Asset management

The development of SRI hampered by the lack of harmonization of methods

In France, conviction-based SRI drives the socially responsible investment market.

The lack of harmonization of environmental, social and governance (ESG) criteria would be the main obstacle to the engagement of investors and companies in this area. This is one of the conclusions of the East and Partners study, commissioned by HSBC, on the sustainable development strategies of 1,731 issuing companies and institutional investors.

According to this study, 61% of investors and 48% of issuers worldwide include ESF criteria in their development strategy. Geographical disparities remain extremely important. While in Asia only 40% of investors have implemented a strategy incorporating ESG criteria, in Europe they are 85%. And in France, article 173 obliges them at least to consider such an approach.

Interesting point for SRI fund promoters: less than 10% of global investors surveyed hold “investment funds incorporating ESG principles”. And if 57% of them have a priori nothing against and believe that nothing stands in the way of increasing their commitment, 43% of investors believe that there are a certain number of obstacles. Among the problems mentioned: the lack of harmonization of the definition of ESG criteria, the lack of investment opportunities and the poor quality of the data produced.

Investors and issuers are also calling for more harmonization through international regulation. But they are only 8% among issuers and 10% among investors, to know the organizations in charge of promoting this harmonization, such as the TCFD. This working group on financial information relating to climate risks has in particular developed a whole set of recommendations on corporate communication on climate risks.

In France, the dynamism of SRI by conviction

France is, with the countries of northern Europe, one of the places where socially responsible investment is doing the best. Latest trend: the development of conviction-based SRI. According to Novethic, there are 150 of these environmental, social impact or multi-thematic funds and they are the ones driving the socially responsible investment market.

Their outstandings thus increased by 10.2% in the second quarter to 37.6 billion euros against 4.6% for all SRI funds (144.4 billion euros). “They alone derive all the collection from the global SRI market and record performances which represent almost two-thirds of their growth”, underlines Jade Dusser-Afonso, head of market analyzes at the Novethic research center.

Gare à « l’ODD-washing »

Investors are no longer content to communicate on the carbon footprint of their portfolios. They are now striving to show that they comply with the SDGs, these 17 United Nations goals that aim to eradicate poverty, protect the planet and prosperity for all. The Novethic agency notes that the development trend in SDG reporting concerns above all “northern European pension funds, but the movement is gaining ground. The rating agencies are also developing their SDG offer, but the assessment work is complex and the benchmarks differ. As Novethic sums it up, “there is still a long way to go to make the SDGs homogeneous and generalized environmental and social impact indicators. In the meantime, there is a risk of “ODD-washing”. “