The French Public Service Additional Pension Scheme (ERAFP) and the French Pension Reserve Fund (FRR) are engaging with environmental, social and governance (ESG) issues to enhance responsible investing and improve shareholder and bond engagement.

The funds said more investors are engaging with companies to improve their practices and develop their business models, and as a result, there is a growing need for transparency and assessment of the impact of these efforts.

To address this, a group of institutional investors, asset managers, and academics - backed by the Forum for Responsible Investment (FIR) - have created a method to evaluate the effectiveness of these engagement actions.

The project led by ERAFP and FRR, with support from responsible institutional investors, Malakoff Humanis, and Mutuelle assurance des instituteurs de France, aims to develop tools for institutional investors and asset managers to track, measure, and report on their engagement with companies.

These tools will also help to standardise how engagement is measured, fix the disparity of definitions and objectives, and address the challenges of demonstrating its real impact.

The group said these tools will help mitigate the risks of engagement washing, facilitate asset manager selection, and improve monitoring and resource allocation within the involved entities.

The pilot group will initially focus on listed markets (stocks and bonds) and ESG initiatives aimed at influencing companies.

The project will be done in stages, starting with the launch of the pilot group in February 2025, followed by a consultation on the first version of the deliverable in Summer 2025 to FIR members and all other relevant stakeholders. In Autumn 2025, the group will integrate feedback from the consultation and finalise the method.

Commenting on this, ERAFP socially responsible investment manager, Pierre Devichi, said: “Engagement is an essential lever for enabling responsible investors to exert influence on the real economy.

“Its measurement and evaluation unfortunately remain difficult, particularly due to a lack of common terminology and practices.

“The creation of this working group and what it intends to provide represents in fact for ERAFP a real response to these issues: it will make it possible to overcome these difficulties, to evaluate the practices in place, and ultimately, to promote better commitments."

Adding to this, FRR head of socially responsible investment, Mickaël Hellier, said its objective is to define evaluation criteria for the engagement action to arrive at a “concrete” result, usable in its calls for tenders and fund selections, but also to monitor and deploy best practices in this area.

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