groups).
Breakdown by assets under management: the percentages communicated represent total assets managed by the insurers concerned by the indicator, relative to total assets under management by insurers making up the panel (€2.261 trillion).
The panel's responses have been extrapolated for certain indicators, in order to communicate AuM and percentages corresponding to the entire French market of FFA member insurers.
1) Green investments
The definition of green investments used in the survey includes all assets dedicated to environmental issues, i.e. investments in :
- Environmentally themed funds (including Green Bond funds, listed equity funds including low-carbon funds and private equity funds),
- Green infrastructure,
- Direct investments in Green Bonds,
- Green real estate (as defined by each insurer). This category covers a heterogeneous definition: some insurers have included all their investments in environmentally certified real estate, while others have only counted investments in certified real estate above a certain threshold.
The "other" green investments reported also constitute a heterogeneous category. According to the insurers, they cover
- Investments in green infrastructure and/or renewable energy in diversified funds that do not qualify as "green",
- Investments in natural capital (forests),
- The green share of investments, calculated on the basis of the "green" turnover of companies benefiting from the investments.
These green investments are calculated on the basis of declarations by the insurers in the panel (representing 86% of general funds, life and non-life) and then extrapolated to the entire market.
The definition of green investments used is the one adopted for the last three years by the FFA within the framework of its annual ESG-climate barometer.
It should be noted that this definition is not aligned with the European Taxonomy Regulation (Regulation (EU) 2020/852 of 18 June 2020 on the establishment of a framework to promote sustainable investments and amending Regulation (EU) 2019/2088). The Regulation had not been published when the survey was conducted and the technical review criteria will only be definitively adopted by the European Commission at the end of 2020 as regards climate change mitigation and adaptation targets, and at the end of 2021 for targets relating to water, pollution prevention and reduction, biodiversity and the circular economy. It was therefore not possible to report green investments in the sense of the European Taxonomy for this year.
Consequently, the definition of green investments will therefore have to evolve in the coming years to align with the criteria of the European Taxonomy.
2) Types of Climate Analysis
Calculating the carbon footprint of a portfolio entails evaluating the greenhouse gas emissions of the companies that constitute the investment portfolio. This indicator provides a static view of the portfolio's footprint at a given moment.
Calculation of a portfolio temperature: a synthetic indicator that attributes the warming temperature scenario if the global economy were to reflect the composition of the portfolio.
Sector Alignment Analysis: methods that assess the alignment of financial portfolios with decarbonisation scenarios for certain key business sectors, generally the sectors most sensitive to transition risks. These methods measure the gap between the carbon intensity recommended by sector to meet the targets of the Paris Agreement and that of companies in the portfolio.
Analysis of the energy or technology mix adequacy: this methodology consists in transposing the challenges of the 2°C carbon budget to a challenge of shifting the energy mix (for energy companies) or technology mix (for car manufacturers). The current and projected mixes are compared with IEA objectives.
3) Exposure to thermal coal
In November 2019, the Fédération Française de l'Assurance (FFA) compiled a list of NGO recommendations deemed relevant by the profession to design an investment strategy for thermal coal.
Coal exposure as reported at the Sustainable Finance Observatory corresponds to the exposure of direct investments by the panel of insurers to companies exceeding the exclusion thresholds recommended at the end of 2019 in this guide, namely :
- relative criteria: share of coal in revenues >30% and/or share of coal in electricity generation >30%.
- Absolute criteria: annual thermal coal production >20 MT or installed capacity >10 GW
- expansion criteria (developers): companies planning new coal mining or extraction operations, new coal-fired power plants or new coal infrastructure
French insurers used the Global Coal Exit List (GCEL) produced by the NGO Urgewald to calculate this exposure at end 2018 and end 2019:
- An analysis was first carried out by the FFA to assess the exposure of the panel members' direct investments to companies included in the GCEL. For this purpose, all investments corresponding to an ISIN code listed in the GCEL or originating from an issuer associated with an LEI code listed in the GCEL were included in calculations. Investments were taken into account in their entirety: no pro rata was calculated on the basis of revenue share or the proportion of coal in the energy mix of the company benefiting from the investment.
- These data were then communicated for each separate player, to the panel insurers, to verify, adjust if necessary, the exposure calculated by the FFA.
- The exposures reported by the panel's insurers were finally extrapolated to communicate a market exposure to thermal coal.
4) Responsible, Green and Inclusive Units of account
This indicator looks at assets in Units of account (French unités de compte) in life insurance contracts meeting the criteria set out in the PACTE law, namely:
- Units of account meeting socially responsible investment criteria and having obtained the SRI label;
- Units of account meeting the criteria for financing the environmental and energy transition and awarded the Greenfin label;
- Inclusion-based units of account that have between 5% and 10% of their assets in securities issued by approved socially responsible companies, venture capital firms or venture capital mutual funds, provided that at least 40% of the assets comprising these funds are made up of securities issued by solidarity-based companies. Although not required by law, some of these funds may carry the Finansol label.
Assets under management were compiled on the basis of declarations by the insurers in the panel (representing 90% of the French market's unit-linked policies) and then extrapolated to the entire market.