At the end of 2017, nearly a third of assets managed by French management companies took into account environmental, social and governance criteria.
Responsible investment is gradually establishing itself as a standard in asset management. At the end of 2017, nearly a third of assets managed by French management companies took into account environmental, social and governance (ESG) criteria: i.e. around 1,000 billion euros out of a total of 3,500 billion, according to the latest figures from the French Financial Management Association.
The development of this so-called “responsible” investment _ not to be confused with SRI (socially responsible investment) whose criteria are more precise _ is very largely linked to French regulations. Investors have an obligation to communicate their practices in this area.
And the public authorities have taken up the subject with the creation of two labels: the SRI label of the Ministry of the Economy and Finance and the Energy and Economic Transition for Climate (TEEC) label of the Ministry of Ecological and Inclusive Transition.
SRI outstandings represent less than 10% of the market
SRI outstandings represent only 9% of the total market (310 billion euros). But they are increasing rapidly: 12% in 2017. This growth is likely to continue, according to the latest announcements.
The giant Amundi, for example, communicated on Monday its intention to move up a gear in terms of responsible investment. AXA IM has decided to integrate ESG criteria in all of its management divisions and to emphasize the thematic “impact” approach. LBPAM plans to be 100% SRI in two years. Finally, another recent example, DNCA (an affiliate of Natixis IM) has converted to responsible investment and launched a range of SRI funds.
The “best in class”, a dominant but questionable approach
Despite the emergence of conviction or impact investing, it is still the “best in class” approach (selection of issuers with the best ESG practices in their sector of activity) that dominates SRI. 84% of SRI outstandings are managed using this approach. The advantage: managers can keep a virtually unchanged level of sector diversification.
On the other hand, “The evaluation method where we assume that each sector is on average equivalent from an environmental and social point of view is in reality not very acceptable”, underlines Hervé Guez, director of research and management of equities and rates at Mirova. According to him, “Savers expect an allocation offer different from traditional funds: you have to be ready to assume a certain sectoral bias”.
A European project in preparation
“Demand from individuals and the development underway at European level will lead to more impact investment”, Raya Bentchikou, head of ESG product development at AXA IM, advances. The European Commission has taken up the conclusions of the Expert Group on Sustainable Finance (HLEG) and may indeed legislate before the 2019 elections. “ This will no doubt make it possible to have measures to measure the impact of investments ” continues Raya Bentchikou.
In the meantime, SRI funds which rely on a “best in class” approach should at least benefit from public labeling, believe a certain number of specialists. “Having a non-labeled SRI offering is all the more suspect as the level of requirement of the public label is not excessive and its cost does not exceed a few thousand euros per fund”, underlines Hervé Guez. In all, 166 funds have obtained the SRI label (45 billion euros in assets) and 22 funds benefit from the TEEC label.