September Insight – Key issues for the growth of SRI

Eurosif's Executive Director, Flavia Micilotta, discusses the key issues for the the further growth of the SRI Market with the Portuguese chapter of the WBCSD - the article can be found here (in Portuguese).  A version of this article also appears in the October edition of OMFIF's Bulletin.

Sustainable and Responsible Investment is becoming increasingly mainstream. Although this might sound like wishful thinking coming from somebody who works in the industry, a cursory reading of the major news in the last 18 months reveals the extent to which terms like sustainability and finance have now become part of our daily conversations.

The 21st UN Climate Change ‘Conference of the Parties’ (COP21), held in Paris last December, ended with the milestone agreement of countries to lower their greenhouse gas emissions enough to keep a global temperature increase well below 2°C this century (relative to pre-industrial levels). The Paris Agreement established a system for measuring the commitments and contribution at country level every five years. An assessment of progress is set for 2018. While it is too early to determine whether the Agreement has been sensibly drafted or if it will deliver on its commitments, what is sure is that it sets the tone for policies and businesses. This has directly resulted in a number of possibilities for investors to contribute to the transition to a more sustainable economy. In this context, the best-case scenario is a race to the top for both investors and companies to contribute to the fight against climate change.

The strongest and most reactive policy push that followed has once again come from France, as the government stimulated the financial community to engage in the fight against climate change, with the adoption of Article 173 of the law on energy transition and green growth. By asking investors to disclose how they factor ESG criteria and carbon-related aspects into their investment policies, this law paves the way for driving investments towards more sustainable patterns.

The “Agreement” also led to a number of investors reconsidering their oil investments; the oil industry being one of the more responsible sectors for climate change. After Mark Carney’s declarations regarding the dubious exploitation possibilities linked to oil reserves, even investors who did not think of themselves as particularly pro-environmental , started reconsidering the viability of investing in oil companies and are now pondering the real costs of the carbon bubble.