Understanding Responsible Investment #12 - Difference between sustainable and positive investments and solidarity investments
Dorothée Chapuis: Hello everyone and welcome to this podcast which is the twelfth in a series dedicated to Sustainable and Responsible Investment. I am Dorothée Chapuis, Head of CSR for Societe Generale Private Banking Luxembourg, Monaco and Switzerland. We have been talking about sustainable and positive investments for eleven episodes and in this podcast I wanted to look at the differences between sustainable and positive investments on the one hand and solidarity-based investments on the other - this, to put an end to the confusion that can sometimes arise.
First, let’s see what a solidarity product is…
There are two main categories of ptroducts. The first includes investments that integrates a mechanism for sharing part or all of the return with a general interest organisation such as an association or a foundation. Some savings products provide for the donation to be made solely by the subscriber, while others provide for a symmetrical donation between the saver and the financial institution. The number of products in the latter category has grown significantly in recent years.
The other category of solidarity investments is that which invests in securities issued by players in the social and solidarity economy (SSE) in order to finance them. These are companies, cooperatives or associations whose activity pursues a dual objective of social or environmental performance on the one hand and financial performance on the other: for example, social land holdings managed by associations such as the Habitat & Humanisme movement or the Abbé Pierre foundation, or micro-credit organisations such as France Active. It is possible for an individual to subscribe directly to the financial securities issued by these companies. But be careful, these securities are illiquid, without any guarantee of capital or return. Moreover, these securities must correspond to the investor's profile, objectives and needs, while being aware of the risk of total or partial capital loss.
To reduce the risk of non-liquidity, while diversifying the players in the social and solidarity economy that one finances, one can invest in "90/10" solidarity UCIs (Undertakings for Collective Investment) offered by many institutions. They are named like that because 10% of the outstanding amount is invested in SSE players. The other 90 percent is invested in more liquid listed financial securities with varying levels of risk. It will be necessary to inquire about the overall risk level of the support to verify again that it corresponds to the investor's profile and objectives and its capacity to incur losses. The possibility of investing in solidarity-based UCIs is also offered in employee savings plans(1).
What is the link between solidarity investments and sustainable investments?
Solidarity investments are a subset of sustainable investments in two ways: firstly, because the integration of a donation, even if it is small in relation to the amount invested, or the fact of financing solidarity-based companies, contributes precisely to building a more sustainable society. And on the other hand because the management processes of sharing UCIs or 90/10 funds take into account extra-financial criteria specific to responsible management.
I hope that these explanations helped you to understand that, while it can be said that all solidarity products are part of the family of responsible products, the reverse is not true: not all responsible products are solidarity products. Thank you and see you soon!
(1) Since 1 January 2010, in France, pursuant to the Law on modernisation of the economy (« Loi de modernisaton de l’économie » - LME), any company with an employee savings scheme must offer a solidarity company mutual fund (« Fonds Commun de placement d’entreprise solidaire » - FCPES) to its employees. The FCPES offer the possibility to invest in job creation, construction of social housing, environmental protection, while offering a certain profitability.
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 Podcasts 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.
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