CRO Wisdom Episode 20: Fanny Charrier, Crédit Agricole CIB – Part 2

Atul Vashistha:

Fanny, we’re seeing that the UK is mandating climate-related disclosures. I’m seeing this conversation about 25 different countries that are looking to adopt it.

And as you know, the SEC recently asked for comments from the industry about greenhouse gas emissions reporting, particularly for companies that are public or any that have announced any particular goals. Talk to us about that specific ruling and in terms of companies’ preparedness and your thoughts on expanding those kinds of disclosures.

Fanny Charrier:

Of course. So it’s a significant step, and I want to thank the SEC and all the investors who provided comments. It’s a great step to help with the standardization of looking at all the sustainability-related risks as a material decision factor for investors and debt holders to actually make their decision to invest in this company. What the SEC did is very interesting, so to take a step back, some will say it’s too much.

Fanny Charrier:

And most of us are saying, it’s great, but it’s really not enough. So what they’re saying is they’re starting with the companies with the large filers, will have by certain date and time, and they’re giving a lot of times for companies to put them in place, to disclose their Scope 1 and Scope 2 greenhouse gas emission. And for those that have goals around Scope 3, or if Scope 3 emissions are material, they need to actually disclose that as well. Only if it’s material to their business or if they have targets.

Fanny Charrier:

So that’s the first step. There are also two other factors, which is the companies will have to disclose their transition risk. And so that’s very interesting because basically, that’s a first step in the right decision where companies will have to analyze not only how the environment impacts their business, but how their business impacts the environment.

Most of our emissions are Scope 3 emissions, which I think is very important. And I think the ESG and all sustainability people are saying we need more. “What about water? What about waste? What about on the social side?”

Fanny Charrier:

And all that, how regulation will play a role in making their business evolve. So you think about, I cover the automakers and so when you look at California regulation and the obligation of reducing emissions for cars, this has a huge impact on the business and actually helped drive the electrification of the vehicles. And so we are starting to see the EV revolution within a lot of companies, and this is a mix of just market evolution, but also regulatory evolution. Companies will have to start looking at and analyzing this risk.

Atul Vashistha:

Yeah, Fanny, I totally agree. I think this is absolutely a step in the right direction. I was noticing, as an example, that Scope 3 disclosures are actually really important. When you look at somebody like Apple, less than 1% of the greenhouse gas emissions of Apple is Scope 1 and Scope 2. 99% is Scope 3. and 90% of Kraft is Scope 3. And it’s all because of the whole outsource globalization third-party supplier model being created. So your point about that Scope 1, Scope 2, good, Scope 3, if it’s material, which in Apple’s case, guess what, the 99% or in Kraft’s case that 90% is going to be very material.

Fanny Charrier:

Or financial institution. I mean, most of our emissions are Scope 3 emissions, for sure. And there’s Scope 3, which I think is very important. And I think the ESG and all sustainability people are saying we need more. “What about water? What about waste? What about on the social side?” But I think change takes time, and it’s the first step. I think the other factor of evolution will be on the shareholder side. And thanks to that, we see a lot of change. I think one big thing to look at is the IFRS partnership with SASB, and they are currently working on a metric to standardize them and to make sure we all report the same data with the same unit. That would be a great start. And so hopefully, that will impact the landscape positively, but it’s hard for companies. And I think it’s important to mention that.

Atul Vashistha:

Yeah, so Fanny, I just want to reinforce two things by the audience that you said. So, the IFRS is a standard that over 25 countries have said that they will adopt including the US. So IFRS for the audience. The second thing I want to reinforce is, that when Fanny and I are talking about Scope 3, we’re literally talking about the supply chain. So that it just shows the importance of your supply chain and maybe the third piece, Fanny, that I’d like you to comment on that you just brought up is, while Fanny and I started this conversation initially talking about climate change, greenhouse gas emissions, being green, the reality is this movement is much bigger. This is about ESG. So Fanny, talk to us about just even outside of the kind of climate change; what are you seeing? What are you hearing in terms of trends around E or S, or G?

Fanny Charrier:

Of course. So I think the trend we’re seeing starts with the E. And that’s important just because it’s easier to measure. So it starts with Scope 1, and Scope 2, because that’s what you can control. Then it’s trickling to Scope 3, and it’s very hard. We are in the process of calculating our, not calculating, but developing a strategy to reduce our Scope 3 emissions. It’s very hard. We don’t control our clients’ emissions. We have to say, we can decide to exit or stay in a relationship, but it’s very hard to influence that.

It starts with the E also because it’s something you can quantify more easily than on the social and governance side. I think it’s important. And a lot of people are uncomfortable with that, but there are a lot of studies that are out there; it’s not always a judgment call. We know what is the right thing to do.

Fanny Charrier:

And then you have all the other things which are, as I said, you have water waste, those are trends people are looking at that as well, energy efficiency, that’s for sure. And then on the social side, I think social, it’s a little bit tricky, and the push is going to come from the US because there is a real awareness that diversity, women, but also people of color, are important to build your business, to grow, and for long term profit. But you also have other metrics, turnover is an important metric as well that people are looking. And on the governance side, I think more and more, the trend we’re seeing is having a compensation link to ESG targets. So if I have to highlight the main theme in all three categories, I think it would be that.

Atul Vashistha:

Yeah, Fanny, very good point. I think you did a good job highlighting the S and G part of it. And I think the reinforcement that I want for the audience is, just as SEC will very likely ask for disclosure on greenhouse gas emissions, so a lot of the E part of it very clearly, we’re seeing movement in some cases, for example, the state of California, we’re seeing movements in Germany and other places where greater disclosure on your social, basically diversity, equity, inclusion practices, your governance practices, and then from E perspective, going beyond greenhouse gas emissions too, where are you? Are you doing business in what is stress environments and others? So disclosing a lot of that board for yourself and your supply chain is very clearly going in that direction very much.

Fanny Charrier:

Yes. And I just also want to add, that it starts with the E also because it’s something you can quantify more easily than on the social and governance side. I think it’s important. And a lot of people are uncomfortable with that, but there are a lot of studies that are out there; it’s not always a judgment call. We know what is the right thing to do. Something is just a little bit harder, and it becomes a little bit political, but there is some on the social side also. You can find some key metrics to achieve, 50% women and men, people of color in line with the US population. They’re saying very easy ways to know what your targets should be.

Atul Vashistha:

So Fanny, let’s go to the measurement for a little bit. And then, I want to come back to a few other topics related to this. Many different frameworks, right? Some people kind of look at that and go, SASB, GRI, TCFT, talk to us a little bit about frameworks out there, and do you see any consolidation or standardization in kind of like in the future?

Fanny Charrier:

Yes. I mean the needs, and I’m not saying anything groundbreaking here, but the need for standardization is there, or it won’t go anywhere. But I think if we take the Scope point and Scope 2, as an example, people started by looking at intensity. You had those that said, well, it should be absolute. What gas should we include? What should we not include? And I think we all came under the science based target initiative, being the relevant institute to validate the method of calculation first, and second, what is ambitious, which is in line within 1.5 degree scenario. So I think as we go and as people are trying different things, and I think it’s important. Companies should try different things, even if it’s not the right way to report a metric, you just start and then you look, it doesn’t work, you adjust and I think that’s what people did for Scope 1 and Scope 2. And then, as more companies are reporting in different manners, people will discuss and conclude. But the partnership to look at is the joint venture between the IFRS and SASB, and I think that the institute will end up helping with the standardization of which metrics should be reported and what’s the right units.

Atul Vashistha:

You know, Fanny, to your point, it’s very similar to the conversation that I have with customers with large institutions is take a look at the standards because it’ll help you decide which stakeholders you want to target your ESG activities towards. It’ll also help you decide what goals you want to have, which is what do you value? What is it that you love, so you’re willing to put your money and effort behind it. And then, as you experience it, you can start setting targets and where you want to get to.

Fanny Charrier:

Yeah, absolutely. That’s what I started in the loan business; what we do or the bond business we look at comparables. So we look at all your competitors and see what pricing there are depending on the credit profile. And I think it works the same way for sustainability. With one thing in mind is that we have a need, for example, in climate, to make sure the temperature rise does not increase by more than 1.5 degrees Celsius, or we know the consequences are terrible, and we have to do it. The issue I have sometimes is, what about the other metrics? Do we really run into a catastrophe if we don’t have 50% of women on the board and in a leadership position? I think companies will not succeed in the long term, or they will, but not as much as they should, but it’s hard to prove that when you do the right thing, what would the consequences be if you had not?

Atul Vashistha:

Yeah. I think time will tell, but you know, there’s been tremendous examples of social discord, leading to an enormous amount of instability and supply chain disruption.

Stay tuned for more from the conversation…

Speakers

Fanny Charrier


Corporate and Leveraged Finance and Sustainable Finance Coordinator

Crédit Agricole CIB

Fanny Charrier is a Director in Crédit Agricole CIB’s Corporate and Leverage Finance (“CLF”) group, primarily covering the loan originations and syndication of the Chicago portfolio including U.S. automotive, healthcare, agricultural, semi-conductor, engineering & construction and telecom sectors. As Sustainable Finance Coordinator, she manages the origination and syndication of sustainable financings within the U.S., liaising with the global sustainable banking team to facilitate the structuring and placement of ESG-related loans & HY instruments including Ford’s US$15.5bn sustainability-linked revolving credit facility that was named “2021 North America Loan” by the International Financing Review (“IFR”) and “2022 Americas Loan” by the Banker. She is also the primary point of contact for the integration of the Net Zero and energy transition strategy within the CLF team.

Atul Vashistha


Chairman & CEO

Supply Wisdom

Atul is the Founder of Supply Wisdom & Neo Group, and is also the visionary behind the GBSBoard and RiskBoard. For more than 21 years, Atul and his teams have worked with nations and corporations to leverage global talent, big data, automation and other technology mega-trends to accelerate new capabilities, increase resiliency, mitigate risks and enable better corporate and societal outcomes. Atul Vashistha currently serves on the boards of Shared Assessments and IAOP. Atul had the distinguished honor of serving on the US DoD Business Board for over 12 years, including as former Vice Chairman from 2018-20.

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