Understanding Responsible Investment #2 - Financial Performance and Labels
"Understanding Responsible Investment" Podcasts
Episode #2: "Financial Performance and Labels"
by our CSR expert Dorothée Chapuis,
Head of Corporate Social Responsibility for Société Générale Private Banking Luxembourg, Monaco and Switzerland.
Interview of Alexandre Cegarra,
Head of Société Générale Private Wealth Management.
Click on the button below to play.
Dorothée Chapuis: Hello everyone and welcome to the second episode of our "Understanding Responsible Investment" podcasts series. I am Dorothée Chapuis, Head of CSR for Société Générale Private Banking Luxembourg, Monaco and Switzerland, and I am with Alexandre Cegarra, Head of Société Générale Private Wealth Management.
Dorothée Chapuis: In our first podcast, we defined what sustainable and positive products and SRI are. Alexandre, does Socially Responsible Investment imply a compromise in terms of profitability?
Alexandre Cegarra: For many years, there was in the collective unconscious the idea that adding selection criteria such as those related to sustainable development increased constraints and therefore implied a lower financial performance. Over the last ten years or so, many studies have shown that there is no difference in financial profitability between SRI management and conventional management, i.e., management that does not take extra-financial criteria into account. Identifying risks means ultimately reducing the volatility of assets. However, taking extra-financial factors into account makes it possible to identify other risk factors that are not taken into account in conventional financial analysis: for example, a high rate of workplace accidents or absenteeism in a company may presuppose a deteriorated social climate that could adversely affect the company's economic performance. Of course, past performance does not prejudge future performance. Indeed, it has been found that companies with ESG best practices have been more resilient to the market downturn of the first half of 2020 induced by the Covid crisis.
Alexandre Cegarra: In order to help investors see more clearly and invest with confidence in products that have a real power of sustainable transformation, several European countries have developed standards and labels for socially responsible investments. It should be noted that Europe is particularly advanced in sustainable finance and is even considering creating an Ecolabel for financial products. France is a leader in this field with two labels: a general SRI label carried by the Treasury and a specific label for products dedicated to green finance, the Greenfin label, carried by the Ministry of Ecological Transition. In Belgium there is the Towards Sustainability label, in Luxembourg the Luxflag label, in Germany the FNG-SIEGEL label, etc… The specifications of these labels are demanding and often audited by an independent third party, allowing investors to choose quality products with confidence.
Financial institutions that manage their clients' financial assets (through funds or mandates) can also sign the United Nations Principles for Responsible Investment (PRI), which were first specified in 2005. They then commit themselves to strengthen their fiduciary responsibility by, firstly, integrating ESG issues into their investment analysis and decision-making processes; secondly, by being active shareholders on ESG issues vis-à-vis the companies in which they invest and by asking them for more transparency on ESG pillars; thirdly, by promoting the adoption of responsible investment principles and cooperating on these issues; and finally, by reporting on progress in the area of SRI. These principles are not a label, but a responsible investor rating. At SG 29 Haussmann, we are convinced that responsible investment is a way to contribute to a more sustainable world. That is why we have even signed the PRI.
Dorothée Chapuis: SRI has grown strongly in recent years as more and more products and services have been offered. How do you find your way around?
Dorothée Chapuis: Thank you Alexandre for this insight into performance and labels linked to SRI. In concrete terms, how does this translate into SGPB's offer for positive and sustainable investments? 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.