Responsible Investing - The Rising Tide


  • Published on Published on March 10, 2018
Dave Rae

Dave Rae

Serious momentum is building in the responsible investment space. According to the Responsible Investment Association Australasia (RIAA), 9 in 10 Australians expect their super/investments to be invested responsibly and ethically. This is no longer a fringe issue.

The trend is the same in the US. The Sustainable Signals survey by Morgan Stanley last year, found 75% of active investors (and 86% of millennials) describe themselves as being interested in sustainable investing.

Recently the head of Blackrock, Larry Fink wrote in his annual letter to CEO’s:

What a significant statement from the largest fund manager in the world!

In Australia, fund managers such as Perpetual, Australian Ethical, BT AMP have offered sustainable or ethical specific investment options for some time. But in recent years there have been some new entrants. These managers are questioning the idea that investing is just about making money: 

Nanuk Asset Management

“Nanuk believes that resource constraints and environmental challenges like climate change, pollution and water scarcity necessitate significant changes to business practices globally and that these changes will present significant long-term investment opportunities and risks”

Eight Investment Partners (Impact Fund)

“8IP Australian Equity Impact Fund is designed for investors seeking to invest in Australian companies that are solving the world’s problems. Using our proprietary impact measurement process, we direct capital to ASX listed companies that are solving the world’s social and environmental problems” 

Impact Investment Group

“Our mission is to shift capital towards investments that blend financial returns with deep social and environmental impact, and to lead by example in using all of our resources to create the world we want to live in”

And as recently reported in the AFR, former head of Perpetual Ethical SRI fund Nathan Parkin is setting up Ethical Partners Funds Management and aiming to raise $3billion.

I expect we’ll see an explosion in new funds in the sustainable/ethical/impact space over coming years. But investors will need to take a close look under the bonnet.

Firstly to make sure a fund is aligned with their values. This can take a fair amount of work. It can also be a case of the more you learn the harder it gets. But research and guidance from experienced investors are invaluable.

And secondly to make the investment is true to label and not (deceptively trying to sound responsible/ethical).

And you know what, it feels bloody good to know you are investing in companies, ideas technologies that are making the world a better place now and for our future.

What do you think? Do you invest in responsible options? Are you considering it?

You can read more of my articles here.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.



Reporting for IMPACT

ICAS is a professional body for more than 20,000 world class business men and women who work in the UK and in more than 100 countries around the world. Our members have all achieved the internationally recognised and respected CA qualification (Chartered Accountant). We are an educator, examiner, regulator, and thought leader.


Sustainability Accounting Standards Board (SASB)

The SASB is an independent standards board that is accountable for the due process, outcomes, and ratification of the SASB standards, including any changes to the standards going forward. Members of the SASB are appointed by the SASB Foundation Board of Directors. The SASB operates in a sector committee structure, which assigns a minimum of 3 board members to each sector for reviews, discussion, and liaising with staff.    

Jean Rogers, PhD, PE
Founder and Former CEO, SASB
Chair of the SASB Standards Board
Sector Chair for Infrastructure

The High Level Group on Sustainable Finance submits its report to the European Commission 1/31/18

Article by Zaouati

Full report here 


The High Level Expert Group (HLEG) on Sustainable Finance set up by the European Commission, of which I had the honor to be a member, publishes its final recommendations today. After a year of work, we are collectively proud of the result, which will enable the Commission to launch an ambitious action plan to put finance in Europe - and beyond – at the service of sustainable development. The Paris marketplace should be at the forefront of this ambition.

 The release of this report is highly significant, because it is certainly the most comprehensive and ambitious action plan in the world that has been published on sustainable finance so far.

The recommendations that have just been delivered to the Commission revolve around several axes, with eight transversal recommendations identified as the most urgent and operational, and twenty other recommendations intended to consolidate our ambition in the long term. All of them are important, since we put forward a global approach of transformation of the financial system in the service of a more sustainable and inclusive society. I would like to detail, however, three of these recommendations, which illustrate the spirit of our report and which, in my view, can help to change the situation rapidly.

A keystone: the European taxonomy of sustainable assets 

The first recommendation, the keystone of many other proposals, is the development of a taxonomy of sustainable assets at the European level. Its objective is to answer the recurring question "in which sectors should we invest to finance the transition? ", and to respond to the risk of greenwashing by defining the notion of an asset favoring sustainable development. We expect the European Commission to first define the sustainable assets in the area of climate mitigation. In a second step, this taxonomy should be extended to other environmental and social aspects. It is essential for Europe to agree on this classification. China, for example, has already enacted its own taxonomy.

This taxonomy will contribute to the creation of standards and labels for sustainable finance products. This will be the case for green bonds, but also for investment funds intended for the general public. The report clearly recommends it. This could pave the way to imagine at a later stage standards for bank loans, or the definition of the "green" part of the activity of a listed company, and therefore green market indices that comply with this taxonomy. 

Involving citizens and end investors 

This evolution is even more important since the labeling systems are of great interest to citizens who are also savers. A green label will help them target investment products in favor of the energy and ecological transition. There is a real expectation from citizens and civil society, which is regularly demonstrated by opinion studies. The creation of demanding labels is a way of not disappointing them.

The recommendation of the report that is the most important to me is therefore the one concerning savers, the "retail package", which proposes a set of measures intended for the mobilization of citizens. First, we propose that retail investors to be systematically consulted by their investment advisor about their sustainability preference, and not only about their risk preferences, as currently required by the MiFID Directive. Second, it will be necessary to provide more complete and accurate information to enable savers to better choose their investments. The so-called "responsible" products (ISR, ESG, green, etc.) are very numerous today on the market, but when citizens have access to them, they cannot always check neither the ingredients nor the recipe. We recommend that only products meeting minimum quality criteria to be qualified as responsible. The French Financial Market Authority (AMF) has favored such development in its latest report on SRI. Finally, we support the creation of an eco-label for financial products intended to the general public, as has been done in France with the TEEC label (Energy Transition and Ecological). 

Enhanced transparency  

A third key aspect of the report is stakeholder accountability and transparency. The HLEG recommends integrating the consideration of environmental and social issues into the fiduciary obligations of investors. In other words, to make investors responsible for their impacts.

On the issue of transparency, we have relied on existing work and regulations. First, the recommendations of the TCFD (Task Force on Climate Disclosure), which published its final report in July. The TCFD recommends the publication of a climate reporting and sets an extremely precise framework on the reference documents that companies should provide (governance, strategy, risk management and indicators used). Nonetheless, this communication remains voluntary. Conversely, in France, the article 173 of the Ecological and Energetic Transition law requires institutional investors to communicate how they integrate climate-related risks. Lastly, the Non-Financial Reporting Directive (NFR) applicable since January 1, 2017, applies to public and private companies in the 28 EU Member States. A review of this directive is scheduled for the end of 2018: this is an opportunity to give the EU a more appropriate transparency regime. Our recommendation is to build upon these existing blocks in order to attain a level of transparency that is commensurate with the information needs of the financial system regarding the transition. We therefore suggest, on the one hand, extending to the European level the experience of Article 173 for financial institutions, and on the other hand, encouraging the voluntary implementation of TCFD recommendations by non-financial companies, before making them mandatory by 2020. We want to be both pragmatic and ambitious.

A green supporting factor ? 

The report did not put an end to all the debates. The "green supporting factor", initially proposed by the French Banking Federation (FBF) and taken over by the European Parliament, consists in reducing the capital requirement of banks for the financing of the energy transition. This idea is explicitly mentioned in the report, but we have not reached a consensus. Some members consider that prudential regulation should remain exclusively dependent on the risks taken by banks and that there is no evidence at this stage that green assets are less risky than others. Others consider that the risk induced by non-durable assets should be penalized as a priority before removing the constraint of banks. Others finally consider that both options should be examined.

I personally supported the introduction of a Green Supporting Factor that would send a strong message to the banks, which are the main financiers of the European economy. In my opinion, it seems difficult to state that climate change induces systemic risks for the financial markets while omitting to take them into account in banking regulation. European Commissioner Valdis Dombroski has declared himself in favor of applying such a mechanism. It is now up to European political leaders to decide.

Towards an ambitious action plan at the European... and French level

The Commission has already announced that it will present an action plan for sustainable finance in March 2018. This goes far beyond what we expected when the work of the HLEG started, and here we must salute the courage of the Commission to take stock and action very rapidly, despite a particularly constrained calendar and political and institutional context. We hope that the Commission will not only repeat a few emblematic measures, but rather that our work will lead to a deep change in the vision of the role of finance.

This underlying trend must obviously be relayed at the level of Member States. In France, the Ducret-Lemmet report, published in December, which fueled the first announcements of the Minister of the Economy during the Climate Finance Day, is a chance. It poses the foundations of a renewed financial system. The Paris marketplace has a real know-how and a very rich ecosystem in green finance. Several of the HLEG report's recommendations are based on French examples. We must remain at the forefront and continue what has been started in recent years. Building a niche will not be enough: green and sustainable finance 

IMPACT investing

IRIS is managed by the Global Impact Investing Network (GIIN), a nonprofit organization dedicated to increasing the scale and effectiveness of impact investing. The GIIN offers IRIS as a free public good to support transparency, credibility, and accountability in impact measurement practices across the impact investing industry.