Lombard Loan: the flexible financing solution…
Holding a portfolio consisting of financial assets, and then having to sell it in part or in full in order to have access to cash on an ad hoc basis, can lead…
Carlo: Let’s start at the beginning! Loïc, could you explain the United Nations-supported Principles for Responsible Investment (PRI) to us?
Loïc: It all began back in 2006, when these investment principles were created by a United Nations initiative aiming to promote and develop a more responsible financial system from an environmental, social and governance viewpoint, ESG in abbreviated form.
There are six main principles to which signatories undertake to adhere to. First, all the signatories commit to incorporating ESG issues into their investment decision-making processes. Second, they also undertake to incorporate these same ESG issues into their ownership policies and practices. Third, the signatories set further requirements for the companies in which they invest, seeking appropriate disclosure from them on ESG issues. Fourth, signatory companies will promote acceptance and implementation of the PRI among asset managers. Every signatory is expected to work together with financial sector operators committed to complying with the PRI in order to enhance their effectiveness. And lastly, signatories will each report on their activities and progress towards implementing the PRI.
In short, the signatories of the Principles contribute to these sustainable developments, and undertake, in concrete terms, to incorporate responsible factors not only into their investment decisions but also into their ownership practices. And to complete the picture, it is important to note that these principles are intended to be voluntary, and their implementation must be covered in an annual report to UN PRI.
Carlo: So we’ve now clearly established the framework. Thank you, Loïc. And the reason why this UN PRI certification is crucial for BCEE Asset Management (now Spuerkeess Asset Management) is obvious. Being a signatory enables us to publicly demonstrate our commitment to responsible investment while placing us within a community working towards this goal. In addition, this approach highlights the importance we place in non-financial factors when valuing securities.
We know that investors are increasingly demanding “responsible” management. This means they want to ensure that their assets are channelled towards companies or funds holding securities that they themselves wish to hold. ESG issues are becoming increasingly important to investors, and increasingly of interest to the public. The latest G7 is the most recent example, showing us once again that the environment is a major political issue.
We believe that offering responsible management certified by an organisation of the size of the United Nations represents real added value, both for the company and its customers.
We should also point out that risk management is of increasingly vital importance and must take into account ESG criteria, which incorporate risks relating to supply chain management, environmental impact and regulatory changes among others, which represent new opportunities and new risks for the company in question.
Loïc: When you put yourself in your customer’s shoes, you realise how important this certification is. It clearly seems to be the key factor that assures them that responsible criteria are actually being taken into account in the selection of companies in the portfolio. As a result, customers can be sure that their investments are focused on assets that are both profitable and that reflect their social values.
By adopting this approach, we are contributing to global well-being whilst benefiting from the long-term performance created by implementation of these non-financial factors. How does this work in practice? Well, we incorporate ESG issues into our analyses, so the valuation of an asset is more comprehensive and can enable us to exclude securities whose reputational or regulatory risk would be too high. So, responsible investment should not be considered as simply a constraint, as it is a real creator of added value.
Carlo: Exactly! Without forgetting the most important thing: this certification reflects our commitment to seeking more transparency and action from the companies in which we invest. Of course, charity begins at home, and this approach makes us systematically more transparent and prompts us to disclose our progress in responsible investment.