What is socially responsible investment?
Socially responsible investment, or SRI, has been booming for several years.
The range of SRI funds is growing as investors - both institutional and private - become increasingly interested in this type of investment. But what exactly is it?
The irresistible rise of responsible finance
Responsible finance covers all financing and investment activities that seek to combine economic efficiency and investment activities that seek to combine economic efficiency with the preservation of the public interest. Its objective is to support actors committed to a more sustainable society by financing their development.
These methods of financing have been growing rapidly for several years. Awareness of the seriousness of the issues raised by the major contemporary challenges (global warming, rising inequalities, etc.) is fuelling the aspiration for greener and fairer growth.
The crisis linked to the Covid pandemic-19 , by highlighting the lack of resilience of our societies, has accelerated the rise of responsible finance. In 2020, 62% of French savers said that environmental and social concerns were important in their investment decisions4. This demand is reflected in the vitality of the sustainable funds market: at the end of December 2020, they represented 461 billion euros in assets under management in France, up 66% over one year1.
Investing in sustainable investments
SRI is one of the three main forms of responsible finance3. This type of investment based on the principles of sustainable development integrates the consideration of extra-financial criteria in investment choices.
In the real estate sector, SRI aims to select funds not only for their profitability, but also for their impact on society in the broad sense. It favors those that are committed to environmental protection, virtuous in their social relations and exemplary in their management.
2Novethic, "Market data: sustainable funds France", December 31, 2020
3In addition to SRI, responsible finance includes the fields of solidarity finance and participatory finance.
"Socially responsible investment is an investment that aims to reconcile economic performance with 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."
Source: French Asset Management Association (AFG), Forum for Responsible Investment (FIR), July 2013.
What are the extra-financial criteria?
Extra-financial analysis, the foundation of SRI, is based on a set of environmental, social and governance (ESG) criteria. These indicators provide valuable information to help investors make decisions.
ESG criteria for real estate funds relate both to the governance of the company that manages them and to the strategy for selecting and managing the assets in their portfolio4.
- Environment: integration of environmental risks, environmental performance of buildings, waste management, reduction of energy consumption, etc.
- Social: health and comfort of occupants, relations with tenants, accessibility, contracting with service providers, etc.
- Governance: quality of reporting to investors, responsible purchasing, business ethics, executive compensation, diversity on the board of directors, etc.
4These criteria may vary depending on the type of assets being valued: offices, retail, healthcare assets, etc.
"CSR, ESG, SRI: what are the differences?"
CSR, ESG, SRI... The field of responsible finance includes many acronyms that are sometimes difficult to understand. Here is an overview.
The Corporate Social Responsibility (CSR) refers to all practices implemented by companies in order to respect the principles of sustainable development. It integrates environmental, economic and social concerns.
The Environmental, social and governance (ESG) criteria are indicators that measure the extent to which companies take sustainable development into account in their strategy. They assess the CSR performance of companies.
The socially responsible investment (SRI) is a type of financial investment that takes into account ESG criteria. By integrating these extra-financial indicators into their decisions, investors encourage companies to improve their CSR policies.