At KBC, Sustainability is at the core of everything they do. It is not part of a separate strategy, rather it is embedded across the organisation and into their products and services. KBC’s vision on sustainability is based on a long term view of remaining sustainable and competitive as a business while increasing their positive impact and limiting their negative impact on the environment and society.
They have identified a number of high impact areas where they believe they can have a positive impact including; the Environment, Entrepreneurship, Health & Well-being and Financial Literacy. Each year new products and services are developed under each of these domains.
In early 2019, KBC launched their Socially Responsible Investment (SRI) funds to the Irish market under the ‘Environment’ domain.
What are Socially Responsible Investment funds?
Socially Responsible Investments allow clients to invest in sustainable and ethical companies. This allows KBC to contribute to a more sustainable society and help to limit the adverse impact that business can have on society.
How do they work?
In its earliest implementation, SRI was about negative screening, which meant not investing in objectionable industries such as tobacco. It then progressed to encompass green finance to protect the environment and combat climate change. Today, SRI has evolved to include impact investing, where the exact societal impact of the investment can be measured.
KBC Group’s SRI offering has followed a similar trajectory since they started in 1992. KBC’s impact investing is about trying to invest your money in a way that you know is delivering some type of positive good which could mean bringing about greater social justice or improving access to water or medicine.
KBC’s approach: transparent and independent
The 10 UN Global Compact principles are the first level of screening in KBC’s best-in-class approach. Thorough screening, based on strict and clear rules, is carried out to determine which companies and countries make up the investment universe for SRI solutions. The sustainability policy and criteria are monitored by the SRI Advisory Board, which is fully independent of KBC. The advisory board decide which screening methodology KBC should use and set the criteria for rating companies. They also ensure that screening is complete, thorough and accurate.
Certain companies are ruled out due to their controversial activities. Information about companies is sourced from Sustainalytics, an independent research agency specialising in sustainability research. KBC Asset Management makes all its research results available on its website.
Return on Investment
The most common concern about SRI is that returns are lower.
However, a 2015 study, ESG and Corporate Financial Performance: Mapping the Global Landscape, examines ESG and corporate financial performance (CFP) across more than 2,000 academic studies published since 1970, and concludes that there is a positive correlation between ESG strategies and strong financial performance. The results showed that the business case for ESG investing is empirically very well founded.
The KBC Sustainability Strategy
Socially Responsible Investment funds contribute to KBC’s overall sustainability objective of limiting adverse impacts while promoting a positive impact on society and the environment. It is an evolution in their sustainability strategy. They recognise that as a bank in the service industry, the biggest impact they can have on the environment and supporting the transition to the low carbon economy is through the products and services they offer their customers. SRI investing allows customers to know that their capital is supporting companies that are working to improve our society and the world we live in.
Just over a year ago, the Economist published an article titled “Sustainable Investment joins the mainstream” which noted that ‘Millennials are coming into money and want to invest it responsibly’. This is supported by a 2018 survey by First State Investments. The survey of predominantly UK respondents found that over 80% of millennials who don’t already have Responsible Investments (RI) are either ‘interested’ or ‘very interested’. The survey found ‘a new generation more at ease with Environmental, Social and Governance (ESG) concepts’. A majority (78%) of respondents said that expertise in RI would be a reason for choosing an asset manager/financial services provider over another.
This is an interesting trend and shows that the ethical consumer wants sustainable options from service providers. By embedding sustainability commitments across the whole business and into their products and services, KBC are able to support this growing trend.
‘Terms and conditions apply to KBC Investment Funds. KBC Bank Ireland plc is regulated by the Central Bank of Ireland