Socially responsible investment (SRI) is an investment that allows you to make your savings grow while responding to ethical, environmental or social concerns. These investments belong to a separate category of investments, which are better defined and supervised in terms of extra-financial criteria (Environment, Social, Governance) than more "traditional" investments.
The different types of SRI
It may seem like a novelty, but socially responsible investment has been around for a long time and has evolved over the years. It started out as exclusionary SRI and has evolved into a more inclusive investment. It has undergone and continues to undergo many developments, notably under the impetus of regulation.
Exclusionary SRI
The origin of exclusion-based socially responsible investment is to establish a blacklist of companies and sectors of activity that do not conform to certain values.
This is really the first form of SRI.
Today, these exclusionary funds still operate on the same basis and make you avoid sectors that are considered harmful on ethical, social or environmental grounds (such as the fossil fuel sector for example).
Integrating ESG factors into investment decisions
Since the 2000s, financial performance is no longer the only factor taken into account when assessing companies, banks and governments. Environmental, social and governance (ESG) criteria are a new argument that is taken into consideration when analysing their attractiveness.
This new approach seeks, in addition to isolating the worst rated, to favour the most honest.
This analysis, based on ESG criteria, is carried out by private extra-financial rating agencies. Even if their evaluation criteria are not standardised, these agencies generally base themselves on the same international conventions, such as the recommendations of the UN, the OECD and the European Union.
In Luxembourg, a label supports the probity of socially responsible investment funds on an ESG basis: the LuxFlag label.
Foyer's invest4change insurance product has received this label, which certifies the relevance of the selected stocks and bonds.
Shareholder engagement
A final form of SRI is shareholder engagement, which proposes to use your power as an investor to intervene in the decisions of companies.
Through shareholder voting rights at general meetings, it is then possible to influence the withdrawal of harmful activities or positions of the target company, according to your values.
Who decides whether an investment is socially responsible?
SRI, in whatever form, can be subject to various supervisory bodies and obligations to monitor the impact of investments.
In Europe, the European Regulation on Sustainability Reporting in the Financial Services Sector (known as the SFDR Regulation), requires financial organisations to comply with rules regarding the integration of sustainability risks and the consideration of negative sustainability impacts.
A classification called Article 8 designates funds that have met the EU requirements.
This is the case for the two funds in the invest4change plan, where sustainability is an integral part of the investment strategy and processes.
To select assets from socially responsible companies, banks and governments, the CapitalatWork Foyer Group experts use an investment methodology that takes into account the principles of exclusion and inclusion.
The criteria for selecting companies are as follows:
Companies that do not comply with the 10 principles of the United Nations Global Compact are excluded.
Companies in sectors considered harmful (e.g. oil or tobacco) are also excluded.
Companies that are highly controversial because of their negative social, environmental or governance impacts are also rejected.
Those with the best extra-financial results are selected.
And finally, the classic financial analysis work is done, so socially responsible investments are subject to the same financial analysis criteria as classic investments. Financial experts evaluate the profitability/risk factor and select successful companies with strong development potential.