There are several motivations for sustainable, responsible and impact investing, including personal values and goals, institutional mission, and the demands of clients/investors, constituents or plan participants, religious, charity purposes.
Sustainable investors aim for strong financial performance, but also believe that these investments should be used to contribute to advancements in social, environmental and governance practices.
Some investors embrace SRI strategies to manage risk and fulfil some fiduciary duties; they review ESG criteria to assess the quality of management and the likely resilience of their portfolio companies in dealing with future challenges of the planet, of a community, the Society... others are seeking financial outperformance over the long term.
What kind of SRI investments?
Building a Windfarm, Solar plants, Biomass factory, … to generate clean or renewable energy
Strategy to avoid Pollutions or Toxics effect on the environment
Treatment of Water use and conversation
Investment in the Climate Change, Carbon
Clean Technology for car, truck, fleet, plane, ships
Investment Fund managers who invest in companies who respect Anti-corruption policy, Human rights
In holding investing in Avoidance of harmful product (petrol, tobacco)
It can also be investment in the Community development, Labour relations, to create a safe Workplace
Are you a SRI investor?
SRI investors comprise:
Individual Investor including average retail investors to very high net worth individuals as part of their savings or retirement plans—in mutual funds that specialize in seeking companies with good labour and environmental practices
family offices
Credit unions and community development banks that have a specific mission of serving low- and middle-income communities
Hospitals and medical schools that refuse to invest in tobacco companies
universities, foundations, pension funds, non-profit organizations
Foundations that support community development loan funds and other high social impact investments in line with their missions
Religious institutions that file shareholder resolutions to urge companies in their portfolios to meet strong ethical and governance standards
Venture capitalists that identify and develop companies that produce environmental services, create jobs in low-income communities or provide other societal benefits
Responsible property funds that help develop or retrofit residential and commercial buildings to high energy efficiency standards
Public pension plan officials who have encouraged companies in which they invest to reduce their greenhouse gas emissions and to factor climate change into their strategic planning
There are in parallel hundreds of investment management firms (AIFM) that offer SRI investing funds and vehicles for SRI investors.
What are the fastest growing areas of sustainable and responsible investing?
The assets to which money managers apply ESG criteria have increased significantly from $4.8 trillion in 2014 to $8.1 trillion in 2016. The significant growth in ESG assets reflects demand from individual and institutional clients, growing market penetration of SRI products, the development of new products that incorporate ESG criteria and the incorporation of ESG criteria by numerous large asset managers across wider portions of their holdings.
New online platforms have helped lower barriers of entry for investors seeking opportunities to support CDFIs and other community-related investments.
Green bonds are also created to encourage sustainability and the development of socially responsible projects. More specifically, green bonds finance projects aimed at energy efficiency, pollution prevention, sustainable agriculture, fishery and forestry, the protection of aquatic and terrestrial ecosystems, clean transportation, sustainable water management and the cultivation of environmentally friendly technologies.
Why Luxembourg - two options to invest in SRI
1)The Funds:
SLP: a Special Limited Partnership can be setup as a co-investment vehicle or as an Alternative Investment Fund.
The SLP is managed by a Manager which remains non-regulated up to 100 Mio.
It does not need to appoint a custodian nor a regulated asset manager nor an auditor.
No prior approval from the regulator.
This allows the promoter to setup such entity very fast and for a fraction of the costs of a normal investment fund.
RAIF, SICAR, SIF are also available as lightly regulated Alternative Investment Fund who can be used to invest in such investments.
2)The Securitisation:
Apart from the Fund structure, some promoters have decided to setup a Special Purpose Vehicle under the Securitisation Law of 22/3/3004.
Such SPV acquire the SRI assets which are financed by the issuance of Bonds, Notes, or Certificates The investors in such a SPV receive a yield which is linked with the SRI project.
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