What responsible investments are and how to choose the ones that allow you to invest in organisations that are truly attentive to ESG factors.
Finance needs strong allies to promote solutions capable of preserving the resources available on our planet. What better companions than the Sustainable Development Goals promoted by the United Nations? Useful, concrete tools for guiding both businesses that intend to grow in a way that respects society and the environment, and savers who want to focus on responsible investments.
"Although tackling the challenge of climate change is primarily the responsibility of public authorities, all actors, including financial operators and end investors, have a role to play. The question is: how can we, as savers and investors, help finance sustainable economies?" These are the words of Jean-Jacques Barbéris, member of the Executive Committee and head of the Institutional and Corporate Clients Division & Esg at Amundi, Europe's largest asset manager and one of the top 10 operators worldwide.
The answer lies in responsible investments — those that select companies that stand out for their environmental, social and governance (ESG) policies, using a range of strategies. Financial operators today offer a multitude of products of this kind, products that are attracting the attention of an ever-growing audience of savers. Addressing their doubts with reliable, clear information is a precise responsibility in terms of transparency.
The growing inclination towards sustainability is undoubtedly good news, but it brings with it a side effect: it becomes necessary to be wary of bodies, institutions and companies that adopt communication and marketing strategies aimed at presenting activities in a favourable light when, in reality, those activities have very little that is sustainable about them. Entities that, in a word, engage in greenwashing (a neologism that has also made its way into the Treccani encyclopaedia).
Then there are the persistent misconceptions still in circulation, such as the belief that responsible investments yield less than traditional ones, or that they are merely a passing trend. In short, there is still a great deal of confusion, and it can sometimes be difficult to reward those who are genuinely trying to stay one step ahead in terms of sustainability — not least because this is a sector in which even advisers themselves are still developing their expertise. However, there are quite a few concrete tools that can help us.
In force since 10 March, the first phase of the Sustainable Finance Disclosure Regulation (SFDR) makes it possible to clearly identify funds that make sustainability the objective of the fund, or that contribute to an environmental or social objective. The European regulation on ESG investments, in line with the European taxonomy on green finance, applies the same requirements to pension products and financial advice, and includes entities that are working to meet the highest sustainability standards. To ensure investors have easy and continuous access, the European Union has established a single access point: the European Single Access Point (ESAP) platform.
There is also the sustainability rating from Morningstar, an American financial services company that also specialises in investment research and management. The sustainability rating, introduced in 2016 and refined the previous year, makes it possible to assess the profile of investment funds and ETFs (passively managed exchange traded funds). The calculation factor is the ESG risk rating computed by Sustainalytics, a Morningstar partner.
In practice, each entity is assigned a score from 0 to 100 that clearly indicates how much its economic value could be at risk due to environmental, social or corporate governance issues. This score is associated with one to five globes, indicating increasing levels of sustainability. The data are constantly monitored and updated every month. Today the sustainability rating is assigned to more than 50,000 funds worldwide.
ESG labels are the labels assigned to financial funds deemed sustainable. They are awarded according to two criteria: the inclusion of equities and bonds belonging to virtuous companies, and the exclusion of less ethical and responsible sectors and securities. Some labels take into account the full spectrum of ESG factors, others only the environmental dimension; in the latter case these are mostly environmental or climate-themed funds. In France, the Minister for Ecological Transition promotes the Greenfin label and the Minister for the Economy promotes the ISR label. In Belgium there is Towards Sustainability, promoted by the financial federation Febelfin and issued by the Ethibel Forum, and in Luxembourg there is the LuxFlag label, which falls under the independent international association Luxembourg Finance Labelling Agency.
