After ten years in the green bond space, Amundi's head of fixed income SRI processes and credit portfolio manager Alban de Faÿ reflects on how the market has changed and what Amundi is doing to stay at the top of its game.

Environmental Finance: This year marks ten years since you first launched your Impact Green Bond fund. That was your flagship product. Looking back, how has the market changed in that time?

Alban de Faÿ: It has been a special year for us. We launched the Impact Green Bond fund back in 2016. Since then, we have looked to build an impact strategy so that when we finance green bonds, we're not only looking at their financial performance but also at their environmental impact.

The main change over that time, I'd say, has been diversification. When we launched the strategy, there were about 18-20 green bonds, but they were almost all dedicated to renewable energy. Now, there's a larger diversification as to which directions these are all pointed at. There are bonds aimed at green transportation, bonds for green buildings, and bonds for energy efficiency. That's been the biggest change.

EF: What has supported your success over the last 10 years?

AdF: Confidence in the green bond market and transparency are key. People can see how we want to help our investors better understand how their money is being used and what its impacts are. We also need to be able to tell the difference between 'good' and 'bad' green bonds. On top of that, there is also the financial performance of these assets. But, most importantly, it is about engagement. That's one of the things that I think we have excelled at with Amundi - being able to improve the dialogue between the bondholders and issuers.

EF: The topic of bondholder engagement does seem to be getting a lot of attention at the moment. How has Amundi responded?

AdF: We have a dedicated green and social bond analysis team with five members, which is maybe one of the biggest in the market. It's through this dedicated team that we are able to assess the quality of the green bond, have dialogue with the issuer, and better understand their reports, help improve frameworks, and move to a higher level of standardisation. It's also to make sure that the level of transparency and the reporting quality are at the level that we deem 'best'.

More generally, we continuously strive to define standards that position responsible investing as an essential investment dimension to be taken into account. In 2024, our dedicated analysts held discussions on 245 green bond-related topics, including 122 specifically focused on improving reporting practices.

EF: Given that Amundi has its in-house analytical team, do you also develop your assessment tools internally or do you look to bring in resources from outside?

AdF: What we do is mainly in-house. Our path when it comes to green bonds has been to, at first, increase our dedicated capabilities, such as developing the team I just mentioned. We also look to do things such as improve our database and make sure that all this information is then available for all of the portfolio managers and not just those dedicated to green bonds. That's extremely important because what it does is ensure transparency all the way from the portfolio manager to the end investor.

EF: You said 'mainly' in-house. That implies that some of what you develop comes externally to Amundi?

AdF: We do leverage some data from outside Amundi. We deal with one of the most advanced data providers on green and social bond analysis. It's through that that we are able to select the right providers, getting the data that we need for our decisions or for the final investor to report on our strategy.

EF: How has your investment strategy changed over the last 10 years in response to the needs and movements of the market?

AdF: The important thing about green bonds is that they are a fixed-income strategy. When we employ them, we leverage on their ability to finance and to manage the dedicated fixed-income segment with quite a long track. We have been able to actively manage this strategy with two main sources of alpha generation. The first is rates positioning, so how we manage our underweight or overweight on duration. We also look at how we build this portfolio on the curve and on the credit.

We also actively manage our credit exposure, keeping in mind that our clients are investing in green bonds. They want to be sure of the quality of the project, the transparency of its impact, and how we are able to navigate in the different cycles while demonstrating our ability to generate performance.

EF: What's the most important trend that you're seeing in the market right now?

AdF: There's a lot of interesting dynamics going on. There was a backlash against the ESG last year. And beyond that, we were able to demonstrate that green investors are still there. It means that people in this sector may be long-term investors and are confident in our ability to deliver in terms of performance.

The other trend we've seen is that we are still - as humans - strongly dependent on fossil fuels, highlighting the need to move towards sustainable energy.

So, there's a need there to finance more products. We're also looking at the rise of AI, which also needs a lot of energy. That's another development that shows that we need to move away from fossil fuels. It's an opportunity for the market to accelerate and to move forward.

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