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Sustainable Investment: Why it is a Good Bet
by Alice Audouin
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The socially responsible investment covers all the approaches which integrate social, environmental criteria or more largely responsibility with respect to the company, in the decisions of placement and the management of a portfolio of shares (generally of companies), in complement for the financial criteria.
These approaches can take various forms:

Sustainable development
The criteria are built on the basis of integration of three dimensions of the performance (economic, social, environmental), in the evaluation of the companies. From this general framework, detailed reference frames are made up, as well as a methodology to allow the collection of information and the comparisons between the companies of the same branch of industry. Some of the criteria can be privileged and weigh more in the choice of the companies selected.

Exclusion
The companies carrying on certain activities or some practice, considered to be contrary in itself with the convictions of the investor, are excluded from the portfolio. It is then a question of defining the thresholds from which a company is judged to carry on this activity (when that does not constitute its principal trade). The activities generally concerned with exclusion are the tobacco, the armament, alcohol, gambling... The practices considered as crippling can be the experimentation on the animals or the presence in a country directed by a dictatorship for example.

Shareholder Engagement respect
The requirement of social responsibility applies, either in the process of selection of the titles of the portfolio, but in the relation with the companies which make it up (use of the voting rights out of General Assemblies, pressure expressed in the relationship with the management).

Other approaches
Other types of approaches are proposed to investors in search of "ethical" placements: profit sharing funds and solidarity financial products. The first reassigns a share of the benefit to non profit associations or ONG and in general are invested in bonds, whose selection can be the criterion object of social responsibility. The seconds finance activities of interdependent economy: they are invested in companies of insertion, micro-credit or other projects interdependent, whose awaited output is generally lower than the market.

Among OPCVM SRI offered on the market some products comprise 10% of their budget affected with solidarity financing and are called "solidarity funds" (the remainder of budget can be managed according to socially responsible criteria's - as described above).

The usual language uses the term of "ethical funds" to indicate the financial products concerned with these various approaches.

In general, the SRI brings into play four principal actors: investor (institutional or particular), manager of funds (trust company which builds and manages a portfolio on behalf of the investors), the information provider specialized on the responsibility for the companies (notation agency or others, sometimes an internal team at the trust company) and, of course, companies (or other emitters), of which the shares compose the portfolios.

Alice Audouin is the Communications Director for Novethc.fr, a resource and expertise center for corporate social responsibility and socially responsible investment.
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