The report by the IPCC (Intergovernmental Panel on Climate Change) demonstrated the need for action to combat climate change. The European Union is committed to combating climate change, notably via the Paris Agreements, but also to tackling societal problems via the United Nations' Sustainable Development Goals. Our generation is facing a huge challenge. It also presupposes that we're going to have to change the way we produce energy, move around, and consume goods and services. And to facilitate this transition, finance has a role to play in moving towards an economy that is more resilient to climate change, and a society that is more sustainable as a whole.
In this context, the European SFDR regulation aims to increase the transparency of financial products and services, notably by requiring the publication of sustainability data. Sustainability risks, such as the risk of rising sea levels and the negative impact that investments can have on sustainability, must also be considered when making investments or advising clients.
What does this mean in practice?
In practice, the first thing we look at is whether an investment is sustainable or not. So, there are common rules in Europe with certain criteria, and the aim is to classify the various investments. The more stringent the criteria, the more sustainable the investment. There are three main families of criteria.
- The first are environmental criteria, such as greenhouse gas reduction, protection of biodiversity, water resources and natural resources.
- The second family, societal criteria: respect for human rights, working conditions, diversity within the company, etc.
- Third, governance criteria: i.e. anti-corruption and anti-bribery rules, corporate culture and ethics.
These three large families form what we call ESG criteria.
If I want to invest, how does it work?
So, in practice, a client who wants to invest will communicate their ESG preferences to us via the investor questionnaire. In a way, they'll tell us to what extent ESG criteria should influence their investment decision. Thanks to this information, the bank will be able to offer products that match his preferences, and we'll use it in particular to manage portfolios under a discretionary management mandate and provide investment advice to customers.
Finally, customers will receive a periodic report on their portfolio, enabling them to see the impact of their investments. In a nutshell, we're going to use financial investment as a lever to create a better society for future generations.