Socially responsible Investment

Definition

The socially responsible Investissement (ISR) is an individual or collective investment carried out according to criteria social, Environnement with, ethical and of Gouvernance of company without occulting the financial performance.

For some, the ISR is even “the financial and speculative variation of the Sustainable development”.

In other words, the socially responsible investment is defined as the financial component of the concept of Sustainable development by which the investor, instead of being interested limitativement in the financial criteria - Rentabilité and Risque - also uses in his decision of investment of the extra-financial criteria; in fact criteria in ethical , of Governorship, social and environmental matter .

Forms of the ISR

The ISR can take 4 principal forms:

the funds socially responsible or for sustainable development : they integrate social and environmental criteria of evaluation of a company with dimensions which are crossed with financial criteria to select the most powerful companies from a point of view of the sustainable development . One evokes positive approach then to indicate the " best in class" , the best (pupils).
the funds of exclusion : they a contrario exclude certain sectors like the armament, the play, the tobacco…, approach of exclusion, known as historical of the ISR.
engagement actionnarial : it consists, for the investors, to require companies a policy of stronger social responsibility by a direct dialog, but also by the exercise of the rights to vote as general meetings. One also speaks in this case about activism actionnarial.
the produced financial interdependent and the funds of division : this category fits rather in the logic of the investment interdependent that of socially responsible investment, because of the high degree of financial loss that the investors of this category are ready to accept to satisfy this type of extra-financial criterion.

History

Also named SRI for Socially Responsible Investing , the Anglo-Saxon tradition of the ISR finds its roots as of the 18th century in particular with the philanthropic movement of the Quaker, or at the end of the 19th century in the United States where religious communities prohibited their members from investing in companies of weapons, alcohol or tobacco.

The first ISR of the modern economy goes back to 1971. On this date, two pastors of the Church Méthodiste, Luther Tyson and Jack Corbett, launch the " Pax World Fund" to invest in the companies nonrelated to the armament.

Since April 27th, 2006, the Principles for the Responsible Investment or UNPRI from now on are devoted by the the United Nations in the prolongation of the world Pacte. These principles mark the recognition of the ISR on a worldwide scale

Why?

The ISR is founded on the conviction that the taking into account of social and environmental factors, ethics and governorship ensures the financial performance of the sums invested in the medium and long term taking into account a better apprehension of the risks and a better management.

For the denominational investors, approach ISR corresponds to a step which has religious bases deeply been dependant on their " ethical of the businesses " for which the prospects are specific.

One will be able to consider retrospectively that the recent dedication of Mr. Muhammad Yunus, father of the Microcrédit constitutes an approach ISR before the hour perfectly adapted to the reality of the commercial economic spheres isolated ones of the circuits of traditional financings in the underdeveloped economies, like those known as developed.

The ISR cannot a contrario constitute in all the cases a label of super-powerful investment what east can be “prejudicial with its generalization”, according to Danyelle Guyatt (thesis at the university of Bath (the U.K. Identifier and to exceed the behavioral obstacles with the responsible investment in the long run , Le Monde Economie 12/5/2006, p. II).

Lastly, for the promoters of sustainable development in concreto , the ISR obviously marks the sign which the financial lever is from now on able to bring all its weight to the evolution of the models macro and micro-economic that it nourishes. A new sensitivity in the council, a major strategic direction posted by the public financial institutions as private which can make it possible to activate more quickly of new behaviors on all the chain of value of the producer to the consumer which will owe internaliser the Principe pollutant-payer.

How?

To build a grid

Multi-criteria grids ISR in extra-financial matter used by the persons in charge of these funds express the search for a durable investment more related to length and medium term that on the Spéculation “courtermist” of the speculative funds (or Hedge funds ). These grids contribute as RSE for the managers of undertakings to being a factor of management of the Risque because they allow better a visibility and foreseeability of the company.

Heterogeneous in a growth market, these grids vary by sector and according to the culture and the experiment of each Investisseur, Institutionnel or not, large or small. Various specialized credit rating agencies or social rating propose their grid and classification to help the investors to make their choice on the market. These grids very tend to track the Risque S specific, sometimes sociétaux and the good or bad practices of the companies concerned.

Research in the field is only at its beginnings. Principal investors ISR decided to develop the analytical reflection on a logic of investment which upsets the practices by financially supporting a dedicated association EAI or Enhanced Analytic Initiative.

To document the grid

The ISR rests above all on the documents produced by the target companies and consequently on their annual report of Sustainable development. In 2005, only 25% of the companies of SBF 120 made check per expert third these data in whole or part. In this last case, one finds 10 to 20% of errors what is normal for qualitative data whose accounting depends on heterogeneous lawful systems.

In the years to come, investors ISR will undoubtedly be increasingly demanding with the detail and the reliability of the data and the indicators of follow-up. The tables of walk of the realization of the intended aims by the companies will be in the center of this vigilance.

The investigations even of the tests into the ground complementary to the documentary review should also supplement this checking of the commitments entered into.

the particular case of the financing of project

Concerning more particularly the financing of project, the principles of Ecuador to which a growing part of the financial institutions adhere, constitute a factor of reduction of heterogeneity of approaches ISR and support its anchoring in the middle of the projects.

The ISR throughout the world

The amounts invested with the title of the ISR know various progressions according to the money markets and sometimes remarkable; but investment ISR preserves a negligible share in comparison with the world entire investment.

As Stuart Langdridge indicates it, British specialist in the ISR ( European Voice , 11/29/2006, p. 37), " The small ones and average values are only right " on the radar" what lets predict real progressions for these companies whose potential ISR is not to draw aside. ---- Africa the Middle East

South Africa: FTSE and the South-African Stock Exchange (JSE) launched the " project; Philosophy and Critères" in order to establish a socially responsible index of investment.

Morocco: the Wafabank creates first funds of division in 2000. ---- Americas

the United States: constitutes by its financial tradition primary market IRS (176 Mandelevium. $ in 2002 according to SIF). The economic actors do not make a difference between the interdependent investment and the socially responsible investment which is synonymous.

Canada: second market in importance (50 Mandelevium. $ placed in funds " éthiques" , data 2002). ---- ¨ ''' Asia '''

Asia little by little also opens with this new approach ISR and in particular in Singapore, Japan and in South Korea via the banking environment. ---- Europe

The follow-up of values ISR in Europe rests mainly on two indices used by the funds to measure performance ISR: Composite DJSI Europe and FTSE4Good Europe. The associations specialized like SAM (Swiss) or Ethibel (Belgium) usefully enrich by their own indices reading ISR.

European Social Investment Forum (Eurosif) launched a code of transparency to make the ISR more accessible to the uninitiated persons. According to the last figures 2006 (September 2006 SRI Studies), the ISR exceeds 1000 billion, that is to say 10 15% of incur European total euros in 9 European countries. But the institutional funds prevail (94%) against 6% of private individuals.

Short echoes of the European national markets of the ISR (figures 2005 Eurosif, going up incur funds):

Germany : 6th European market of management ISR (3 billion € incur). ).

Austria : 9th European market of management ISR (1 billion € incur). ).

Belgium: 4th European market of management ISR (9,5 billion € incur).

Spain: 8th European market of management ISR (1,5 billion € incur). ).

France: 3rd European market of management ISR. 137 funds ISR in 2006 account for only 1% of the credits of French collective management, for an amount of only 12,5 billion € incur.

Italy : 7th European market of management ISR (2,8 billion € incur). ).

Netherlands: 1st European market of management ISR (41,5 billion € incur).

the United Kingdom: 2nd European market of management ISR (30,5 billion € incur). Sweden: 5th European market of management ISR (7 billion € incur). The pension funds were obliged by the legislator to integrate placements ISR in their wallets.

The ISR in France

Model ISR in France progressed in 2006 but it seems to have always evil has undoubtedly to be popularized taking into account the absence of a culture of direct saving actionnariale to Anglo-Saxon and this in spite of the progressive increase in salary savings. " zinzins" or institutional investors remain determining by creating funds ISR in actions and obligations.

" According to a study published by Novethic, the whole of the market of the ISR (dedicated OPCVM and funds) increased by 88% to be established to 16,6 billion euros in 2006 but only 6,06 billion came from the private individuals. And still, on this amount, only 3,25 billion euros comes from products ISR sold to the private individuals by the banking networks, the balance being engaged in the salary savings " .

Perhaps a beginning of explanation on this defect of popularity: " This sudden passion for the green funds poses a problem however: it is difficult to see there clearly, for the particular saver, in an offer rather little structured. " There is confusion between green products and funds of socially responsible investment (ISR). They are two different categories, but certain green products can be ISR " , summarizes Anne-Catherine Husson-Traoré, managing director of Novethic, the media on line of sustainable development " .

In addition to the success of this formula of saving via the financial intermediaries, its natural outlet in favor of the national écoindustrie seems to leave something to be desired in France in comparison with other financial circuits. According to the Chambolle report/ratio of 2006, “Another way which would deserve to be explored is that of the socially responsible investment. In the other comparable countries, a share of this investment is devoted to the development of the éco undertaken (funds cleantech), which is not the case in France. (…). A dialog should open with the persons in charge of these funds on this point. ” (cf p. 29).

But the French banking system seems to take the ISR with the serious one. The approach Bilan carbon initiated by the Case of the deposits for its own policy of investment could inspire the models of investments according to the principle of effectiveness and the principle of Neutralité carbon as of other banks already post it in the world. The Savings bank will propose soon within the framework of its future Bénéfice program labelling ISR of all its banking products according to three criteria: financial risk, intensity carbon and taking into account of the social and environmental impacts.

For the sector of the insurance, this approach starts to find a certain success with the CNP and BNP Paris Assurance.

To promote the French reflection on the ISR, a pulpit dedicated to the ISR and entitled " durable Finance and responsible investment " will be installation since 2008 with the support of the AFG.

See too

Bank
Assessment carbon
Equitable trade
Investment
Microcrédit
Neutrality carbon
Social responsibility of the companies

External bonds

Vision CSR side banks and finances, in the world
Environmental finances
Forum Socialinvest America
ISR in Asia or ASriA
CSR
EUROSIF
in France, Liste of funds ISR on Novethic.fr
ISR according to the interdependent MEDAD
Fonds

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