Qu’is the’Socially Responsible Investment SRI ?
Associate social responsibilities where CSR a sustainable business with the ESG criteria translates socially responsible investment. What does this form of investment really mean and how does it manifest itself ?
What is Socially Responsible Investment SRI? ?
L’socially responsible investment is part of the policy of every sustainable company. To do this, it puts into practice the ESG criteria (environmental, social and good governance) as well as its CSR (corporate social responsibility). Each company must then combine its financial management with environmental actions.
From a historical point of view, this form of investment has its origins in the Anglo-Saxon society of the 18th century. A practice that is also visible in the United States in the late 19th century. During these eras, SRI was initiated by the religious community.
This prohibits its followers from investing in any form of alcohol, weapons and tobacco.
Nowadays (in the modern economy), this SRI is available at banking institutions criteria in the form of investment funds. The management of the latter includes environmental or social elements. This is another way of integrating sustainable development into the world of finance.
Among the criteria selected, we can cite the respect of the environment and the employment policy.
In Europe, socially responsible investment is a small fraction of the total 10% of the asset management. These are all the rights and assets that a company owns. Among other things, this includes patents, business assets and buildings.
Despite this small percentage, this form of investment is constantly growing.
Experience has shown that this practice has allowed many companies to cope with crisis situations. It is a good guarantor of your investments.
What are the forms of SRI ?
L’socially responsible investment can take several forms, including :
The ESG funds are bond and/or equity portfolios. These include governance, environmental and social criteria in their investment processes. In other words, bonds and stocks have been subjected to drastic tests.
It is the principle of a sustainable company in order to assess the sustainability of its activity.
To be included in the ESG funds, the securities in question must hold extremely high sustainability ratings. Companies that do not recycle or that are polluting are not included. An establishment with a failing management is also excluded from these ESG funds.
The use of these funds at the time of the selection of securities makes it possible to make the right decisions. For example, the shares of a company with a low carbon footprint will be less volatile than those of a polluting company.
In short, ESG funds are analysis criteria. They will allow to take into account the development that a company integrates in its sustainable development strategy. This can include the level of transparency of executive compensation, the quality of social dialogue and CO2 emissions.
Also called the ethical investments, this is a practice that is more widespread in Anglo-Saxon countries. For religious, environmental or moral reasons, they aim to exclude certain sectors such as nuclear, arms, tobacco, fossil fuels, etc. It is a form of sectoral exclusion.
This method also aims to excluding the portfolios of companies that do not follow international conventions. In this case, we speak of normative exclusion. This is the case for countries or producers that still use GMOs in their activity.
Considered as dangerous, this product is excluded in favor of organic farming and breeding.
This is a form ofsocially responsible investment that comes from investors. They require companies to adopt a much more socially responsible policy. To achieve this, they may challenge them directly or vote at a general meeting.
L’shareholder engagement is always on the agenda of a general meeting. In any case, this is the case in some countries such as the United States. Such a requirement makes it possible to force companies to be more responsible.
This implies making more energy savings in order to reduce greenhouse gas emissions.
When the dialogue is unsuccessful, the investor can resort to different means of action levers. For example, it can make engage a public communication to describe the advance of the commitment. This will enable the company to demonstrate its extra-financial inadequacy. To remedy this, they will divest or freeze their position.
In case he is a shareholder, he can put pressure on certain decisions. For example, it can refuse resolutions proposed during a general meeting, it can also support external resolutions.
How to develop SRI in your company ?
The development of SRI within a company revolves around three main points. These are the economy, of the social dimension and ecology. A company cannot be qualified as sustainable if it does not take into account these 3 elements.
In order to propose a sustainable investment, investors have adapted this notion to their challenges. The result is sustainable and responsible finance. Although the environmental part is not omnipresent in some denominations, it remains one of the fundamental pillars of investing.
In any case, this is the case in Germany.
To develop a socially responsible investment, you have to put into practice the requests required by the method. Among others, encourage local recruitment and avoid discrimination. Taking care of the customer/supplier relationship and considering safety and health.
The environmental criteria highlight different points. These include water management, energy saving and greenhouse gas emission management. Without forgetting the part reserved for the governance.
It requires the establishment of a good working atmosphere, the right of shareholders, a good remuneration, the establishment of a dialogue … when the company also thinks about its environment in addition to its profit, it establishes a primary form of thesocially responsible investment. It only remains to deepen the approach so that it can meet all the requirements that this policy requires.