Sustainable development becomes a reality for the world of finance.

Indeed, a growing amount of money is invested in environmental funds. For example, in Europe according to Watson Wyatt, a investment consultants, 15.2 % of net investments in equity funds were invested into environmental funds during the first seven months of 2007, against 2.6 per cent during the whole of 2006.

This accelerating trend is due to the fact that asset managers take into account environmental and corporate governance issues in their investment decisions.

These funds ($ 4000 bn) are invested, on the long term, in companies which are committed in the sustainable development path. Asset managers are helped by extra financial rating agencies ( like Vigeo) which give a rating to a company for its commitment in environmental, human resources,…..

New financial products have been launched like “green” fixed income, real estate funds and funds trading in carbon credits. Some hedge funds invest in carbon credits.

This kind of investment will increase due to the fact that performances are better than stock market indices over long periods. If finance begin to believe that sustainable development a key issue for the future, it could be a good news for the planet..

Antoine

Financial Times, Investors jump on environmental wagon by Kate Burgess, published June 3 2008

The Rockefeller Foundation studied the opportunities to create a social stock Exchange located in United Kingdom . The ethical investors ‘ll can  trade with companies socially responsible. http://www.ft.com/cms/s/0/9a7da70c-f79f-11dc-ac40-000077b07658.html?nclick_check=1

This initiative is a way to promote sustainable development to the investors and implies them to the social responsibility of the company in order to protect the environment, the diversity, helping the poor and encouraging the fair trade. We can consider that the investors take into account the ethical issue as a significant investment.  

Moreover, David Kam is setting up a new Stock Exchange : The Green Stock Exchange and will be available  this summer  in United States : The Green Stock Exchange ( Green SX). The idea is that the investors trade with social businesses.

If you want to be part of this experience… here is the link www.greensx.com

–WOW– to be honest, I am not sure we have firms like this in Canada, but the Vigeo Group are, in essence, THE Corporate Social Responsibility (CSR) police in France.

Vigeo examined ~ 1,500 European, American and Asian companies with regards to:

1. Human Rights
2. Human Resources
3. Environment
4. Business Behaviour
5. Corporate Governance
6. Community Involvment

I  L I K E.

Offering services similar to that of traditional accounting firms, The Vigeo Group performs CSR audits and provides feedback to firms about the extent to which they are fulfilling their social promises.

But what gives?

One reason companies, administrations and the territorial bodies subject themselves to such examination is that a CSR performance audit “helps in the strategic piloting and control of social, environmental and governance risks.” Basically, it helps firms protect against the element of “surprise” government regulation.

Other benefits resulting from a Vigeo Audit include: (source: Vigeo Website)

• Identify your enforceable social responsibility objectives;
• Identify your risk factors and levers of performance;
• Clarify your principles and the vision of your responsibilities;
• Capture the weak signals of your social and competitive environment, anticipate your risks, reinforce your performance factors;
• Ensure the relevance of your operational objectives and managerial choices.
• Check the effectiveness of your managerial processes to achieve continual improvement.
• Prove that “actions speak louder than words” by communicating on the basis of tangible facts.

Lastly, Vigeo provides a ranking which helps investors determine if subject firms are a good Socially Responsible Investment (SRI). (to serve the growing interest in “green” investing)

Curious about your investments now? Search for SRI Funds here.

That is all. RT

As I am currently following a financial training, and because I’m also really interested in Shares Portfolio Management, I wanted to focus on the Socially Responsible Investment (SRI).
As you may know, ethic and social responsibility are newly popular trends and have recently reached the investment process. On one hand, you have the people’s will to invest in firms recognized as responsible that is very personal, morality and ethic being subjective notions.
On the other hand, as an investor, the first element you will take into account should be the yield and profitability of the chosen share. However there is actually no guarantee regarding the performance of socially responsible companies.

SRI funds are means for individuals to invest in social responsible firms and banks have created them to respond to the demand. At the beginning, it was to enable people to invest in firms that had no link with the armaments industry during the Vietnam War. Now the movement has evolved and a company has to meet several criteria in order to be categorized as ethical.

Surely, several studies shown that socially responsible companies usually do not under-perform; but no link can be established between their behaviour and their financial results.
As you may know, consumer’s loyalty to this type of investment is also surprising as they accept lower return on investment. In order to protect their investment, we must then ensure that these companies will not take advantage of this. To address this challenge, extra-financial rating agencies were created to control this market. I think this is a way to provide feedback about the measures adopted by a firm in term of social responsibility, however we can not assess the relevance of the tool (e.g.: to analyse the sustainability) and information used to analyse, as well as criteria or values considered are not always available. How investors can be sure of the respect of their own values when they subscribe to one of these funds?

Ethics and Morality are personally defined. It can not be classified or measured, and therefore you can not ask someone to assess the effectiveness or the social responsibility of a company. Moreover, fewer information is available from the banks about such funds, which can not enable a potential consumer to make an enlightened choice (How can the investors know what is really included inside?).

To conclude, I am a little sceptical regarding the socially responsible funds and also afraid of the possible hypocrisy of some firms. However, accordingly to my own set of values, if I were to choose between two firms with similar financial results, I would choose the more socially responsible company.

Along with the growing alertness for the environment, sustainable development (SD) has become a popular term in the business world, so popular that it even exists in the form of mutual funds. One might think it is actually a good thing as you can get two birds with one stone (prospect earnings along with good consciousness).

However, an article in The Globe and Mail, “Sustainable development for sale”, is questioning the integrity of the companies promoted by those SD mutual funds. Some of the corporations that have been included in the funds seem doubtful when it comes to social responsibility. According to the article, the SD term appears to have been overexploited as a marketing tool through corporate communication which has, according to the author, “cheapening its value”. The article also states that the term is not well defined as it has sometimes been referred to the sustainability of the firm rather than the actual resources. Furthermore, SD is virtually inconsistent with the vocation of some industries such as oil companies and petroleum is a limited resource.

Personally, I agree with the article. While taking advantage of the ecological movement, some companies might have use the term SD for their own benefits rather then with good will. A comparison can be made with the food industry. With the increasing popularity of healthy nutrition, the food industry has been using various health-related labels to promote their products. However, we all know that “low fat” does not necessarily mean good for health. This being said, I still think that despise the abuse of the SD term, there is at least a growing awareness surrounding the actual concept and this awareness is in my opinion, already a good step forward.

The article can be found at http://www.sustreport.org/news/comm_1_reg.html