Name La Française
Signatory type  Investment manager
Region of operation Europe
Assets under management €50bn
Name of fund Carbon Impact Euro
Sector All
Geography Eurozone
Asset class Equity
Environmental objective Mitigation and adaptation
Economic activity All

La Française has been involved in responsible investment for more than a decade and our Carbon Impact product series has been a key element of our ESG investment strategy. We welcome the release of the EU Taxonomy for sustainable activities. This is a new framework we can use to demonstrate how our product series finances the transition to a lower carbon economy through mitigation and adaption. Furthermore, we believe this is a useful tool for our clients to compare green impact funds.

We selected our Carbon Impact Euro Fund, which aims to invest across the energy transition value chain: solution providers, transitioning companies and enabling companies. The investment strategy for the fund was introduced for a similar product in 2015 – well ahead of the EU Taxonomy – but is very closely aligned with its principles.

Other aspect you would like to mention?

We selected our Carbon Impact Euro fund, which aims to invest across the energy transition value chain: solution providers, transitioning companies and enabling companies. The investment strategy for the fund was introduced for a similar product in 2015 – well ahead of the EU Taxonomy – but is very closely aligned with its principles.

Taxonomy implementation

Principles, criteria, thresholds

We used a three step process:

  1. Eligibility screening:
    We screened the portfolio holdings using the new dedicated Bloomberg function {WATC EUTAX <GO>}. We believe this is an efficient way to quickly determine the eligibility of companies in the portfolio.
  2. Alignment screening:
    For companies which passed the eligibility screening we analysed their revenue breakdown to assess what proportion was aligned with the mitigation/adaptation taxonomy. This step was carried out by ESG analysts trained in the application of the EU Taxonomy and leveraged data from company disclosures (company reports, FactSet, etc.).
  3. Do not significant harm (DNSH) screening:
    This was the final screening to identify revenue that could potentially have a detrimental environmental impact. This was also carried out by expert ESG analysts leveraging existing data sources.

Do no significant harm assessment

Activity-based screening:
No more than 20% of revenues derived from fossil fuel-related activities.

Norms-based screening:
We assessed violations of globally accepted norms, in particular applying the environmental principles of the UN Global Compact (UNGC). We used a two-stage process which combined both external and internal tools:

  1. Externally, we used ISS ESG UNGC screening for environmental issues.
  2. Internally, we conducted both ad-hoc and quarterly review meetings, assessing controversies as raised by ISS ESG to identify those that required exclusion or close monitoring.

Social safeguards assessment

We followed the same approach, focusing on the anti-corruption, labour and human rights principles of the UNGC.

Turnover/capex/opex alignment

We focused on turnover, making use of company disclosures, as there was a lack of information on other metrics to make meaningful assessments across all eligible portfolio holdings. Even at the revenue level it was sometimes hard to identify reliable information, because companies had not made disclosures that matched the taxonomy.

We did not set a specific threshold of eligible revenues for companies to be included in our subsequent assessment of alignment of green activities. However, we decided that companies that derived more than 20% of revenues from fossil fuels were non-eligible, as in our view this indicated that they were excessively harmful to the environment and did not satisfy the DNSH requirement.

Additional comments

At a portfolio level we decided to aggregate green revenue shares (aligned with the EU Taxonomy for sustainable activities) through a weighted average, using the weight in the portfolio.

We found that the assessment tool only partially supported the process, with some companies, which we are confident to have taxonomy-eligible revenues, being excluded. We suspect enhancement of data sources would be helpful in enabling better coverage in the run-up to the first investor disclosure cycle at the end of 2021.

Alignment results

The stocks in the Carbon Impact Euro fund were selected because of their positive climate impact throughout the value chain. We developed a range of tools aligned with the Task Force on Climate-Related Financial Disclosures (TCFD) to conduct this assessment and therefore developed an excellent understanding of company activities and their impact on the environment.

  1. Eligibility screening:
    We reduced the eligibility universe to 17 stocks (21% of the portfolio’s value) by leveraging the dedicated Bloomberg function {WATC EUTAX <GO>}. Some 15.9% of assets were eligible through the EU Taxonomy for sustainable activities, in terms of share of revenue. This is an approximated percentage based purely on company activity breakdown and is subject to Bloomberg’s coverage constraints. Hence the importance of the next step.
  2. Alignment screening:
    This is by far the most important and the most time-consuming stage. For each eligible company, we manually researched or estimated the share of revenue aligned with the mitigation or adaptation taxonomy. This included, for example, finding appropriate carbon intensities when a carbon threshold existed. We excluded three companies as we could not demonstrate any activities matching the taxonomy requirements. We concluded that 6.2% of the portfolio was aligned with the EU taxonomy for sustainable activities.
  3. DNSH and minimum social safeguards screening:
    Of the companies flagged for potential exclusion by our screening process, we did not consider any to represent significant environmental or social threat.  However, we excluded one company on the basis of its fossil fuel-related business.
  4. Overall, we concluded that 5.8% of the portfolio was aligned with the EU Taxonomy for sustainable activities.

1. Eligibility screening

1. Eligibilty screening

2. Alignment screening

2. Alignment screening

3. Final results

3. Final results

Challenges and solutions


Identify share of revenue aligned with the EU Taxonomy for sustainable activities – particularly challenging in the construction/real estate sector.

We applied conservative estimates based on comprehensive research and analysis. For example, in the case of construction activity within the real estate sector, we had to disregard almost all eligible revenues because disclosure from the companies lacked the granularity required to assess against the taxonomy. This means our final alignment figure is likely to be lower than the actual level of aligned activities. 

Identify companies/activities that harm significantly in terms of research and DNSH.

We relied on ISS ESG UNGC screening and our internal controversy committee, which meets every quarter and on an ad-hoc basis, for this assessment.

Lack of reliable and comprehensive data (revenue) from existing sources. This makes integrating the EU Taxonomy assessment into the reporting process very inefficient.

Third-party data providers have not yet developed an appropriate dataset. As we did not identify an external solution, we conducted in-house assessments relying on sell side research where appropriate. 


The EU Taxonomy sets a high bar for green activities and we were initially surprised that this climate change-thematic fund was only 20% aligned with the taxonomy. This suggests that market participants need to manage expectations about levels of green activities, for both a sector-neutral fund or even a dedicated climate change-related investment strategy.

Companies are advised to assess and report alignment as soon as possible to allow data providers to systematically collect and distribute this new data. Asset management companies should plan early for this new reporting requirement given the potentially high costs in data and research.