LBP AM: innovative ESG strategies at the heart of our real and private assets
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Each month, LBP AM deciphers market news in video. Today, Frederic Lowe , ESG expert for Real and Private Assets at LBP AM, discusses innovative ESG strategies in our Market Views" segment.
Real and Private Assets - companies, infrastructure or real estate - are physical assets that have an essential role to play in achieving the Sustainable Development Goals, which are at the heart of LBP AM's concerns.
But to play that role, ESG criteria need to be taken into account when making investment decisions. Borrowers need to manage the risks, as well as seize the opportunities, associated with sustainability.
LBPAM's Real and Private Asset management platform is at the heart of this approach.
A pioneering approach to private debt
LBP AM's Real & Private Assets management platform pioneered the integration of ESG into Private Debt investment strategies in 2016. Based on our proprietary GREaT analysis methodology, our approach assesses the ESG practices of issuers across 4 dimensions: responsible governance, sustainable resource management, energy transition and regional development.
Thanks to our extensive experience, we tailored our ESG methodology to Real and Private Assets, to capture the specific characteristics of this asset class in greater detail, taking also into account the question of access and availability of ESG data.
Integrating sustainability into a private debt strategy requires having for each investment strategy - whether corporate debt, infrastructure debt or real estate debt - its own specific data set and analytical framework.
In facts, each investment team has a dedicated tool in this respect (sauf erreur il manquait cette traduction)
For corporate debt, certain criteria are taken into account only if the counterpart is a listed company or in manufacturing.
For infrastructure debt, our analysis will vary depending on whether the issuer is a project or a company, or if day-to-day operations and maintenance are carried out by employees or subcontractors.
For real estate, greater emphasis is placed on the environmental performance of assets, and their contribution to the well-being of users and the surrounding community.
Innovative and ambitious strategies
Since 2016 we have grown our ESG expertise thanks to our remarkable proprietary methodology, and from 2022 onwards we turned a corner with the launch of two highly innovative and ambitious investment strategies labelled under Article 9 of the SFDR.
The first was a climate-impact infrastructure private debt strategy fully focused on investment in activities that substantially contribute to mitigating climate change.
The second was a corporate private debt portfolio consisting of sustainability-linked loans, or SLLs.
Two years after their launch, these strategies substantially contribute to improving the sustainability practices of debt issuers throughout their value chain.
Building on our experience, and to keep answering our clients' needs and requirements, we are considering an Article 9 real estate debt strategy to promote the transition of real estate assets to higher environmental performance standards.
These examples illustrate perfectly how Real & Private Assets can contribute to the transition towards a more sustainable and balanced economy. Thanks the implementation early 2024 of the European ELTIF 2 regulation, more professional and private investors are now in a position to gain exposure to this asset class and support the acceleration this transformation.