Dince the early 1970s, numerous initiatives have sought to integrate social and environmental dimensions into financial professions. This movement has accelerated significantly since COP21 (2015) and the launch by the European Commission of the action plan on sustainable finance (2018). But, despite the wide diffusion of the concept, there is still no consensus on how finance can contribute to the emergence of a more positive economy. Several labels have emerged in different European countries, but they have very different specifications. And the latest European texts, which could have been used to better structure the market, are so vague that even specialists in the sector struggle to find their way.
This situation has led to widespread confusion and accusations of greenwashing. from one actor to another. To remedy this situation, the Commission plans to overhaul the entire product classification system. The objective is clear: to better structure the market and thus give savers the opportunity to better integrate environmental and social issues into their investment choices. To do this, the Commission could recognize four categories of responsible investment.
First big family: exclusion policies. It has become very common for financial players to exclude certain sectors, such as unconventional weapons (cluster bombs, antipersonnel mines, chemical weapons), unconventional fossil fuels (shale oil and gas, offshore drilling, Arctic ), the tobacco. Some go further by excluding any investment in new fossil fuel projects, in military equipment that could be used by non-democratic countries or, more generally, in companies that do not respect human rights. If exclusion is considered the bare minimum by many savers and NGOs, most responsible finance players seek to go further.
Direct the flows
Second big family: financing companies or projects providing solutions to major sustainable development challenges. On environmental issues, there are countless funds available to finance renewable energies, energy efficiency, green mobility, hydrogen or the preservation of natural capital. This approach has the merit of simplicity. Faced with colossal investment needs, it is relevant to direct capital flows towards these projects. The main obstacle to the emergence of these funds is linked to financial considerations: these investments only cover a limited part of the economy. As financial theory encourages diversifying one’s investments to optimize returns and limit risks, this type of approach is often just one building block in a more global asset allocation strategy.
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