As chief executive officer of ERAFP, the influential mandatory public service scheme for some 4.5m French civil servants, Philippe Desfossés is perhaps most notable for his unwavering commitment to ensuring the continued growth of its SRI strategy. This has led in the past couple of years to the adoption of an extensive climate change risk policy. His role as vice chair of the Institutional Investors Group on Climate Change (IIGCC) underlines his influence in this area – internationally as well as in France.

 

In 2017, ERAFP joined Climate Action 100+. This is a five-year initiative, partly co-ordinated by IIGCC, encouraging investors to engage systematically with significant greenhouse gas emitters and other companies in line with the United Nations’s Paris Agreement on climate change. The investors are calling on companies to improve their governance on climate change, curb emissions and strengthen climaterelated financial disclosures. The fund also joined PRI-led engagements on tax and climate change transition for oil and gas.

 

Within ERAFP, Desfossés’s work in this area translated into several key refinements of its ESG and carbon footprint management. Based on the analysis of several specialist consulting firms, it was able to apply its carbon footprint reduction strategy to private equity, real estate and infrastructure mandates. This means the proportion of the scheme’s assets that are now covered by carbon footprint measurement totals 95%, up from 89% in 2016.

 

But this was not the only area of expansion for ERAFP’s climate risk management in 2017. The fund’s public report includes information on its corporate bonds and equities alignments based on the sectoral decarbonisation approach (SDA) methodology, which seeks to limit corporate carbon emissions to achieve a 2°C maximum increase in global temperatures. This information comprehensively takes account of the fund’s energy mix, energy transition, green engagement activities and investments, and reduced emissions levels in its portfolios.

 

ERAFP’s guidelines for shareholder engagement to cover the full spectrum of its investments and its ESG responsibilities were originally implemented under Desfossés’s leadership. These are updated yearly and define the priorities for the scheme for the coming year. In 2018, the priorities were:

 

In addition, this year’s revision of ERAFP’s SRI charter has allowed it to adopt measures to track various ESG criteria weights within different sectors. The dynamic best-in-class approach that the charter promotes has also become more efficient, with improved in-depth monitoring of controversial issues and more resolute shareholder engagement. Furthermore, ERAFP has begun working on aligning its ESG ambitions with the UN’s Sustainable Development Goals (SDGs), with the first step being board training in 2018.

 

ERAFP’s next priority is to increase the positive impact that its comprehensive SRI framework has on the French economy and society. The first wave of investments are holdings in SMEs, including renewable infrastructure and affordable housing for public sector employees.

 

Aside from ESG, another notable area of achievement for Desfossés at ERAFP in more recent times has been its diversification into assets that were previously off limits. One key asset class is real estate. Work on this portfolio has seen its value more than double in the past two years from €980bn at the end of 2015 to €2.1bn at the end of June 2018.

 

As Desfossés leaves ERAFP in December, there can be no doubt that his significant achievements and guidance have allowed the giant public scheme to become a leader in the development and implementation of comprehensive active ESG policies and carbon footprint management.