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Impact funds, the future of “sustainable” finance?

In the family of sustainable finance funds, ask for impact products! Far from being limited to ESG practices (emphasizing criteria related to the environment, social and governance) of companies, these target a specific objective, for example limiting global warming, reducing social inequalities, giving access to education for as many people as possible, preserving biodiversity, etc.

They often intend to meet one or more of the United Nations Sustainable Development Goals. “Impact funds are interesting because they force you to define the desired impact and the path to achieve it”judge François Soulage, president of the ethics committee of Kaori, an association of savers created by Secours Catholique-Caritas France.

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According to the French Financial Management Association (AFG), 46% of management companies declared managing impact funds in 2021, for assets under management of 60 billion euros. A drop in the ocean of French asset management, but a very strong increase in the amount over one year (+148%). This figure is nevertheless subject to discussion, given the difficulty of precisely defining this management. Each company has its own methodology.

In March 2021, Bruno Le Maire, Minister of the Economy, and Olivia Grégoire, then Secretary of State in charge of the social, solidarity and responsible economy, launched a consultation with Finance for Tomorrow to “promoting consolidation and nurturing the development of impact finance in the Paris marketplace”. Reports were then published to precisely define the contours of this approach, presented as the ultimate in sustainable investment, which agree on three pillars: intentionality, additionality and measurability.

Difficult to prove

According to the trade association Finance for Tomorrow, intentionality “corresponds both to the financial player’s desire to contribute to generating a social and/or environmental benefit and to [celle de] the financed company which has set at the heart of its business model the achievement of one or more sustainable development objectives”.

Several reports have been published to define the contours of this approach, which agree on three pillars: intentionality, additionality and measurability.

Last year, the Responsible Investment Forum (FIR) and the professional organization France Invest, together with sixty management companies, drafted a common definition of impact management. They indicate that intentionality is “what differentiates impact investing from other responsible investment approaches” because “The investor therefore pursues a dual objective of financial performance and impact”.

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