08 May 2011

Put your money where it really worths…

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Affiche conferecne ALFI-SRI 2011

(credit ALFI)

 

“Given that much of the blame for the recent crisis has been put on the financial sector, the crisis has also been perceived as a crisis of ethics for this sector. Socially-responsible investment is therefore increasingly at the heart of investors concerns on the long-term sustainability of their investment”. Jacques Santer *, former Luxembourg Prime Minister and former Chairman of the European Commission opened on the 17th February, the 3rd annual edition of the ALFI conference on SRI – Sustainable & Responsible Investments as such.

An ever growing market share

The last report from Eurosif on the socially responsible investment sector (SRI) in Europe – issued every 2 years – estimates that this segment has a total of Euro 5 trillion assets under management, an increase of 87% against 2008. That comprises Euro 1 trillion “core” SRI (covering positive screening, or excluding companies from investment portfolios on ethical/values grounds) and Euro 4 trillion “broad” SRI (covering simple screening, engaging with companies in ESG issues, or actively integrating ESG criteria in valuations). Most of the growth in the last two years has come from the broad rather than the core SRI market. According to Eurosif, core SRI now represents about 10% of the asset management industry in Europe.

Tackling with conceptual questions

Respect, subsidiarity, sustainability, responsibility and profitability … so much concepts and key-words to illustrate the shift that is being observed in the investors mind.

Indeed, the socially responsible approach start to be seen as an additional risk control in the run of a company.
It is obviously admitted that the investors are always looking at yields, but if we look at sustainability of yields, we can not set aside the ESG aspects (Environment, Social, Governance) from the decision criteria.

In this respect, the general consensus in the sector is that “sustainability is part of a generational change”, said Matt Christensen, Executive Director of Eurosif … so no surprise that the definition of sustainable investing is moving. According to Eurosif research, the main drivers for SRI development are as followed : 1. the demand from institutional investors ; 2. the international lobbying (such as the UNPRI) ; 3. the external pressure (NGOs, media …) ; 4. the demand from retail investors.

Luxembourg : a SRI player

In its welcome message, Camille Thommes, Director General of ALFI said that “Luxembourg has a duty in the SRI area, as it is at the forefront in cross-border funds distribution in Europe”.

It deserved then to put a focus on the Luxembourg dynamism in promoting SRI. Some local actors were invited to witness their initiatives to move the art of responsible investing forward : first of all, the NGO etika whose mission is to promote alternative and sustainable finance in Luxembourg reminds that the place hosts an increasing number of SRI funds (250 around in 2010). The labelling agency LuxFlag shed light on an Environment label for the SRI funds industry, they have just launched along side their 5 years old Microfinance label.

Last but not least, the EIB – European Investment Bank presented GEEREF, their fund of funds investing in renewable energies in the emerging markets, whose major innovation is to embrace an educational mission in encouraging the implementation of financial capabilities in the countries where the selected funds invest in.

In a recent Communication on Industrial Policy, the European Commission stated that “the financial crisis showed a new approach is needed to the balance between short-term profit maximization and sustainable value creation in the longer run”.
Go ahead !

* Jacques Santer is also Chairman of Tigfi, the Luxembourg-based Institute for Global Financial Integrity, set up in May 2009.

Some references :

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