Giving meaning to one’s savings, investing in projects that are profitable but also beneficial to the planet and to society in general, is a dream that is becoming a reality. For an individual, the challenge is to sort the wheat from the chaff in order to meet his or her financial and responsible investment objectives. The keys to navigating the world of new investments.
Should we believe in the promises of socially responsible investment (SRI)? Only a few decades ago, the idea of reconciling economic performance with social and environmental impact aroused sceptical smiles rather than enthusiasm. But what seemed totally incongruous is now being translated into very concrete advances. The world of finance has taken hold of so-called “extra-financial” criteria, and this is only the beginning. So-called “responsible” savings and investment products meet new standards. In just a few years, this strategy has gained a prominent place in French people’s portfolios: at the end of 2019, responsible approaches accounted for 36% of assets under management in France, according to the French Financial Management Association (AFG).
Responsible investment now takes many forms. Life insurance policies, for example, have been required to include at least one SRI-labelled fund in each policy since 1 January 2020. Employee savings funds, retirement investments… But real estate funds such as SCPIs are not left out. What do they have in common? Taking into account criteria that are not financial in nature.
Environmental and social criteria
Although there is no precise standard for these criteria, they are generally classified into three categories: environmental, social and governance (ESG). “On the environmental side, criteria related to the portfolio’s climate trajectory, CO2 emissions, waste or water management are all agreed. For the social aspect, it will be above all respect for human rights, employment and gender equality,” explains Grégoire Cousté, General Delegate & Secretary General of the Forum for Responsible Investment (FIR).
“According to an Ifop survey for FIR and Vigeo Eiris published in September 2020, six out of ten French people attach importance to environmental and social impacts in their investment decisions.”
As for governance, it encompasses issues such as fiscal responsibility, business ethics or fair pay. “Governance serves the other two pillars,” explains Alix Faure, AFG’s director of responsible investment. In addition to these extra-financial criteria, there are often sectoral exclusions, such as tobacco, coal or controversial weapons, which are now widely applied.
Shareholder engagement
But responsible investment is also a question of commitment. This notion is at the heart of the practices of financial players, who can formalise dedicated policies, for example, labelling their funds. “Commitment means exerting positive and constructive pressure on the company,” summarises Grégoire Cousté. It can take several forms, such as voting at the general meeting and dialogue, which consists of a bilateral discussion between the management company and the company to determine areas for improvement or to change certain practices.
This desire to change things is reflected in the evolution of the product offering: “Savers want to give meaning to their savings, but they also want it to be measurable, hence the rise of thematic funds and then impact funds,” analyses Alix Faure. According to an Ifop survey for FIR and Vigeo Eiris published in September 2020, six out of ten French people attach importance to environmental and social impacts in their investment decisions. A trend that professionals have understood well for Grégoire Cousté, who assures us: “In the long term, SRI is destined to become 100% of the market. “
The objective has a good chance of becoming a reality, which should also increase the demands of investors in this area… the SRI revolution has only just begun.
Source: Les Echos, Camille Prigent, le 14 juin 2021.
Link to the article: https://www.lesechos.fr/patrimoine/placement/placements-donner-un-nouvel-elan-a-son-epargne-avec-linvestissement-responsable-1323249