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[Podcast] Better understanding of responsible investing

The world of finance and investment is increasingly subject to the commands of sustainability and responsibility. But then, what is responsible investing? What are its prospects and what are its challenges? Decoding with Stephanie Chopin Ferrio, the financial expert responsible for the track podcast.

In the great transitional movement that is occurring to take better account of environmental and social issues, it is clear that funding is under pressure. New regulations are emerging (European classification, ESG rules, etc.), stakeholder expectations are changing. From now on, financing and investment must be responsible.

But then, responsible investing, what exactly is it? What are the famous ‘ESG’ standards? How can it be measured and determined? What are the challenges and prospects for this emerging responsible finance? To better understand this new world of responsible investing, the Trajectory podcast, created by Birdeo, People4Impact and Youmatter, welcomes Stephanie Chopin Ferrio, an expert on financial markets and so-called sustainable finance. After her career as an analyst and fund manager, she created her advisory firm ESG Evolution to support financial players in their sustainable investment policy. She answers Caroline Reno’s question in Episode 11 of Masar.

Understanding Responsible Investing

In recent decades, the awareness has emerged that the economic and financial system cannot function in a vacuum, locked in on itself. On the contrary, it must contribute to the improvement of society, and in the context of environmental and social transformation, this requires consideration of additional financial criteria in addition to the financial criterion alone. Concretely, this means that in the long run, finance must move from a model where its raison d’être is only to produce the accumulation of financial capital, to one aimed at enriching and maintaining financial capital, but also social and environmental capital in the broad sense.

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This change represents a real revolution in the financial model. Because the investment world is now expected to adopt rules and criteria for determining where to use invested money to improve our collective capital. Problem: The sector today still lacks these standards, and is not yet well regulated.

Responsible Investing and Finance, ESG: Many Approaches

So many styles coexist in this emerging world. Whether it is about excluding certain sectors from portfolios (the ones that pollute the most or least ethical) or favoring the most virtuous players, the approach is fundamentally different, and the social and environmental impacts it has as well.

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The common point of all these approaches is that they are based on an analysis of the so-called ESG criteria: Environmental, Social and Governance. It’s supposed to help identify the most virtuous players and those with a positive impact, yet it’s still highly debated, because the lack of standardization means that players in the sector don’t really have a solid methodology for comparing players. Unreliable ESG measurement methods remain unclear for most professionals, who also admit that they lack the skills to properly integrate this topic into their professional practice.

Future Challenge: Stay away from green washing, define methods

Thus, the sector today needs to structure itself and clearly define methodologies this time around to determine which investments are “sustainable” and “responsible” and which are not, in order to truly channel the money. It is necessary to get out of the green washing that currently dominates the sector, this structuring begins at the European level, with attempts built around the green classification: a classification of economic activities according to their environmental impact.

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The next few years will be crucial in terms of structuring the responsible investment and finance sector. It will be necessary to be especially vigilant so that the rules that are set make it possible to supervise and regulate such financing which has only served its own interests for a very long time, without regard to the public interest or its effects. Social and environmental.

photo by Marcus Winkler employment Unsplash

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