Following on from the government's decisions, and in particular the taxonomy mentioned in our article of June 16, 2023, the financial world is placing increasing emphasis on sustainable development. For both private and institutional investors, the environment is a major concern these days.

How does this affect institutional investors?

Given their weight on the financial markets, investors such as pension funds, insurance companies and Collective Investment Schemes (investment funds managed by asset management companies) have a fundamental role to play! Two approaches are possible:

• The first is to divest - i.e. sell off - holdings in the least virtuous or most carbon-intensive companies. In fact, a sale of shares by these major investors is considered a bad signal on the markets, and can lead to a fall in the company's stock market value. This kind of situation can be dramatic for companies. To avoid these pitfalls, many companies go further than the law requires, even if this is sometimes more akin to "greenwashing".
• The second is a more active approach to decarbonization. In this case, investors will maintain or even strengthen their position in the stock, so as to have a significant say in the company and influence the decarbonization strategy implemented. In this way, they can put indicators in place, set objectives that also include the social impact of the expected transformation, and monitor results. This method is becoming increasingly popular, with funds owning fewer but larger "positions".

This is a significant transformation, as funds move from being "passive" shareholders to actively managing their holdings.

The behaviour of individual investors

For individual investors, the situation is inevitably different, since it is complicated for them to influence the decisions taken by companies that can "weigh" up to tens or even hundreds of billions of euros. This was the starting point for the so-called Article 8 and Article 9 funds, which consider social and environmental criteria. This gave investors the opportunity to invest in companies that took environmental issues into account. Unfortunately, the laws introduced by the French and European authorities have led to a number of abuses.

In order to protect investors from dubious practices such as "greenwashing", safeguards have been put in place to enable everyone to invest in the knowledge that their funds will be going to a virtuous company.

It is this dynamic, through managed investment funds, that will give individual investors the most influence over corporate strategies.

Against this backdrop of environmental concern, the financial world is adapting. It is now possible to invest while respecting one's values. Wealth A7's team of financial advisors can help you make the right choice and seize these opportunities. We look forward to hearing from you!

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