Our Foundation
Focus
Socially responsible investing means a portfolio not only composed based on the financial interest, but where also other considerations play a part. This type of investing can be based on a negative selection – non-investing in sectors and undertakings that develop specific, to the judgment of the investor less preferred activities or that do not meet certain quality requirements – or on a positive choice.
Increasingly a more positive and a pro-active approach comes up. In the last couple of years a series of investment funds for the ethical investor has been set up. These funds focus so far mostly on the aspect environment.
The positive approach can also be larger orientated on selecting the undertakings of their branch that are best in various dimensions of responsible undertaking (a best in class approach).
Such a large orientation can come together with an aim at an optimal profit of the investment in the long run, from the philosophy that social responsible enterprise is a prerequisite to book good financial results in the future. As long as the selection conditions are not too restrictive and allow for investments in a broad and balanced compound portfolio, in practice probably a result will be booked comparable to investing in the relevant index. A positive spiral can come into being when the group of investors led by Triple P, will exceed a critical mass.
Also in financial services the interest in aspects of sustainability has grown. The United Nations Environment Programme – a declaration of banks concerning the environment and sustainable development – establishes that the financial service industry is an important party in the strive for sustainable development. Signers of the declaration strive for a preventive approach, focused anticipating and preventing potential degradation of the environment, and acknowledging that identifying and quantifying of environmental risks are part of the usual process of risk analysis and risk management.
In practice it has turned out that the environmental risk of a costumer can become a financial risk to the bank. Besides, banks can – at least in the US – in certain circumstances be held responsible for damaging the environment by a relation. In the meantime, several banks pay attention to possible environmental risks when reviewing applications for credit.
Based on that they can proceed to rate differentiations. Some banks (including Swiss) take a step further and use their function as financial intermediate to stimulate sustainable development also by non-risk premium differentiation.