SOCIALLY RESPONSIBLE INVESTMENT

BACKGROUND
SRI is
An investment management approach which integrates Environmental, Social and Governance (ESG) criteria in traditional financial analysis. This approach often connotes collaborative engagement with businesses on such issues.
SRI in France
SRI in France is characterized by a 'best in class approach' which consists in selecting the leading companies from each industry group based on specific ESG criteria. Today, 50 asset management companies (both French and foreign) offer roughly 200 SRI funds on the French market. Six asset management firms manage more than a billion euros each, mainly in the form of mutual funds: Allianz Global Investors France (formerly AGF AM), AXA Investment Managers, BNP Paribas Investment Partners, Crédit Agricole (grouping C.A. Asset Management and I.DE.A.M.), Dexia Asset Management and Natixis Asset Management.
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Trends in the European SRI Market
Europe represents the most dynamic region when it comes to the creation of SRI funds. This development has taken place within different national contexts. Today, the growing engagement of institutional investors, favorable legislation and the rising credibility of SRI in the financial community are the main drivers of the SRI market in Europe.
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SRI in North America
SRI in the United States
The SRI market in the United States often emerges as a model of development. SRI dates back to an earlier period: the first American SRI fund, Pax World Fund, was created as early as 1971, about 10 years before the first French SRI fund. Also, the size of the market is theoretically more important: 12 percent of assets are managed through a socially responsible approach, while that proportion is less than 1 percent in France. However, we must put this in perspective since the US definition of SRI is broader.

The US Social Investment Forum has identified three types of SRI approaches in the United States:
  1. Screening - Consists in selecting companies based on ESG criteria. Positive screening entails rating the company on a number of ESG issues, while negative screening applies exclusionary criteria which ultimately determine whether the company will be retained or not. For example, all companies that derive more than 5 percent of their revenues from the weapons industry will be excluded from the investment universe.
  2. Shareholder advocacy - Consists in engaging with the companies in which one invests, and to propose or support resolutions at Annual General Assemblies (AGMs) in order to bring about more responsible practices.
  3. Community investment - Investment which seeks to create wealth in economically deprived or under-developed areas either in the United States or in developing countries.
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SRI in Canada
SRI is a concept that emerged in Canada in the 1980s. Originally based on the exclusion of a number of sectors, it now encompasses different approaches, such as shareholder activism, the integration of SRI criteria and the selection of companies well rated on these issues. Two dominant SRI areas have arisen in Canada: community investment and capital risk linked to sustainable development.
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SRI in Asia
Asia is an area where SRI is growing, although its expansion greatly varies from country to country. Corporate governance and environmental issues are the dominant themes. An ethical dimension through negative screening is burgeoning in countries where Islamic Finance is taking place.
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