MSCI Inc. (MSCI) Earnings Call Transcript & Summary

Let's move it on. So much more to come. This is our last session of the morning. There's more to come this afternoon. I'm going to hand you over to Thibaut Ghirardi, who's going to be moderating the first panel of the day of the Sustainable Investment Forum Europe 2021 edition. Thibaut, joining 2 Degrees Investing Initiative in March 2020 as Senior Manager for the Paris office team. He's in charge of the Finance Climate project which aims to align the French and European action plans on sustainable finance and to strengthen France's positioning on this topic. Thibaut, I'm going to hand it over to you. Thank you very much.

Good morning, everyone. It's a pleasure for me to be here today to talk about such an interesting topic, and we -- with such a great panel. So as explained, I am Thibaut Ghirardi, I'm part of the 2 Degrees Investing Initiative and I'm in charge of the operation of the French office, and we are working with public authorities and with financial institutions on the alignment of financial market with the International goal of the Paris agreements. So maybe I will pass over to the several speakers for quick introductions. So let me start with Katharina Lindmeier, you're Responsible Investment Manager for Nest Corporation.

Thank you, Thibaut, and good morning, everyone. Yes, my name is Katharina Lindmeier. I work at Nest Corporation. We are a U.K.-defined contribution pension scheme. We were set up specifically When the U.K. introduced automatic enrollment or implied to enroll their employees into pension schemes. We now have about GBP 17 billion in assets under management and just under 10 million members, making us the largest pension scheme in the U.K. by a number of members. And my role in Nest is, I work in the responsible investment team. We've actually got all of our money managed by external managers. So we ensure that ESG is integrated from the asset allocation into managers, selection, monitoring and also carry out stewardship activity.

Thank you very much, Katharina. Let me now introduce Olivier Rousseau, your Executive Director for Fonds de Reserve pour les Retraites in France. So if you can give a quick introduction on your side, please?

Yes. Thank you very much. The French pension reserve fund is a reserve fund supporting the pay-as-you-go pension scheme in France. We currently have EUR 27 billion. We had very significant cash calls last year from the government in connection with the crisis. So we have suffered from it directly, not just indirectly. Same as for Nest, we have to delegate all our asset management by law and in the mandates that we award. Of course, we put great emphasis on the ESG strategy and its real implementation, i.e., no big promises and very disappointing delivery, please. We also invest a bit in collective funds, neutral funds, be they open ended or closed ended. And here, we apply the same requirements, but we do not master the whole thing contrary to what happens when we do a request for proposal in order to work mandates.

Thank you very much. Now I will pass the button to Guido Giese, you're Executive Director at Core Equity Research for MSCI.

Yes. Thank you, Thibaut, and good morning, everyone. My name is Guido Giese. I'm member of the core research team at MSCI in London. And in my role, I'm fully focused on researching how to use MSCI's [indiscernible] in climate data in building climate indexes, climate or ESG risk management tools, portfolio management tools, portfolio construction. And I've also been working with my colleagues on several research papers that we put out there on these topics, MSCI research papers, but also some academic papers that we published in the Journal of Portfolio Management recently on ESG and climate risk integration.

Thank you very much, Guido. And our last paneler is Jean-Jacques Barberis, you're Head of Institutional and Corporate Clients division at Amundi. And I can't see Jean-Jacques anymore on the screen. So I don't know if there is a problem. Okay. So sorry about this. There is a little technical problem. So waiting for Jean-Jacques to come back. I suggest I just switch to the next section of this roundtable. So roundtable about the European ESG landscape meet and post-pandemic. Please, let me start -- so Jean-Jacques is back. Please, Jean-Jacques, could you give us a quick introduction on your side, please?

Yes. And sorry, I don't exactly know what happened. I hope you can hear me properly now. So my name is Jean-Jacques. As you can see on the screen, if you can see the Eiffel Tower behind, I'm based in Paris. And I work at Amundi. So Amundi is an asset manager, the largest in Europe. We used to call ourselves the largest asset manager in the world that is not American. We are mutually owned, just as Magnus mentioned before. And as I was saying, we're based in Paris. So basically where [indiscernible] agreement was signed. And my role at Amundi is notably to head the Institutional division and to supervise the ESG department. I would stop there because I believe the technical problems have delayed already a little bit, and sorry for that, again.

No problem. Thank you very much. Once again, it's really a pleasure to have such a great panel today to talk about these topics. I'm really excited about this opportunity. Let me now switch to some context elements. So as I already said, at the 2 Degrees Investing Initiative, we are working on the alignment of financial market with the Paris agreement goals. So with a focus on climate change, the topic of climate change has been raised several times this morning already. Obviously, ESG is broader than climate, but still, we all see that this is a significant topic these days. So I would like to start by sharing some numbers with you as a context. First, based on the research that we did, one of our latest report, which is named On The Road To Paris, we reviewed the commitments taken by financial institution, and we identified in 2020 more than 2,500 commitments related to climate change targets from financial institutions, which is quite significant numbers and which shows that the topic is really like identified as a key topic by financial institutions. And if we look at the retail investors side, also based on another report that we published in 2020, which is a large majority of retail investors want to invest sustainably. We realize that more than 80% of retail investors, when they are asked, say that they would like ESG criteria to be taken into account when managing their savings, which is really, really important. And which shows that ESG is really becoming -- are really becoming key topics for the financial markets. This is also quite well described when we look at the regulation. So obviously, that won't be comprehensive, but just a quick overview. In France, we have, since 2015, the Article 173 which became Article 29 and which is about the disclosure -- ESG disclosure of financial institutions. And this is now under consultation for a new decree with regulation, which is becoming more and more stringent. Obviously, at the European level, we have the sustainable finance disclosure regulation, which is applicable now since March 2021, and which is about how financial products are integrating ESG and how they are reporting about ESG. Talking about retail investors, obviously, we are still waiting for the delegated act of MiFIDs that will support the integration of ESG topics into the suitability questionnaires for financial products. And last but not least, the last latest version of the technical report from the -- for the EU Eco-liable that should become available soon. And hopefully, that will lead to the implementation of such an Eco-liable. So I think that based on those topics, we can definitely see that there is a momentum for ESG. The question which has been raised is what is the impact of the COVID crisis on this momentum. So obviously, when we look at the data, we can see that ESG funds, they have been impacted also by the COVID, but -- so which is interesting in what way because like we could expect from ESG funds to be less sensitive to nonfinancial crisis. And actually, that's the case because most of them basically overperformed non-ESG products, which is an interesting signal. So what we would like to discuss today is basically this momentum for ESG in the time of COVID, how asset owners and managers are addressing the ESG issues, how cultural and regulatory shifts are shipping the ESG landscape, and will ESG investing become second nature in France and Europe and worldwide.

So let me start with Katharina Lindmeier. I would like to talk to you about the climate change policy that Nest Corporation published with a net zero target last summer. Could you tell us how you have engaged with your fund manager and what the mandate-specific objectives you have been stating for them as part of this strategy, please?

Yes. Thank you, Thibaut. So as you said, last summer in July, Nest published its team-wide climate change policy where we set an ambition to align the scheme with 1.5 Degrees of warming by reaching net zero emissions by '50 at the latest. And this is really developed in line with most recent signs. Nest is -- it's scheme was a large proportion of very young members. So we actually saw the risk and potential impact on returns and our ability to pay [indiscernible] of members, including myself, I'm going to retire after 2050 most likely. So this is really something that affects our investment horizon and our ability to pay pension. So as I mentioned in the introduction, we allocate to external managers. We're not bottom-up stock pickers. So when we developed the policy, we really talked about all what influence do we have and what can we do. And we came up with 4 kind of key pillars of the policy. The first two focus really on the scheme and the scheme's assets in making sure that we decarbonize. And so this is around the asset allocation. So this is something that we do in-house and looking at risk returns, developing new asset classes, new mandates. And then closely linked to that, the second pillar, which I want to talk about in a bit more detail, is around fund manager, selection and monitoring. The final 2 pillars, they're all linked together, and they all have been quite interesting. But the last 2 are around [indiscernible] in efficacy. So this is more about making sure that real-world emissions are reduced rather than just isolating the impact of our portfolio. So we've long had a very in-depth divergent process. And when we go and decide that we want to invest in a new asset class, a new mandate, we include ESG consideration throughout the whole due diligence process. And we try to select best-in-class managers in terms of ESG whenever we look for a new mandate. But with the climate change policy, we decided to do something a bit more ambitious. And we developed an internal benchmarking exercise when we first develop the policy, we benchmark all of our managers against this. We also looked at publicly-available information, for example, NGOs, like share actions, assessment of things like managers' stewardship records. And we then engage with all of our managers, and we developed some specific objectives. So for all of our most, we ask them how they can help us to reach ambitions limited moving to 1.5 Degrees. But we also set specific closure requirements, requirements around stewardship, particularly for our equities mandate, and also the target around aligning mandates with new kind of methodologies out there such as the EU benchmarks. So the outcome of this trend has been actually, as of right now, kind of 9 months in terms of having development policy. We moved all of our equity allocation, which is more than half of our portfolio into what we call a [indiscernible] fund. So we're not claiming that we're aligned with 1.5 net zero at the moment. But these are portfolios that are managed and [indiscernible] and the process of looking in things for our fixed income mandate. So I'll just stop and hand back to you, Thibaut.

That's a really interesting view. And so based on what you just explained and the trends that you identified, I would like to ask Jean-Jacques Barberis, how is Amundi, as an asset manager, impacted by these trends that have been described by Katharina Lindmeier.

Thank you very much. Well, I think at the moment, I want to echo a little bit on the introduction that was made by Magnus. Our key area of focus at the moment is really, I would say, our way to Glasgow. I was referring to the Paris agreement before. It's interesting to see that COP '21 was in Paris, COP 2016 in Glasgow. And I think the oldest alliance in Europe from a historical perspective was called the old Alliance in the 13th century. So we hope to see this alliance, I would say, reconvened at Glasgow to make sure that we have, I would say, more ambitious steps being taken there. So on our side, I think we have 2 areas of focus at the company level at the moment on our way to Glasgow: First, it's to define precisely what our 225 net zero commitment will be. Because I think it's very important for asset manager as well to commit not only to be net zero into a '50, but also to take short-term steps. So that's one area of focus. And second, and maybe we can discuss that a little afterwards. It's really the focus on how we integrate the social dimension in our net zero commitments. But elaborating a little bit more on what Katharina has said, what we are seeing from investors at the moment, vis-a-vis ourselves, I think, it's a few things. First, it was mentioned before, it's not coming only from the institutional world anymore. It's coming massively from the retail world and indeed an asset manager that is working both for institutional and retail networks. And what is extremely clear at the moment is indeed there is a more and more important demand for climate line strategies, funds, proposals by the retail investors which is not easy, by the way, because it implies to produce, I would say, measurement methodologies, management reportings of what we do that are, I would say, easy to access, easy to understand and easy to spread out in a retail universe. So that's one thing. Second, what we see in terms of trends coming from the institutional, I would say, clients in particular, and that are our areas of focus. And it's completely in line with what Katharina just said. But first, I think the fact that ESG shall be integrated into the investment processes, et cetera, et cetera. I think now it's licensed to operate almost. Really, the areas of focus are a little different. First, more and more, of course, demands for portfolios that are, I would say, aligned that our net zero line aligned with 1.5 Degree Celsius target with different techniques to achieve that, but clearly an increasing demand on that trend. Second element, which is more structural, more and more, I would say, demand coming to us on how to, I would say, propose an asset allocation and propose an evolution over the long term of the asset allocation for asset owners to meet their net zero commitments. So not at the portfolio level, but more globally. So this is I would say, a conversation. We have more and more with our key clients, big European insurers, in particular. So that we say it's the second trend. Third trend that we see is more and more request for measuring, I would say, not backward-looking, but forward-looking alignment of portfolios and companies we invest in. So clearly, I think this is something That is a growing demand from investors and for instance, that's why at Amundi, we are very interesting -- interested in the development that we do on temperature methodologies, trying to be a little more forward-looking to deploy capital in companies that are aligning progressively. The fourth trend is, as Katharina was mentioning, asking us to participate in our engagement and voting policy to the, I would say, encouragement vis-a-vis corporates to align themselves on 1.5 Degree Celsius targets. So on our side, we decided, for instance, to engage all companies we invest in to engage into an SBTi approach. And more than that, we try also based with the conversations we have with our institutional clients to ask CEOs of these companies to engage into concrete KPIs, notably associated with our compensation schemes. For instance, one thing we do this year for very emitting sectors, we request the compensation packages of top management of these companies to include ESG KPIs that are directly linked to a decrease of emission scope 1, 2 and 3. And this is based also on the dialogue we had with a number of our institutional investors that we developed such an engagement policy. And finally, the last trend, we see the fifth one coming from the clients, it's, of course, in line with the regulation. So asking us clearly to report on the alignment of our portfolios vis-a-vis the European regulations, SFTR, in particular, where on our side, we reported a little more than [ 450 ] billion of AUM, Article 8 or Article 9. So these are, I would say, the 5 trends we see from our clients and that are helping us to move forward.

That's really interesting. You talked a lot about reporting and portfolio alignment, and this is something that we are increasingly focusing on at 2DII, obviously, portfolio alignment is at the core of activity, and we work a lot on data and hope to use asset-level data, for example, for portfolio alignment. I would like to have the view from a data provider now. So Guido Giese, could you please tell us according to you, how those trends are mainly impacting your activity as a data provider?

Yes. Thank you, Thibaut, for the question. I welcome this discussion today. Yes. I mean at MSCI, we've seen a rapid increasing demand ESG and specifically climate solutions. And there are 2 drivers behind that, that were already mentioned before. The first driver is that asset owners and asset managers are increasingly recognizing climate risk as a financial risk that they need to manage. And secondly, the regulator. But what it means is when we have conversations with asset owners and asset managers, the conversation of the demand from them has completely changed over the past 5 years. So 5 years ago, it was enough to buy carbon footprint data. It may be an index that improves the carbon footprint. So 5 years ago, climate risk, carbon footprint. That's no longer the case. When we look at the demand and the questions today investors ask us for more sophisticated climate rates start to indicate us for their supply chain such as Scope 3 emissions, data risk or physical risk exposure of companies. And it goes on, it goes into how to conduct climate risk stress testing, forward-looking climate risk stress testing. So we invest in an effort in that area where you might have seen, we acquired a climate risk fintech 1.5 years ago in Zurich, climate carbon delta, that developed a forward-looking stress -- climate stress scenario model for equities, fixed income and for real estate to basically respond to that demand to see that the questions we get from the market go even beyond that. Personally, I had a few meetings in the last 6 months where clients asked me, "Look, you MSCI, you have all this nice data and these tools. But can you prove to us that the tools are really effective in measuring climate risks and are really the right thing to use in portfolio construction?" So it really goes into kind of basic economics showing that the data does what it's supposed to do. So we started doing a lot of research around that. So we -- months ago where we basically should integrate climate risk into a standard equity portfolio risk model alongside other traditional market risk factors. We are doing the same thing now for credit risk. So we are integrating client into our credit risk model. Once again, we work on paper, show to the market how to model using the data from us or the tools from us. And you can see the discussion got very challenging. So it started 5 years ago with climate foot printing, but now we're talking about climate risk data, climate risk indexes, climate risk analytics, climate -- risk and the second driver behind that, and that was mentioned several times before that, is the regulator. The regulator steers us in the same direction. When you look at the EU regulator, the EU regulator is probably the most ambitious regulator in the world. And the EU regulator is basically the whole value chain from investing. Starts minimum disclose for companies, labeling of sustainable investment products, regulation of climate benchmarks, risk, climate risk management and so on. So -- and we need to reflect the entire record in our offering. And that has not only transformed the conversation we have with this. It has also informed us as a data provider. When you look at MSCI today, we have 400 people, roughly 400 people just working on ESG and climate, 400 people. And that is, as I said, it's not just enough to provide data. I mean to provide data, probably 100 people would be enough. But to provide all of the different solutions, it takes indexes, it requires a much bigger organization and to be [indiscernible] by my experience I find and also the... [Technical Difficulty]

So I'm sorry, I think I have technical issues on my side. So the bandwidth might not be great. But thank you very much, Guido, for this. So I think what you said raised 2 really important questions. The first one is the more we are using data, the more there is a need for standardization. Obviously, if the stakeholders are using several types of data in several ways, then come the question of how to ensure that this is done in a consistent way. And the second one, and you already talked about is the role of the regulator. So I would really appreciate to have Olivier's view on that. What is, Olivier, your view about this need of standardization, what are the types of solutions that you see emerging? And according to you, should we expect the regulator to play an increasing role in this standardization?

Thank you very much. At the pioneering times of ESG, people were looking at it as a way of being decent. And some others were also looking at ESG as a way of measuring risks, not the ones looming at the corner, but the ones that could translate into financial problems in a few years. And this is still very valid. But of course, now we have the massive climate issue, which is upon us. And there is a big misunderstanding in terms of what can be expected from the financial sector. The financial sector can be in the vanguard, yes. But it cannot solve the solution by itself. It's too easy to put all the blame and to pass the buck plainly to asset owners, asset managers and banks. That is not to say that they cannot do anything far from that. But the 2 crucial issues now are data indeed, and the action taken by the public authorities on the carbon pricing. The carbon pricing, Magnus billing mentioned it, but we have been saying that, all of us, for many years. It is absolutely crucial that the public authorities should reward and validate the steps taken by the decent investors already many years ago, with the increase the -- making more relevant the issue of carbon pricing. We see here and there exchange trading schemes put in place or improved. We see some very shy indications of carbon prices. But actually, what we need here is authorities to define a path for carbon pricing. It may start now at, say, $30 per CO2 tonne, but we need to see that it will go up and quickly. If we seem to be on track with the 2 Degree maybe we can say $100 in 2030 would be okay. If, as we fear, we are a bit backwards, we are not reaching those targets, not speaking about 1.5 Degree, then we probably need to say that the price of carbon will reach $150 maybe in 2030. That's one very fundamental step that needs to take place to make this real. And now data, it's a crucial issue, data. There is a burgeoning effort by many players, including the big index producers like MSCI and the others. Actually, we have 3 things: data methodologies, and simulations, and projections. Data, I'll be very plain, it should be public. It's probably good. Just as accounting data has to be published by law and is then available for everybody to play with, it should be the same for ESG. We should no longer see the situation in which ESG-aware asset managers or institutions were knocking on the door of companies and asking them to disclose their numbers each asking with different ways so that the data being collected by different vanguard institutions were not comparable from one to the next. This must take an end. It should be made compulsory disclosure. That's it. You rebuild it. By the way, I see besides the very pioneering actions taken by France and by other countries and the European Commission in the EU, which is very good. I see with great optimism that the American administration seems to want to impose climate disclosure to banks and investors, as was mentioned by John Kerry a few days ago. So that would be excellent. But data, it's a public good. We need to add the [indiscernible] on it. Methodologies, it's not for the public authorities to impose which one is good, which one is bad. No. They may help. It's mostly an issue of protecting the -- a retail public, which is not informed and needs consumer protection, kind of, in the action that public authorities take regarding methodologies. But we need more trial and error, and we need to progress towards convergence. But this is going to be mostly organized by the markets. Now simulations and projections as was mentioned for MSCI, it's very important. And this is a very technical business here, a few institutions, a few dozens in the world, maybe can be very useful players. It is not something that makes sense at the individual institutional investor or any type of medium-sized asset manager. There are massive economies of scale here. And so this is something that is another service to be provided to the asset management ecosystem.

Thank you very much, Olivier. That's really interesting. You talk about retail investors and protection of retail investors. I think that's really a key topic how we come from the data assets and companion level to a data which is understandable for retail investors. I think that's really important. Talking about this, maybe I would pass the button to Guido Giese. We have another regulation in the European framework, which is about EU benchmarks and that can provide further information about those carbon emission. So we at 2DII level, we think there are still some points to be improved with this regulation, but Guido, could you tell us a few words about this, please?

Yes. Of course, I think, the EU benchmark regulator is a very nice for the vision of the [indiscernible] and respond to one of the topics that [indiscernible] just mentioned. I think it's absolutely true. And I agree with Olivier said that, I think disclosure of companies is very important, and it would help everyone, right, in the market, all players in the industry if in the world started for example, reporting since according to a predefined standard. Now it is also fair to say that disclosure has improved a lot over the past 5 years. But we are still not where we should be, right? And I agree, it would really help regulators across the world. I'm starting posing minimum standards on all companies disclosing climate-related data and maybe even ESG data, minimum set of ESG data outside of climate. But disclosure of data is one area. The other area is how to use it and who to use it with. So this is where the EU regulation is a very nice example because the EU is very ambitious. The EU establish capital markets as a key driver for driving the economy towards a greener future. And what I personally like about the EU benchmark regulation. That's why it's a nice example. So it's the ambition. So the minimum requirements in the policy are very ambitious. So there's no way you can come along with a greenwashing index and call it EU benchmark complain. The minimum targets are too high, but they are also like the EU benchmark regulation, that it's very measurable. Because one of the problems of regulation is often that it's very vague. It's very -- it's undefined, you can interpret it as you want. And this is not the case with the EU benchmark of regulation. It's very tangible. It sets very antiquated standards such you need to decarbonize your index portfolio by 50%. The carbon footprint need to improve by 7% a year. You do need to take into account scope 1, scope 2, Scope 3 emissions. You need to reshuffle capital towards greener companies versus browner companies. So there's a very long list of quantitative, measurable criteria. And I think that's how it should be. It's -- the minimum requirements, they need to be measurable to be transparent and to create a level-playing field for the market. And that's what the carbon regulation is. It creates a level playing field for benchmark providers, users, so investors who are looking for a climate benchmark, they can look at different solutions. They know exactly what are the minimum requirements. They can test them themselves, and they can verify which is really playing with the EU benchmark regulation. So I think it's a very nice example for regulation moving in the right direction, but also making it easy to verify and to quantify.

Thank you so much for this explanation. So we definitely can see that when it comes to regulation, transparency is really important. Even more when we talk about climate-related risks. So recently, in the U.K., they decided to implement a new regulation for mandatory TCFD reporting by pension schemes. Katharina Lindmeier, what are the implications for you and your fund manager regarding this regulation?

Yes. Thank you for that question. I think we've heard a lot about how the EU and France -- and I have been leading in this area. But recently, as you mentioned, the U.K. has introduced a new Pension Schemes Act, which is coming into force in October this year. And it's actually -- I believe, it's the first in the world that makes this scheme mandatory for pension schemes. So both in terms of the governance of time a change risk and how pension schemes have to disclose on this. So obviously, it's going to have a huge impact on schemes in the U.K. that are in scope of speculation. But it's not just U.K. pension schemes because we invest with external managers, not just U.K. managers, but all across the world, and therefore, going to be asking all of our managers a lot of questions on TCFD information and the managers in turn will then likely more companies to improve their disclosure. So for us, we've actually used the TCFD framework for disclosure for a number of years, but it has been a challenge at times to get good quality data, I think, as Olivier mentioned. So something like emissions data has been around for a long time, but the standardization and the quality has been an issue. So you used to joke that the best way to reduce your carbon footprint, which has been to change the provider. And this new regulation does have some recommendations in terms of what types of methodologies you should use. And we do really hope that this will help level the playing field and also should make it easier for managers because what we hear a lot of the time, particularly in pool funds, is that either -- we're the only one who's asking for this information. So it has to be done on an adhoc basis or there's -- not all client's asking for the same type of information. So again, kind of standardization across the all industry. We found the TCFD discussions actually really helpful in helping us think about climate change risks and opportunities. I would say that has contributed to us then developing our policy because we were really thinking about the kind of metrics we were tracking, what targets to set. I think Jean-Jaquces mentioned earlier, about, yes, 2050 is actually a long time away. So we need to think about sort of more medium-term target 5 years, 10 years. And also, in terms of new areas such as [indiscernible] analysis, again, going back to what Guido was talking about the different methodologies that are coming out there. But yes, to close on this point, I think I'm taking something that Magnus said earlier as well and I think Olivier as well, is not just about our pension scheme. So of course, as pension schemes, we have a lot of leverage, we also have benefit being really close to the end beneficiary, the members. And we can really influence asset managers and in turn the whole system. But at the same time, we can't do everything. And therefore, we also really welcome additional regulation around company disclosures. So again, it's a company in the U.K. is looking at the moment in terms of publicly-listed companies and large private companies and potentially making TCFD disclosures and achieve for those as well, which will really help us with our reporting requirements of disclosures.

I would like to ask a question to Jean-Jacques Barberis now. I know that the notion of just transition is really important for you. I saw that Amundi recently published some interesting news about this. So could you tell us a few words about this notion and how this could, for example, articulate with the regulation we have been talking about so far?

Yes. Thank you very much for the question. Maybe a few elements of reactions. Just a few things that were said by our group analyst. First, I completely concur with Guido on the fact that the, I would say, European benchmarks are extremely useful. I think we launched the first ETF that was a Paris aligned benchmark. Because clearly, here, you know exactly into what you're investing in, and you're absolutely sure of delivering a reduction of the carbon emissions of your portfolio aligned with the Paris agreement. At the same time, to be very honest, the capital that has been deployed according to this benchmark, I think, is limited. And I think -- so it's a little an appeal for investors to look at that because it is indeed a very stringent framework. But clearly, at the moment, it's probably the best that we have to fundamentally give, I would say, certainty to the end investors that they are deploying capital into Paris aligned solutions. So just I think the tool is great. Now we need to use the tool massively and to deploy capital out of it. Second reaction was on the point of Olivier, which I totally support what he said at the very beginning of his intervention. I think there is a lot, of course, that the financial industry should do. At the same time, it's not our role to substitute to policymakers for very one basic reason which is that neither we do, neither Olivier, neither Katharina, neither myself are elected. And therefore, it would be a fundamental democratic problem if we were to substitute to the responsibilities of policymakers. It doesn't mean that the financial industry doesn't have its responsibilities, but I think it's always important to have that into perspective. We started this panel with a church and port. There was another one which is the price of greatest is responsibility. There is a great responsibility on the financial sector. But at the same time, let's, I would say, focus on what we can concretely deliver and what we are legitimate to deliver. Sorry for these 2 reactions. Coming back to your question, I think, we are particularly, I would say, concerned by the fact that within the, I would say, action being taken on climate and the associated regulation, notably at EU level, to use a French expression, the social part of the aspect is a little the [indiscernible], so not really been addressed in the overall picture. And we totally consider that there will be no transition, if not socially acceptable. This is principally something for policymakers, but also for investors. So as you mentioned, we revealed yesterday our first investment methodology trying to address the just transition concept for -- from an investor perspective. But we think that we need more than that. We think that we need indeed having the European future, I would say, a sustainable development strategy, sustainable finance development strategy, really also focusing on the social part of the equation of the climate challenge. And this comes -- this can be, for instance, through a social taxonomy. This can be done by multiple ways. But I think what is absolutely key is that indeed, we integrate the social dimension into the transition agenda. This is something that the European Union has started to do. Within the green deal, there is the creation of the new financial mechanism at EU level, which is a just transition mechanism. We definitely think that this is something on which the European Commission should focus on in the new sustainable finance strategy that will be revealed in June. And last point on that and on the evolution of the European regulatory agenda, which is absolutely crucial to meet our carbon neutrality target. Also, to concur with something that Olivier said, I think, clearly, there are very 2 big priorities for this renewed sustainable finance strategy from the European Union. The first one is that as the EU has taken historically, the leadership on the question is really to defend our case and to promote the concepts that we have integrated into our regulations worldwide. For instance, there will be a fierce battle regarding shall we use double materiality or single materiality approach when it comes to climate. We definitely think that the double materiality is the good way forward. And this is something on which the EU shall promote at, I would say, worldwide level. For instance, including the future NFRD standards into the European trade agreements with other countries. I think we shall not be naive at EU level, we need to promote and try to impose our standards. That's one thing that is key. And second, also concurring with what Olivier said, we need the European Union to have the tools the industrial tools to address the climate and ESG challenge. For instance, something we are extremely interested in is what we call single access point. So coming back to Olivier's point, which is how to make sure that the maximum of ESG data that is going to become mandatory is available publicly at EU level for all the players that are involved in European markets.

Thank you very much, Jean-Jacques, about this. You talked about a really interesting point, the role of the financial industry itself versus the one of the public authorities and the substitution between the two of them. Olivier Rousseau, I know that you wanted to say a few words about this. So what should be, according to you, the responsibility of the sectors versus the one of the public authorities?

Well, I think we have already mentioned quite a few things about that. I'm just saying it's too easy to put all the burden on the financial sector and expect that it will sort out the mess. It will not. We are a community of decent well-intending people, but not all financial investments end up in well-intending hands. And if we, the good people, sell the bad companies on climate issues, but also on governance and social issues as well. If we do that, and there is no action from the public authorities, well, it will simply be that the bad companies end up in hands, we don't care about ESG and life will go on. And these guys will actually potentially get extra returns as a result of the well-meaning investors dumping those companies. They will create a bad ESG premium. So that cannot be just the financial sector acting. I mentioned it's very important in my mind. The financial sector can and must act as the vanguard of the process. But the public authorities must put coherence in the whole picture, and that is imposing reporting obligations to everyone that's absolutely key. That is also defining frameworks along which people may communicate and prohibiting misleading ways of communication. And that is defining a path, a track, for, as I said, the increases in the price of carbon, whether it be a tax on emissions or an exchange trading system, maybe there's room for both. And it seems easier for states to start with exchange trading systems applying to large sectors in carbon emissions. That is the way it has to be. So financial sector, we can do a lot. But it's too easy for the governments, for the NGOs, for the press, for the media to put all the blame on the financial sector and all the owners on them. That is just unrealistic, unfair, and it's going nowhere.

Thank you very much for these explanations. So we were supposed to have a few more questions, but we need to have a hard stop in 2 minutes. So I would just tell you thank you very much again for this really interesting roundtable. On my side, I'm really excited to see that financial institutions are more and more increasingly taking ESG issues into account. As you all said, we need to find a good trade-off between industry-led initiatives and new regulations and working all together to ensure that we will stay under the 2 Degrees goal of the Paris agreements. On our side, we want to highlight the fact that, obviously, the financial industry is playing a key role these days and that now we all need to ensure that this will turn into concrete changes in the real economy because we obviously need to ensure that CO2 emissions will decrease in this real economy. In France, the government launched recently a new initiative about impact investments. And I think that's also a really interesting topic, and that will help the industry working towards the Paris agreement goal. Thank you again to everyone. We need to leave the floor to the next sessions, but it was really interesting to talk about this topic to everybody. Thank you so much.

Thank you very much.

Thank you very much.

Thank you.

Thibaut, thanks very much indeed, fantastic Part 1, Session 1 virtual panel, so many nuggets in their data, action on carbon pricing. We need to reword and validate all those words that were made years ago. We had authorities to define the path of carbon prices. Data should be made public. Compulsory disclosure, when it comes to regulation. Transparency is so important. We need to introduce the social agenda into the transition agenda, too easy to put the burden on the financial sector and expect this mess to be cleaned up, too easy to put the blame the onus on the financial sector, authorities must add coherence to the process. Yes, the finance sector must be the vanguard of this process. Brilliant panel, 55 minutes of pure gold. I hope you enjoyed it as much as I did. Big thanks to Thibaut, big thanks to his panelists as well. [Operator Instructions] We want you to engage, you're such a big part of this sustainable investment forum. So please do fire questions at the panelists, tell us where you're from and, of course, tell us who you want to ask those questions, too. It's all about engaging networking, connecting, engage, use the platform to engage to visit the expo, to use all our platform facilities as well. We really want you to engage. It's difficult in these very troubling times to meet people face-to-face, some economies are opening up, some aren't. So this is a wonderful opportunity to network, to connect, to engage. This is why this Sustainable Investment Forum Europe '21 is so important. Please follow us on social media at climate underscore action, climate score action underscore and the hash tag is #climateactionlive. So absolutely fantastic. Want to just take you through what we've discussed so far. It's been an absolutely brilliant few hours. It's passed just like that, just Part 1 session 1, we've got Part 2 coming up in just a few seconds' time. So many amazing takeaways. We really need to promote, impose our standards within the European Union, that action on carbon pricing that was set by Magnus, that was said just at the end there, the data should be made public. Two Winston Churchill quotes during today's session "Each crisis shouldn't be wasted". Get on the panel, get on the platform, the event platform, please meet the sponsors, please meet each other, please set up meetings. Please set up -- share your thoughts on social media, #climateactionlive. Session 2 of Part 1 is going to take place in about half an hour's time. Bear with me. I'm going to give you a sneak preview of what's going to come up shortly. First, we'll have the last panel of today, the future of sustainable finance and responsible investing in Europe post pandemic. What does it mean for capitalism in 2021 and beyond? Greening and inclusive recovery in times of debt distress. Then we're going to have climate leaders' insights presented by LFTE on how to measure positive impact directing capital to companies making a meaningful contribution to UN SDGs. And then the concluding part of Part 1, we're going to hear from Marion Folksted, who, of course, is the Secretary General of the European Investment Bank on financing the transition to a net zero carbon society and examining the investments required and challenges to reach 2050 climate goals. We've got about 0.5 hour break, please engage, please tweet, please connect. That is what -- that's what this is all about. Don't miss out. Join us after the break. We'll see you at 12:15 BFT. Don't go anywhere. I'll see you in about half an hour's time.