Pioneering companies have taken a leading role in their sectors by changing their business models, reducing their environmental footprint and increasing their positive social impact.
The Financial industry has also accelerated these trends by financing sustainable business plans and driving profitable growth. Investors (Asset Managers, Pension Funds) have made bold commitments to ensure their investments follow this direction.
As a result, a new financial asset class has emerged: Socially Responsible Investing (SRI). This segment development has been originally fueled by the Green Bonds, typically used by companies to finance their green projects (renewable energies, water sanitisation, etc…)
Today, SRI has become a mainstream way for investors to channel capital towards climate action, and corporates are quickly turning to them to fund the transformation of their businesses. SRI assets under management have reached a new high of over $1tn, and ESG-focused investment attracted net inflows of over $70bn globally between April and June 2020 alone.
More recently, transition towards a low carbon economy has also been financed by the newly emerging Sustainability-Linked Bonds (SLBs), which can be customized to the specific needs of the different sectors. Channelling the notion of ‘what gets measured gets managed’, SLBs bring scientific and trackable metrics to accelerate the decarbonisation of issuers’ business models. Investors like the transparency of bonds structured on science based targets, as evidenced by consistent oversubscription. CHANEL – the prominent luxury company – has demonstrated its leadership in the SRI space by pioneering €600m sustainability-linked bonds in September 2020.