Understanding the EU Sustainable Finance Regulation (2/4) - What is SGPB's “global sustainable investment” approach?
We began our article series on the EU Sustainable Finance Regulation by focusing on its underlying ambition. We learned that banks and advisors are now required to factor in the sustainability preferences of their clients, and we touched on the three approaches that SGPB has designed for its clients to express their preferences. For our second article, Claire Douchy, Head of Corporate Commitments and Responsible Projects for Societe Generale Private Banking France, and her guest Stéphanie Agrefilo, Head of Advisory and the CSR expert at our private bank in Monaco, zoom in on the first of the three approaches: “global sustainable investment”.
Claire Douchy: Stéphanie, could you give us a rundown of how we collect our clients sustainability preferences?
Stéphanie Agrefilo: Since the implementation of MiFID II(1), bankers and advisors are required to question their clients on their sustainable investment preferences. At SGPB, in France and in Luxembourg, clients have a choice of three profiles: no sustainable investment preferences; sustainable investment preferences with a personalised profile; or sustainable investment preferences with a “generic” profile, which is the “generic SGPB” profile. If opting for a personalised profile, clients must choose one or more or the three sustainability investment approaches we offer: “global sustainable investment”, “environmentally sustainable investment”, or “negative impact investment”.
Claire Douchy: Let’s pause on the first of these, namely the “global sustainability investment approach”(2). What does it entail?
Stéphanie Agrefilo: The first thing you should know is that it stems from the Sustainable Finance Disclosure Regulation(3) by which all products must be classified by their sustainability characteristics. It encompasses companies that, through their activities or behaviours, contribute to achieving one or more of the UN’s 17 Sustainable Development Goals, also known as SDGs. We can look at these companies’ contributions to the SDGs in two ways. Some contribute by way of their business model – a recycling or healthcare company being two good examples. And then there are companies’ whose business model may not necessarily be based on a sustainable activity, but which act sustainably. For example, companies whose human resources policies promote inclusion and gender equality, or which minimises their water consumption and waste production. Of course, in addition to assessing the sustainability of a company’s activity or behaviour, we must also make sure that it does not have a negative impact on ESG(4) issues in other ways.
Claire Douchy: For clients who are sensitive to sustainability issues and personalise their preferences accordingly, what does this approach mean?
Stéphanie Agrefilo: It means having to decide how much of their financial assets they would like to align with global sustainable activities. In other words, they will determine what percentage of their assets they want to allocate to sustainable activities, without pinpointing a specific ESG theme.
Claire Douchy: Can interested clients allocate all their assets under this approach?
Stéphanie Agrefilo: Depending on their assets and risk appetite, this is not always possible at this stage. Let’s take the example of a client who wants a conservative approach for their investments, with little to no exposure to equity markets — money markets, bond markets, and so on. In most cases, and under current market conditions, investment vehicles that match this client’s risk appetite and disclose their share of global sustainable activities are rare. Similarly, if a client wants to invest in small caps, there is very little information available on small cap companies’ contributions to sustainable development goals.
Interested to know more? Read the next three articles of our series Understand the EU Sustainable Finance Regulations:
What does it seek to achieve?
SGPB’s 3 sustainable investment approaches: “environmentally sustainable investment”
SGPB’s 3 sustainable investment approaches: “negative impact investment”
... and feel free to contact your Private Banker for more information.
(1) MiF I (Markets in Financial Instruments) is a European directive adopted in 2004 and applied in 2007. A regulatory framework of the financial markets, it enforces the investment service providers to classify and inform clients. After the 2008 financial crisis, the European Commission decided to review MiF I, voting in MIF II in 2014. The purpose of the updated directive is to protect individual investors as well as improve the transparency, security, and operation of the financial markets. (Source :
(2) The two other approaches are covered in the next articles in the series: “environmentally sustainable investment”, and “negative impact investment”.
(3) The SFDR is a European regulation aimed at improving transparency related to environmental and social responsibility on the financial markets.
(4) Environmental, Social, Governance.
Would you like to discuss this subject further with us?
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