Geneva Forum: promote transparency
Last Thursday, the seventh edition of the Geneva Forum For Sustainable Investment (GFSI) was held in Geneva. The interest in sustainable and responsible investment is clearly increasing in the major financial centers as well. The Swiss financial industry wants to present itself as indeed sustainable.
This year the forum was marked by transparency. This was mainly the result of the new Swiss law of 2015, which requires foundations that their investments are transparent and remain consistent.
To begin with, it is certainly interesting to look at the survey conducted by the organizers every two years with their members (more than 330), and mainly in French-speaking Switzerland.
Two-thirds of respondents today adopts criteria on environment, social welfare and corporate governance (ESG). The shares remain the most important asset class on which they focus, although in the future the criteria will be included in all asset classes.
The methodology regarding responsible investment keeps improving, but exclusion, thematic approaches and impact investing remain the most important.
Another finding of the survey is that a large gap exists between the demand from retail investors, who is more focused on the ethics of their investments, and the question of institutional investors, which also focuses beside ethics in the management of risks in the long term.
Historically, the demand from clients has been the main stimulus for investment managers to incorporate responsible investment strategies in their range. Today also the reputational risk ensures that ESG criteria are becoming more integrated, and therefore 64% of respondents said their share of responsible investments will go up in the coming years. Two years ago it was only 50%.
There is unanimity on the fact that things evolve ever more quickly. And as a participant told the forum: responsible investors are no longer regarded as the old hippies of the financial industry.
Our lecture also went along these lines: responsible investing is becoming a genuine management tool and allows to identify global risks.
Remember that according to the 900 members and experts of the World Economic Forum the purely economic risks are not the most important ones. If we focus on the cartography of the three main risks by continent, then risks on social, technological or environmental field are more important than the economic risks. On the North American continent the economic risks are not even the most important ones.
Source: World Economic Forum 2016
The expertise on responsible investment in recent years has become quite mature. The information both in terms of quantity and quality improved significantly. This increases awareness and further perfects the approaches and methodologies.
While no magic solution exists for everyone, as responsible investment also applies to individual values, our learning curve of the past decade clearly indicates that it is important:
- to see investment strategies in the medium and long term;
- to incorporate sustainability criteria into the strategies;
- to develop valuation methods that integrate sustainability challenges;
- to focus on the need to provide material problems and measurable and tangible solutions.
In the face of growing individual and collective awareness and growing activism among investors and individuals, sustainable management is hopefully more than just a niche for specialized investors. Ideally, the approach is totally integrated within a global approach that is understandable and accessible to all, with a real impact on the functioning of the economic system.
Taking initiatives to promote transparency is an important step in this direction. Creating value by promoting best practices to make the financial system more sustainable is of great importance. Let's applaud that one of the major financial centers takes this matter to heart.