Sustainable investments: “It is important to determine your ‘playing field’ in advance”

In the plethora of funds available on the market, it is not always easy to distinguish the investment(s) that will best correspond to one’s own philosophy or principles in terms of sustainability. It must be admitted that the ethics of some are not the ethics of others. It won’t be easy to find a sustainable investment that exactly matches all of your own social and environmental responsibility concerns. The investor will therefore no doubt have to make concessions.

To make the right choice from among the range of responsible investments, you must first know what you want. “With this in mind, we can then ask ourselves the few questions that will be addressed as part of the development of the MiFID profile in terms of sustainability. Do I want to integrate the SRI concept into my investments? If so, do I I have sufficient knowledge in this area to make an informed choice? How do I want to make this choice? By excluding certain sectors or by approaching best in class ? Do I want to approach this approach through more specific themes? If so why ?”advises Ophélie Mortier, Chief Sustainable Officer at DPAM.

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Frame

It seems quite obvious that the more the investor will frame and limit his ESG choice, the less he will have access to certain types of funds. “It’s important to determine your ‘playing field’ in advance. Knowing what I want and what I don’t want. You also have to be aware that if you include sustainable investments in your portfolio, you incorporates a bias. Sometimes this bias will cause short-term declines in profitability. Fund prospectuses should also be read critically.”adds Roger Depasse, Head of Belgium Distribution at Nordea AM.

Once he has clearly defined his expectations, the investor can then turn to the existing offer on the market. “To see more clearly in this offer, he can go to the site of the Belgian label Towards Sustainability. This site will already allow him to skim the offer quite a bit according to his expectations and to see more clearly in the classes of funds that are listed there and especially on their quality”, notes Nicolas Crochet, Founder and CEO of Funds for Good. Investing in this asset class therefore requires a certain effort in terms of information.

Ask your banker

In this context, the investor must also dare to ask his banker questions. It is understood that the responses of the private banker must meet the expectations of investors. “The first thing to consider in such a fund is transparency. How is the fund invested? Do I have access to all the lines in which the fund invests? What is the strategy in terms of sustainability? And in terms of of commitment? Who manages my money and how? All this information must be clearly accessible in the documents provided on the fund”, says Romain Avice, SRI Manager at DNCA Investments. It is obvious that the integrity of the manager will be paramount in this type of fund. You can then go to the manager’s website to analyze the management policy, the composition of the team and also the presentations of each fund.

Any gray area is akin to a lack of transparency and should encourage caution. The investor can also see how the impact of the fund is assessed. He can also ask questions about how the management company practices its engagement policy. Has it signed collegiality agreements with other management houses to have more weight in general meetings? How does it establish a dialogue with companies on ESG issues? When and how does it exclude companies from its investment universe? Investors can also find out about the impact that the sustainability policy will have on the performance of their fund. Once well informed, and having checked the label of his investment, the investor can invest with full knowledge of the facts. He will then be comfortable with his investment knowing what he has given up and in what he is investing in complete transparency.

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