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Impact investing is gaining momentum

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For the past year, financial products have been classified according to their sustainable investment objective. In force since March 2021, the European SFDR regulation (Editor’s note: Sustainable Finance Disclosure Regulation) has enacted clear rules. In particular, it defines two categories of products: those which “promote environmental and/or social characteristics (known as “article 8”) and those whose objective is sustainable investment (known as “article 9”)” explains the AMF. So-called “article 9” funds are the most demanding: they have a quantifiable sustainable investment objective, must explain their methodology and be transparent about their extra-financial performance. “We offer our clients several article 9-classified investment solutions, including a management mandate invested in listed shares or direct investment in private debt funds such as BlueOrchard Microfinance,” says Olfa Maalej, member of the Neuflize OBC management board. .

In the field of private equity, France took this path early on. “I have been working on this concept since 2007. The idea is to invest in companies that are useful to society. Capitalism seems to me the most efficient economic system, judge believes Fanny Picard, founder of Alter Equity, a private equity company pioneering impact investing. But liberalism has gone too far in maximizing shareholders’ profit, underweighting the interests of employees, consumers and the environment. »

Methodology. It has developed a very precise company selection methodology. “We only invest in start-ups whose activity is useful to society and we ensure that the negative consequences of their activity are as limited as possible. We also require that the companies in which we invest commit to a process of progress by improving their CSR practices. A company that does not respect its employees, pollutes or does not pay its taxes, could not be selected, even if it contributed to the energy transition”, emphasizes Fanny Picard. Companies in which Alter Equity invests must commit to a decarbonization policy and open up their capital to all their employees.

“There is still quite a bit of social impact funding. It is more difficult to find companies and projects with a social impact than an environmental one, because the measurement of the social impact is more complicated than that of CO2. And because the return on social impact investments is often lower”

Impact finance, through its requirements, contributes to advancing practices and better informing investors. “Companies must of course remunerate the risk taken by subscribers, but they must also be concerned about the consequences of their activity on employees, consumers, the environment and society. We focus on financing companies that have a measurable positive impact”, adds the one who raised 40 million euros for her first impact private equity fund in 2013 and who has just raised 110 million euros in a second fund of the same type. Some of the first stakes taken have been resold with a financial return of up to 400%, proof that impact finance can rhyme with profitable investment.

social pact. “Finance becomes virtuous for society if it supports companies that have a positive impact. It is destructive if it invests in companies that create damage for society or for the environment”, sums up Fanny Picard. In the long term, these virtuous companies that take into account their environment and society should be better investments than the others. In terms of CSR, however, all players recognize that the S for social remains more difficult to implement than the E for the environment. “There is still quite a bit of social impact funding. It is more difficult to find companies and projects with a social impact than an environmental one, because the measurement of the social impact is more complicated than that of CO2. And because the return on social impact investments is often lower,” acknowledges Fanny Picard. However, it will be necessary to advance the two subjects, environmental and social, together. “The current pressure on purchasing power, social suffering show that we need a social pact to support the energy transition. Without this pact, we will not be able to make this transition,” emphasizes Fanny Picard.

Some big names in finance, such as Sir Ronald Cohen, founder of Apax Partners, Harvard professor and chairman of Portland Trust and Bridges Ventures have been working for years to publicize impact investing. “We need to increase transparency on the impact of companies. Today companies communicate about their positive impact, but they say nothing about their negative impact,” he confided in an interview with L’Opinion in the fall of 2020. “After 250 years of capitalism, it is clear that the invisible hand of the markets is not beneficial. It is time to introduce impact measurement to bring things back into balance. We can change the situation and correct the failings of our economic system”.

The ball is in the investors’ court. “When a group creates more harm to society and the environment than its benefit, buying its product makes no sense. The consumer and the investor must be aware of this. They are the ones who by their attitude, their choices, their rejections will pull companies up. Thinking in terms of impact changes everything”, summarizes Sir Cohen.





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