Sticks and carrots: investing ethically works better when you finance projects
SRI funds are popular with investors with a conscience. However, the impact of these funds on corporate behaviour is limited, at best. Only active engagement can bring about durable change and measurable benefits. LFF interviews Philippe Depoorter, Secretary General at Banque de Luxembourg about SRI investing.
What can the man in the street do to invest in sustainable assets?
There is no lack of financial products that invest in sustainable energies, the environment or humanitarian projects. We too have a successful SRI-fund, but clients that invest in it should be aware that their real impact is limited. SRI-funds seem to have become a “must-have” for ethically-minded investors. But, at the end of the day, what difference does it make to the world?
What is the alternative?>
Impact financing offers a realistic alternative. In contrast to SRI funds, impact financing vehicles aim to offer financial and social benefits with a measurable impact for the investor. Favoured instruments are microfinance vehicles: social private equity funds sometimes wrapped into SIFs (specialised investment funds).
Microfinance is closer to impact financing than to SRI funds, because the money collected is passed on to finance or help finance projects in the field, like a hospital for instance. Since the target institutions are known, identifying with the investment is much easier. There is a logic in it. The client is able to measure the assistance he provided to a concrete project.