The acronyms SRI and ESG are two terms that have become firmly established in our society in recent years. SRI refers to Socially Responsible Investment, while ESG (environmental, social and governance) is the acronym that defines the criteria on which this type of investment is based. In recent years, the letter “E”, which refers to the environment, has become particularly relevant.
Climate change, pollution and deforestation, among others, are part of a pandemic that is affecting the planet and, unlike the coronavirus, threatens to continue for an indefinite period of time. Although there is no vaccine against this pandemic, we can contribute with our actions to mitigate it. These actions range from recycling to making investments with an environmental commitment.
Low risk-return trade-off
SRI brings clear benefits for the planet and the people who depend on it, but what about the investor? When it comes to investing in ESG criteria, the lack of information on this type of investment has led to a certain skepticism among investors. However, recent data show that SRI is, at least, as profitable as traditional forms of investment. Moreover, it offers us all the options: fixed income, equities…
When it comes to selecting projects, profitability is the first part of the binomial that governs investors’ traditional criteria. As for risk, experts agree that ESG investments are less exposed to risk, since these projects are subjected to greater control and transparency mechanisms. Also, the environmental risks associated with traditional companies are practically non-existent in the case of SRI.
The international scene also seems to support sustainable investment. We spoke a few weeks ago about the positive consequences of Joe Biden’s election victory for ESG investments. In addition, green bonds and public policies aiming to mitigate the human impact on the environment are increasing. Therefore, sustainable projects will have greater possibilities of financing and greater viability in the future, increasing their attractiveness for investors.
Increasingly “green” stock markets
The stock markets’ commitment to ESG criteria has also increased. In recent years, various indexes that measure the sustainability of companies have appeared, such as the Dow Jones Sustainability Index (DJSI) or the STOXX Global ESG. This provides investors with valuable information when looking for ESG criteria in their investments.
When we talk about investments that are committed to the environment, we must distinguish between three types. Although ESG criteria are taken into account in all cases, the range of commitment varies. The responsible policy excludes projects with harmful effects on the environment and society from the investment portfolio. The transformative policy focuses on sustainable businesses with good environmental performance.
Fellow Funders and ESG commitment
The social impact policy directs investment toward companies that are specifically geared to respond to environmental problems. This is the case of companies dedicated to the electric mobility sector, such as EasyCharger or Mooevo, companies that Fellow Funders has supported in recent rounds of financing.
At Fellow Funders we have a clear commitment to the environment. In addition to helping to finance startups that help protect the environment, we take ESG criteria into account when evaluating the projects presented to us. We know that making investments profitable and improving the planet are two totally compatible actions. In the coming years we will continue to increase our commitment to Socially Responsible Investment.