Responsible investment arouses the enthusiasm of savers who direct their capital towards sustainable investments to meet societal and climate challenges.
According to the French Association for Financial Management (AFG), responsible investment represented € 1,860 billion at the end of 2019 with management companies becoming increasingly involved, taking ESG criteria into account in the constitution and management of their funds.
28 labeled real estate funds
In 2016, France adopted a framework to certify sustainable funds with the creation of the SRI label. Since then, 870 funds representing an outstanding amount of 693 billion euros have displayed the label, which was extended in November 2020 to real estate funds (SCPI and OPCI). 28 real estate funds now have the label for an outstanding amount of 23 billion euros.
Eligibility for the SRI label requires compliance with specifications coupled with an obligation to report to investors, to measure the achievement of SRI objectives by the fund.
For SRI real estate funds, the management company must, upstream of the labeling, define an investment strategy integrating the 3 ESG pillars (environmental, societal, governance). While each manager has the option of weighting these three pillars with regard to the fund’s strategy, by favoring one of the pillars, he nevertheless has minimum objectives to achieve for each of the three.
A strict label that can be withdrawn in the event of non-compliance with the objectives
In general, real estate funds favor the environmental pillar with an approach Best-in-Progress to renovate or rehabilitate the existing building stock, a significant part of which emits a lot of greenhouse gases.
But real estate funds can also take an approach Best-in-Class aiming to maintain the performance of assets over the long term, especially when it comes to new or recent assets.
Whatever approach is adopted, the manager must put in place a three-year improvement plan with minimum objectives to be achieved on each of the ESG pillars which are reflected in an evaluation grid incorporating a certain number of extra-financial criteria.
Then, it has the obligation to publish annual reports to investors presenting the improvement of these extra-financial criteria (published on the website and in the regulatory documentation).
Controlled each year to monitor the progress of this improvement plan, the manager will be re-audited after a period of three years and the SRI label may be withdrawn if the objectives set are not met.
Voluntary legislation and increasing transparency of sustainable investment …
This strengthening of transparency is also defined at European level with the application in March 2021 of the Disclosure regulation (read framed) which obliges financial actors to communicate on the negative impacts of their investment decisions. This text will be completed in January 2022 with the gradual application of the Taxonomy regulation (read framed). This last text really lays the foundations for the European Union’s green strategy by proposing a framework for assessing the sustainability of each activity.
Taxonomy, on which arbitrations still have to be made in the coming months, obliges financial players to structure their responsible product offer through standardization at European level.
The benefits are twofold: increased transparency of financial products which allows savers to make informed choices in their investment decisions and indirectly to fight against the “greenwashing” practices applied by certain financial players to market their products. products.
On the real estate side, from January 2022, developers will have to apply the 2020 environmental regulations which aim to improve the energy and carbon performance of buildings. This new regulation reinforces RT 2012 and will be supplemented from September 2022 by the tertiary eco-energy system which is particularly binding for the existing fleet.
Regulations are being tightened up and are forcing developers and managers to rethink their relationship to construction and maintenance by favoring, for example, more ecological materials and actions to renovate buildings.
Management companies must continue to be proactive in drawing up their improvement plan for existing buildings and in their choice of acquiring new buildings, in order to offer performance and meaning to savers, increasingly. mindful of the ecological transition and the social impact of their investments.
… but there is still educational work to be done with investors
According to an Opinion Way study of 2021 *, the French are concerned about the issues related to climate change. 76% say that the impact of investments on the environment is an important subject.
However, only a third of French people have a good image of responsible finance. This finding tends to show a certain popular distrust partly linked to the lack of financial education, but also to the various scandals that regularly shake the world of finance.
However, savers can now actively participate in financing the transition of our development model by directing their savings towards sustainable investments.
To this end, the European directive MiFID 2 (read framed) should make it possible to better assess investors’ appetite for extra-financial criteria, in the same way as their risk appetite is assessed.
But, it will be important to carry out educational work to make individuals aware of responsible finance by offering educational tools such as podcasts or popular videos intended to explain the major role of finance and real estate in the transition. towards a more sustainable world. The allocation and operation of the SRI label must also be detailed.
This awareness-raising work involves training financial advisers who act as the interface between managers and savers. It is necessary to support them by providing them with a sufficient level of knowledge to guide individuals in their investment choices.
The AMF offers a training module on green finance accessible to all. In short, a lot of things still need to be done to give or restore investor confidence and make this SRI label known, which reflects a real commitment to more responsible finance and investments!
* OpinionWay survey for the AMF: The French and responsible investments, July 2021
The EUROPEAN ESG FRAMEWORK
Disclosure Regulation : Disclosure establishes harmonized sustainability transparency rules, requires disclosure of sustainability information at entity and product level.
Taxonomy Regulation : Taxonomy creates a classification system to identify economic activities considered environmentally sustainable, provides investors with more visibility on the level of sustainability of an investment and thus limits the risks of greenwashing.
MiFID 2 : The distributor subject to the MiFID2 directive must assess the compatibility of each financial instrument with the needs of its customers, in particular in relation to the target market. It aims to strengthen the protection of investors vis-à-vis financial institutions, as well as the transparency of markets and transactions. The result is clearer information and better control of the risk for the customer.