FRR 2016 ANNUAL REPORT32
THE FRR, A RESPONSIBLE INVESTOR The FRR excludes the tobacco industry
Tobacco is responsible for six million deaths a year worldwide, and generates considerable costs for healthcare systems and insurers. In response, the World Health Organization, gov- ernments and civil society are increasingly com- ing together to discourage tobacco consumption, and this could eventually weigh on these com- panies performance. The FRR also believes that dialogue with these companies cannot achieve anything, as the only question that can be asked of them is to quite simply give up their business. This is why the FRR decided to exclude the tobacco industry from its portfolio at the end of 2016.
The FRR provides information on the carbon footprint of its equity portfolio
The FRR calculated the environmental footprint of its portfolio for the first time in 2007, including the carbon footprint. The FRR has been evaluat- ing its portfolio annually since 2013. In 2016, it made a call for tenders to select a service pro- vider that could assess its emerging and devel- oped market bond and equity portfolios environmental footprint for the next three years. The study covers emissions generated through companies and their direct suppliers business. S&P Trucost Ltd was selected to measure this footprint.
The FRR has chosen to measure its carbon foot- print using two complementary methods: in terms of capital and revenue. The carbon foot- print in capital terms, calculated in tonnes of CO2 equivalent per EUR 1 million invested, rep- resents the amount of emissions financed by the FRR s assets, whereas the carbon footprint in terms of portfolio revenue, obtained by divid- ing companies annual CO2 emissions (in tonnes) by their annual revenue in millions of euro, also shows the efficiency of the companies in which the FRR is invested. Within the latter measure, the FRR also distinguishes between the sector effect and the asset selection effect within each sector, relative to its composite index.
Method using revenue (t CO2 e / EUR 1 million of revenue)
Composite index FRR s portfolio
End 2013 End 2014 End 2015 End 2016