Socially responsible investing, where SRI, is a way of investing that consists of taking sustainable development issues into account when making investment choices.
Responsible investment remains a very broad and subjective topic, it is the French Association of the Financial Management (AFG) which brings in 2013, a precise definition of the SRI:
“SRI (Socially Responsible Investment) is an investment that aims to reconcile economic performance and social and environmental impact by financing companies and public entities that contribute to sustainable development regardless of their sector of activity. By influencing the governance and behavior of actors, SRI promotes a responsible economy. “
Historically, it is the Catholic Church that puts in place the first forms of ethical investment. First in the United States and then in France in 1983 with the Crédit Coopératif launched by the Catholic Committee against Hunger and for Development (CCFD) which donates part of the income to the creation of businesses in the third world.
Beyond the ethical aspect, socially responsible investment also aims to be more efficient by raising investors’ awareness of social and environmental factors. This would help to better understand the risks and benefit from better management.
The goal of SRI is simple. By encouraging retail investors and portfolio management companies to take environmental and social criteria into account in the selection of their financial assets, SRI promotes a sustainable and environmentally conscious economy.
It is generally considered that there are 4 forms of socially responsible investment:
Globally, the Global Sustainable Investment Alliance (GSIA) publishes a report every two years on responsible investing worldwide. The 2017 report indicates that responsible investments reached $ 22,890 billion in early 2016, a figure that has increased by 25% since 2014!
This increase is directly linked to a general awareness of the issues related to global warming but also to better global governance. Indeed, several international agreements, such as the April 2006 United Nations, codify SRI. The “Principles for Responsible Investment” (PRI) for example, are six in number and constitute the basic principles to which investors can refer if they wish to integrate more ethics into their investment policy.
Today, the success is such that we consider that SRI represents a market of more than 746 billion euros in France. SRI methods vary from country to country. In France, for example, it is largely the ESG selection approach that dominates whereas in Northern Europe, exclusion funds are much more widespread.
To verify and certify investors’ social and environmental commitments, there are specialized labels and rating agencies.
In France, there are two labels:
Non-financial rating agencies , on the other hand, rate companies according to the impact of their actions on the environment and their social policy. These notes are then used by SRI fund managers. They allow to have a systematic analysis of the companies, a traceability of the methods used, as well as a history of the evolution of the rating of a given company.
These agencies were created in the late 90s and now have around thirty players located in Europe, North America and Asia. To bring this rating to light, each agency proceeds in its own way. They can either analyze public documents, make questionnaires or go directly to the heads of companies.
Internationally, agencies have formed partnerships with companies that produce stock indexes (such as FTSE Group or Dow Jones). This allows them to create new stock indexes that take into account social and environmental criteria. The Dow Jones Sustainability Indices (DJSI) for example is based on notes provided by a Swiss appraiser and takes into account these selection criteria.
In France, the main rating agency is Vigeo and its stock market index is ASPI Eurozone.
Even if the comparison of all eco-responsible funds is difficult, the question of whether SRI is as good as another type of investment is recurrent.
First of all, whether they are invested in equities or bonds, we must always bear in mind the specificity of SRI: its dual financial and extra-financial selection.
In 2007, a study entitled Demystifying Responsible Investment Performance was published by UNEP-FI. This study confirms that taking into account extra-financial criteria reduces certain risks (related to reputation or regulation for example) while tending to slightly improve the financial performance of investments.
As far as taxation is concerned, there is no special tax advantage in France linked to the subscription of SRI funds. Eco-responsible or ethical investment is therefore above all a choice linked to one’s personal convictions.
Learn more about the performance of socially responsible investing (SRI)
SRI funds are marketed by portfolio management companies. The regularity of the decisions of Undertakings for Collective Investment in Transferable Securities (UCITS) is controlled by these companies which set up specific control systems, by creating, most of the time, an extra-financial analysis unit, or even a company. fully dedicated to SRI.
It is possible to subscribe to eco-responsible funds in a life insurance , a title account or even a PEA. However, depending on your bank or your broker or advisor , the offer may be reduced to a few funds.
At Nalo, we have from the beginning wanted to make a socially responsible and environmentally conscious investment possible. By investing with us, you can choose an eco-responsible investment portfolio composed of SRI index funds, with ESG-compliant funds on the one hand and thematic funds on the other. renewable energy and water treatment.
These investments are made in a life insurance policy to take advantage of reduced taxation .