The actors of social finance, whose vocation is to invest in companies aiming to tackle social and environmental issues, are constantly challenged by their own investors to prove the consistency and the quality of the impact they generate.
Among the recurring requests are those to join a common impact measurement reference system that would allow the performance of players on these dimensions to be compared. One of the arguments underlying this demand is the need to standardize a market as much as possible to allow its development.
However, social finance is a subset of sustainable finance, the contours of which are themselves poorly defined. There is precisely no common reference system, no European label for socially responsible investment (beyond the UN PRI at global level, which remain voluntarily very broad, and the various European or global networks bringing together categories of actors defining their own principles).
This has not stopped the trend already at work from growing in recent months: conventional finance is turning massively, at least in its communication, towards sustainable investment strategies. It is increasingly adopting the pillars of ESG, namely environmental, social and governance criteria, both to improve its risk management and to develop portfolios that are labeled sustainable or responsible, and thus better respond to investor demand. The latter are particularly aware of the issue at the moment, and in the current economic climate are at the head of considerable forced savings (€50 bn at the end of August for the French alone, according to the Conseil d’Analyse économique – more than half of which is held by the richest 10%).
The French forum for responsible investment (FIR, member of eurosif) has just published a study on SRI-labeled funds in France. This is an opportunity to recall that in 2016, France adopted a State label, which is now awarded to more than 500 funds with over €200m of assets under management (and according to the FIR, this label must now be reformed in order to be more readable).
In addition, the European taxonomy, whose timetable has been postponed, invites asset managers to redouble their efforts on the green aspect of their portfolios. Some, faced with growing demand from clients who are aware of the incredible inequality-generating power of finance, are ahead of Act 2 of the taxonomy and expand on the assessment of the social performance of their investments (taxation/redistribution, job quality and employability, inclusion, diversity, etc.). They are also attempting an approach that truly integrates the value chain of portfolio companies (including subcontractors).
The time for sustainable finance really defined (by the regulator) is becoming clearer in Europe, and this is good news. For finance, for companies and their stakeholders, and for taxpayers. And for savers, in order to guarantee them truly wealth-creating investments.