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20.03.2019 | Sustainable finance
Now worth €1 trillion in France, SRI (socially responsible investment) funds are the vanguard of a new kind of finance, one that is more responsible and attuned to social and environmental challenges. Millennials, born between 1985 and 2000, place a lot of importance on the social and environmental impact of their behaviors, purchases and investments. Béatrice Verger, Head of SRI Promotion at BNP Paribas Asset Management, discusses the growing affinity of young customers for SRI funds.
SRI is an investment option that can deliver financial performance while taking into account environmental, social and corporate governance (ESG) criteria. It started to develop in the 2000s and has reached a much wider scale today, notably among individual investors. But SRI is still a relatively new tool, so understanding these vehicles requires support and information, since it can still cause some hesitation. My role is to contribute to expand our offer of SRI products and promote these tools. My job is to inform customers and employees about SRI and the positive impact of this portfolio management style.
The SRI market has seen continuous growth in recent years. At BNPP AM, our assets invested in SRI funds totaled €35 billion as of December 31, 2017, representing an increase of 38% over the previous year. In 2018, despite a complex financial context, total investments climbed by €3.8 billion.
Moreover, SRI management is adding new asset classes and themes. The classic best-in-class approach (marketed primarily in France and defined as selecting only the top-rated issuers in the ESG criteria) is now coupled with a thematic approach to shares, bonds (green bonds) or diversified funds (green business). Funds also include unlisted securities like solidarity funds, and the financing of real estate or infrastructure projects (with environmental impact criteria).
Rising demand has driven us to roll out an increasingly diversified offer.
Photo : Béatrice Verger
I’ve noticed that SRI is a topic that speaks to millennials. For this generation, it’s important to find meaning in their investments, rather than basing their decisions on financial performance alone. It is estimated that 15% of investors under 35 are likely to decline an investment if the fund or company is involved in questionable activities, compared with just 7% of their elders. This is a generation that lived through the 2008 financial crisis and experienced the impact of derivatives on the financial system.
It is now facing all the challenges linked to climate change and its social consequences. For all those reasons, ethical and environmental concerns play a central role in their decisions. Millennials are also changing their consumption methods just as much as their savings habits.
SRI is part of a major shift in attitudes. It has changed the way we think about finance and responds to millennials’ demand for meaningful savings vehicles that support businesses which have a positive impact on the planet.
I’ve noticed that SRI is a topic that speaks to millennials. It’s important to find meaning in their investments, rather than basing their decisions on financial performance alone.
This group is often more interested in a thematic approach and “impact investing”, rather than funds that follow a classic best-in-class model. Millennials want to know the concrete impact of their investment by supporting several different causes—75% of them believe their investment can have an influence on climate change. Funds like BNP Paribas Aqua, which invests solely in businesses working on water issues, are thus a popular option. But this generation is also keenly aware of social issues. Eighty-four percent of millennials believe that they can use their investments to fight poverty. Our BNP Paribas Social Business France fund, which supports business that have a strong social impact, and BNP Paribas Human Development, respond to this aspiration.
We work to be as transparent as possible in our approach to responsible investing. We measure the carbon footprint of our funds and publish annual extra-financial reports to account for our actions and their concrete impact.
We work to be as transparent as possible in our approach to responsible investing.
Impact analysis is a concept that millennials care about more than their elders, because it allows them to measure their contribution to sustainability challenges. We also promote our climate strategy and concrete actions to reach the target set by the United Nations of a maximum 2°C temperature rise by 2050. We have 14 funds bearing the SRI label, a French government certification that guarantees the proper management of these funds. These certifications boost our credibility, as well as customer confidence in our products.
I’m convinced that accounting for ESG criteria in all investment decisions will become the standard practice. Financial decisions cannot be detached from social and environmental challenges. Millennials are the pioneers of this trend because, among all investors, they are the least skeptical and the most interested in these investments. They are eager to sing the praises of these solutions among their networks. Over time, their savings capacity will grow. SRI is expanding not just with millennials but because of them, as well as their new attitude towards “consumer activism”. As asset managers, we now have a crucial role to play. Only if we identify and implement real and observable solutions today will millennials continue to place their trust in us and support us in this approach. SRI is a social project: managers and investors must work together to have a concrete impact on the future.
Crédit photo : header ©ninelutsk