Damien Conce

SRI: What Positioning for Monaco ?

Damien Concé, Doctor of Law, Tech enthusiastic and loyal contributor to Wealth Monaco, offers us today his article on Socially Responsible Investment.

The history of Socially Responsible Investments (SRI) has its roots in the Quaker communities of the United States, which in the 18th century became “major economic players and owned the country’s main industries.»[1].

Their property ethics lead them to refuse to invest in businesses linked to the sale of slaves, weapons trade, alcohol and pirate activities. This way of investing will become institutionalized, a few centuries later, with the creation of a “Pioneer Fund” (1928) which will exclude from its field of action “sin stocks” (values based on sectors linked to trade of alcohol, tobacco, games, pornography…)[2]

During the second half of the twentieth century, this conception will evolve from a position of exclusion of assets towards that of shareholder activism and cross the Atlantic.

In 1971, the PAX WORLD fund was founded, which added to the exclusions of the Pionneer Fund those sectors linked to the armaments industries as well as companies with links to the apartheid government of South Africa. [3].

And in 1983, Nicole Reille sister [4] founded, in France, the association called Ethic and Investment[5] influencing the creation of Meeschaert Asset Management’s “New Strategy 50” fund, which embodies an activist vision of SRI based on dialogue and the influence of the companies benefiting from the fund’s investment.

Finally, since the last decade of the twentieth century, the United Nations has taken up the subject and established several principles and benchmarks for voluntary “reporting”: Rio Declaration on Environment and Development (1992); Global Compact (2000), Principles for Responsible Investment (UNPRI[6] 2006).

In Europe, the Commission has defined corporate social responsibility[7] such as “the voluntary integration by companies of social and environmental concerns into their business activities and their relations with stakeholders”.

Then in France, the PACTE law of May 22, 2019 provided a framework for companies’ voluntary commitments.

Monaco, for its part, left the greatest freedom to companies and some, like the SBM, have chosen to make commitments on the French SRI model..

In such a broad framework and with a definition encompassing all investment approaches that use “non-financial” criteria for the selection of securities in a portfolio[8], it is possible to distinguish different families / methodologies of SRI funds:

  • The Exclusions Methodology : sectoral exclusions (sin stocks) and / or regulatory exclusions (non-compliance with certain standards: labor law, parity, etc.);
  • The Activist Methodology : which aims to have an impact on a given company or a selected sector
  • The « Best-in-class » methodology : which selects the companies with the best results in a more or less restricted sector.

These different methods have in common that they are based on the work of social and environmental rating agencies, the most important in Europe being [9] : Standard Ethics, Vigeo Eiris4, RepRisk, Oekom, Triodos Bank, Novethic, Arcet Listing, EthiFinance, Gavet & Bacqué …

In november 2020, the European Association of Funds and Asset Management (EFAMA) has assessed[10], at around 11,000 billion euros, the volume of the investment market incorporating in one way or another an SRI criterion.

In this context, the Principality has shown its interest in these subjects by hosting not only the CC FORUM [11] which aims to bring together “the main institutional and private investors, policy makers, opinion leaders and innovative start-ups, united in their zeal to change the current economic paradigm and effectively make the world a better place”, but also the forum CleanEquity[12] which aims to “offer exceptional companies in terms of sustainability and resource efficiency a platform that will allow them to embark on the path of self-sufficiency” and thus achieve their SRI objectives.

But Monaco’s legitimacy in this area is undoubtedly found in the existence of a sovereign fund (Constitutional Reserve Fund) with an investment strategy in line with the Sovereign Prince’s commitment to sustainable development.

And perhaps between an event devoted to the strategists of the change of “economic paradigm” and another, dedicated to the self-sufficiency of “responsible” companies, there is room to make Monaco the place where meet the players in the teeming ecosystem of responsible finance carrying the Principality’s Green, Impact and Tech values.

Green / Impact / Tech 2021 DC investment fund ecosystem

Article: Damien Concé

Post Author: Wealth Monaco