Éric Tournier, Fund Manager at CMG Monaco (Société de Gestion de CMB Monaco), discusses the challenges of sustainable finance in the Principality and the project to map ESG practices led by the Monegasque Association for Sustainable Finance (AMFID). Between European regulations and Monégasque specificities, he deciphers the challenges faced by financial institutions and possible avenues for development.
What is your role at CMG Monaco?
I have a long experience in fund management, particularly in the environmental field since 2006. Gradually, this interest in environmental aspects led me to look into ESG regulations, and when they emerged, I naturally took charge of these subjects for CMB Monaco.
Today, in addition to my role as fund manager, I am the bank's ESG representative. My job is to integrate ESG issues into all of CMB Monaco's activities, including, for example, portfolio management, risk control, particularly with regard to loans granted, monitoring of regulations, but also through a carbon footprint of day-to-day operations. I work with our parent company, the Mediobanca Group, to implement in Monaco many of the ESG measures developed at the group level.
You are involved in a project to map ESG practices in the Principality. Can you explain this initiative to us?
The project, led by AMFID, focuses primarily on the environmental aspect of ESG. However, we are not forgetting the other dimensions, even if it is true that the social and governance aspects have already been the subject of numerous regulations.
An initial questionnaire on these practices was carried out four years ago by the AMAF. Today, we are repeating the exercise by asking more specific questions to banking institutions and management companies. The objective is in particular to assess the impact of European ESG regulations on Monegasque financial players and to analyze how these institutions take these issues into account in their activities.
The questionnaire addresses several key points:
- The implementation of ESG policies within institutions;
- The integration of ESG risks into overall risk management;
- The marketing of ESG products;
- Training and raising awareness of these issues among employees.
Is this questionnaire being sent to all credit institutions and management companies operating in the Principality?
Yes. The aim is to measure the extent to which they take ESG issues into account and to see if a common framework of good practice can be defined.
Monaco does not have specific ESG regulations. This is an opportunity, because it avoids certain biases observed in other countries, but it also means that each institution adopts its own practices. The idea is therefore to develop a pragmatic and effective approach that is tailored to the Monegasque context, without creating new regulatory constraints.
The questionnaire will help identify existing initiatives and promote the emergence of a common foundation of responsible practices. The idea is to gradually adjust local practices without coercion, but by encouraging financial players to adopt virtuous approaches.
What is the response rate to the questionnaire?
To date, around 50% of institutions have responded, which is a good start, and the response to the questionnaires has been extended until the end of January. The challenge was also to reassure institutions about data confidentiality. That is why we have entrusted the management of the questionnaire to a firm of experts.
What are the main differences between banks and management companies in terms of ESG?
Banks often have greater structural support thanks to their parent companies, which are generally subject to European regulations. They have the financial and human resources to develop ESG policies consistent with those applied within the European Union. In Monaco, although banking institutions do not necessarily have a fully-fledged ESG department, they are aligned with the directives of their groups.
On the other hand, Monegasque management companies, which are not always anchored in an international group, are less subject to ESG constraints. However, many of them propose and manage Luxembourg or Irish funds, and as such, they are indirectly subject to European regulations through these structures.
What are the main ESG risks identified for banks and management companies in Monaco?
There are several types of ESG risks:
- Reputational risk: Banks and management companies must be careful not to exaggerate their ESG commitments in their communications. In Europe, regulators are actively fighting greenwashing. An institution that overemphasizes its ESG commitment without solid justification exposes itself to sanctions and a loss of customer confidence.
- Physical risk: Financial institutions are beginning to integrate climate-related physical risk into their analyses, particularly with regard to real estate. In Monaco and the surrounding municipalities, banks are now collecting data on the energy performance of the properties they finance and anticipating the climate risks that could impact these assets.
- Transition risk: This is the risk associated with the regulatory and economic changes imposed by the transition to a more sustainable economy. Some industries are particularly exposed, and banks must assess how these transformations may impact their financing and their clients.
- Liquidity risk: This may arise if clients heavily exposed to climate risk areas suffer significant losses, which could lead them to withdraw funds en masse to refinance their activities elsewhere.
Can Monaco draw inspiration from other financial centers to improve ESG risk management?
Absolutely. We have already held discussions with stakeholders in Luxembourg and we would like to deepen our discussions with Switzerland. Switzerland has characteristics that could be a source of inspiration for the financial center. In particular, we need to find a good balance between the requirements of sustainable finance and the reality of the institutions in the Principality by adopting a pragmatic approach.
For example, rather than imposing complex ESG questionnaires on clients, a simplified approach could be considered: asking two key questions – do you want an ESG allocation? If so, at what level (20%, 50%, etc.) – and defining a clear method of asset selection. This would make it possible to reconcile transparency, efficiency and simplicity.
Any final words?
We still have some work to do to finalize this study, but we hope that this initiative will help structure sustainable finance in the Principality. It is not a question of imposing unnecessary constraints, but of supporting institutions in a pragmatic evolution adapted to the Monegasque context.
