Understanding Responsible Investment #1 - Sustainable and Positive Investment - Definition
"Understanding Responsible Investment" Podcasts
Episode #1: "Sustainable and Positive Investment: Definition"
by our CSR expert Dorothée Chapuis,
Head of Corporate Social Responsibility and Responsible for Société Générale Private Banking Luxembourg, Monaco and Switzerland.
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Dorothée Chapuis: Hello everyone and welcome to the first episode of our "Understanding Responsible Investment" podcast series. I am Dorothée Chapuis, Head of CSR for Société Générale Private Banking Luxembourg, Monaco and Switzerland. Before explaining what socially responsible investment is, let's see how this theme fits into our global private banking strategy.
At the beginning of 2020, the Société Générale group adopted a "raison d'être" which is "building together, with our clients, a better and sustainable future through responsible and innovative financial solutions". For private banking, providing financial solutions to build a more sustainable world means being able to help you make a greater societal impact with your assets and offer you sustainable and positive investments.
About terminology to be clear on the terms used: you often hear people talking about sustainable or responsible investments, or SRI or ESG investment; SRI meaning “Socially Responsible Investment”, and ESG being “Environment, Social and Governance”. It's basically the same thing: with these words, we are aiming for financial products that incorporate sustainable development considerations. At Société Générale Private Banking, we have chosen the term "SUSTAINABLE AND POSITIVE" offer to refer to all of our products that integrate sustainable development. For financial management solutions such as our internal collective funds or management mandates, we prefer the term “SRI management”.
What is sustainable development?
It is the idea that economic growth must be part of a long-term perspective by integrating issues related to the environment and the functioning of society. The term was first used in 1987 by the United Nations, which defines sustainable developmentas development that meets the needs of the present without compromising the ability of future generations to meet their own development needs.
According to the FIR, the Forum for Responsible Investment, SRI is an investment that aims to reconcile economic performance with social and environmental impact by financing companies and public entities that contribute to sustainable development, regardless of their sector of activity. By influencing governance and the behaviour of stakeholders, SRI promotes a responsible economy. It is therefore an investment that takes into account traditional financial criteria but also so-called extra-financial criteria. The latter are derived from the CSR (Corporate Social Responsibility) policies of companies. They are classified according to three pillars: “E” for Environment, “S” for Social and “G” for Governance. Companies don’t integrate sustainable development issues with the same intensity. They can be given a dedicated rating, most often called an ESG Rating, which enables them to be compared with each other.
At the same time, how can SRI be defined?
What are the concepts covered by ESG?
In the environment part, we find for example the company's energy consumption, greenhouse gas emissions induced by the activity, production and waste treatment. The S for Social covers how the company manages its human capital, for example on the subjects of safety, climate quality and social dialogue or supply chain management. Finally, under the G, the Governance pillar covers, for example, the issues of quality, diversity and independence of decision-making bodies, executive remuneration, transparency and shareholders' rights.
To measure how a company is interested in development, we can also take the analytical grid of the 17 sustainable development goals defined by the United Nations in 2015. At Société Générale Private Banking, we have grouped these 17 objectives into the following 3 major ones: firstly, issues related to the biosphere, such as the protection of the oceans, or biodiversity, or forests...; secondly, issues related to society, i.e. those that contribute to making our human societies more harmonious, such as gender equality, access to education or an efficient and egalitarian healthcare system; and thirdly, issues related to sustainable economic development, such as the development of infrastructure, the circular economy or sustainable cities.
Now that we have defined sustainable and positive investment, does it imply a compromise in performance and how do we get there? This is what we will see in our next podcast. See you soon!
This podcast is part of a series of episodes proposed by Societe Generale Private Banking to understand responsible investment. It is available on the Spotify and Apple Podcast streaming platforms via the "#Private Talk by Societe Generale Private Banking" program and on our website www.privatebanking.societegenerale.com. Feel free to subscribe to be notified when the next episode is released and to spread the word.