socially responsible investment (SRI) in the service of the objectives of sustainable development becomes a reality.
Ignore sustainable development issues is no longer an option. “We produce more than nine billion tonnes of CO2 per year, while the planet can absorb only five,” says Sebastiaan Masselink, manager Actiam, Dutch leader of responsible investment, with 57 billion euros of assets.
As to him, 61% of investors in the world to incorporate criteria of environmental, social and governance (ESG) into their strategy, first of all for the sake of financial return (48% of them), according to a recent study published by the HSBC bank.
A legal requirement
In France, the taking into account of the sustainable development goals (SDGS) has even become an obligation for management companies and most of the financial institutions under article 173 of the law of energy transition 17 August 2015. According to the article L533-22-1 of the French monetary and financial code, created by this act, management companies, insurers and pension funds should inform their clients of “how to take into account in their investment policy criteria relating to the respect of social objectives, environmental and quality of governance”, the famous ESG criteria.
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“The decree is entered into force last year, and the supervisory authorities have started to apply to management companies and insurers in their reports this year,” explains Olivier Johannet, founder of The Responsible Financial. This obligation of information and display nourishes a healthy rivalry between institutions and insurers to better take account of the SDGS to the UN, the 17 sustainable development goals adopted by 193 countries in 2015, and reinforced by the Paris agreement on the climate the same year.
La Banque Postale Asset Management is committed to being 100% SRI (socially responsible investment) by 2020. In the clear, everything she will propose will be SRI. The Caisse des dépôts, CNP, AXA, and Generali, or Mirova, among others, have renounced any investment in coal.
SRI is also becoming a reality more believable to individuals. The organic products are commoditized, electric vehicles or less polluting to have the favor of consumers, the recycling and the energy savings are on everyone’s minds, both for the sake of economy, to preserve the environment. Therefore, for their investments, more and more investors want their money to be managed in coherence with these values, and that their investments contribute most to achieve the SDGS that away from it. The managers of SRI funds are well understood. “The fish that you have in your plate is both healthy and sustainable because it has a much better carbon footprint than meat, even if we prefer the salmon fish farms of Bakkafrost in Norway,” explained Alex Zuiderwijk, the fund manager NN European Sustainable Equity, which has invested in shares of Bakkafrost, at a luncheon in June with French investors.
on the performance Side, the experts are no doubt more that the superiority of the ISR is needed as evidence in the long term. But this still remains to be proved. So far, the oil companies were more profitable for their shareholders than the producers of renewable energy, but the turning point would be at the corner of the street. “The technological progress and decreasing costs, continuously improve the productivity of renewable energy sources and their adoption in mass will trigger a disruption of god”, predicts Sebastiaan Masselink. It is estimated that the fall in the price of purchase and use of electric cars and autonomous vehicles could eliminate the market for gasoline-powered vehicles, new or used, reducing the oil consumption by 2 million barrels/day in the world by 2024.
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labels become
today, investors can invest in hundreds of SRI funds. But which to choose ? If the socially responsible management is more credible, it has not always been the case.
three years ago, three-quarters of the funds (74%) highlighting their dimension ISR does not provide information accurate enough to verify the reality of their commitments, according to a survey by the financial markets Authority (AMF) published at the end of 2015. Since then, the situation has improved, notably with the regulatory obligations and the development of the labels.
The Committee inter-union of employee savings (CIES), composed of four trade unions (CFDT, CFE – CGC, CFTC, CGT), was the first proponent of the social responsibility of enterprises to create a label ISR, as of 2002, for the mutual fund business (CIPF). It now covers a dozen lines of CIPF available in the savings plans and inter-company.
another label ISR, created in 2016 by the ministry of finance, today composed of 149 fund manager 41 billion euros (appointed lelabelisr.fr), while the label Energy Transition and Ecological Climate (TFFC), carried out by the ministry of the ecological transition and supportive, does that 22 funds.
Not easy to find. “For clarity it would be necessary to bring these labels around a common base,” says Philippe Zaouati, president of Mirova, one of the leaders of the SRI in France, managing nearly 10 billion euros.
investments more or less risky
If the ISR can contribute to the objectives of sustainable development, the SRI investments present many risks that the other, depending on the types of funds involved. On almost 900 fund of this type identified in the database Quantalys, the performance varies very strongly according to the categories. The SRI funds invested in equities following the fluctuations, upward and downward, of the markets in which they are invested, the more successful in recent times in the United States than in Europe or in France. Even the SRI funds in bonds may decline in the event of a crisis on bond. There are also SRI funds profiles ranging from the least risky (cautious) to more risky (aggressive) according to their proportion of shares.
For investors convinced by the socially responsible investment, the first step is to check the offer of their bank or intermediary in this field. Almost all institutions now offer ranges of SRI funds, in particular in the context of insurance contracts-life multi-media. Those online brokers or advisors in wealth management are often more open than the banks. Beyond costs and performance, socially responsible investors will be attentive to the quality of the information on the ESG criteria of the investments selected.
Among the specialists of the ISR, Ecofi Investissement publishes on its website Ecofi.fr a report of the rating of each title on the environmental, social and governance, with the bonus of a “key Ecofi” on four complementary criteria (balance of power, customer and supplier relations, fiscal responsibility, equality of opportunity). This “reporting SIR” indicates overall ESG grade of each company in the portfolio, and even his “level of controversy”.
Adhering to the principles for responsible investment (PRI) of the united nations, Lazard select its investments from among the companies benefiting from an extra-financial rating agency Vigéo, which Lazard assigns an overall score (overall rating) according to its own calculations (40% hr, 30% environmental, 10% relationships customers/suppliers, 10% societal commitment, 10% human rights). Sycamore, an independent company which was recently acquired by Generali, indicates a “footprint ESG” overall for each fund, with its ‘carbon footprint’, measured in tonnes of CO2 equivalent per year per million euros invested, a common measure in finance. And Mirova, indicates on each fund its contribution to global warming compared to that of the stock market index to which it compares.
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of Course, there is an urgency to the climate, and the current focus on the environment relieves the planet. But the ISR is not restricted to ecology, and some argue that governance is a criterion even more essential to build a sustainable economy. “A company with a good governance can deal with its social problems, or environmental, while those with a poor governance, not only the problems remain, but they are often hidden,” says Ajit Dayal, founder of Quantum Advisor, a management company india expert in governance issues. The margin of progress remains immense.