How to finance a positive economy?

Béryl BOUVIER DI NOTA, Deputy Head European Equities and Head of Impact Investing - OFI AM
Deputy Head European Equities
& Head of Impact Investing

Supporting the positive economy means investing solely in responsible companies committed to financing the virtuous growth of tomorrow. This is a noble objective that could reduce the scope of action of companies whose main purpose is not making the world a better place... but, then again, the world is in full flux…

Current business models appear to have reached their limits. Today, it is no longer possible to create growth while ignoring social inequalities or while failing to combat climate change. The positive economy addresses other stakeholders – not just shareholders – and takes their interests to heart in redistributing wealth more equitably.

The positive economy aims to be more inclusive and more sustainable.

ESG and positive economy analysis: what’s the difference?

ESG (Environmental, Social and Governance) research aims to select those companies that have adopted virtuous practices. This doesn’t mean that their business makes a contribution towards sustainable solutions.

Companies are not judged on the basis of what they do or produce, but on how they do so. ESG can focus on “polluting” companies that pledge to be less polluting. Such companies fall into the realm of a transition into ESG practices, with a CSR (Corporate Social Responsibility) strategy and policy focused firmly on reducing their negative externalities.
The positive economy also includes companies that have incorporated ESG criteria, but not just those companies…

Impact investing

The positive economy and impact management seek out companies that, through their business activities, provide something beneficial to society. These include companies that supply clean, renewable energy (to decarbonate the economy).
Conversely, companies such as McDonald’s and Coca-Cola may be excluded, at the portfolio manager’s discretion, because of the products’ lack of nutritional virtues or even their negative health impact. In the agro-food sector, companies that work towards solutions for reducing salt in food or finding natural sugar substitutes may be worth a look.
Royal DSM in a good example of a company whose business model offers positive solutions for enhancing the quality of life for everyone. A former coal and chemicals company, DSM has gradually shifted its focus to its nutrition division, which recently accounted for 63% of its revenues. It is also working on innovative nutritional solutions, such as stevia compounds and Veramaris algae oils and is also researching enzymes that can reduce animal-based methane emissions.
Another company contributing to the energy transition is McPhy, a French niche maker of electrolysers that supplies “green” hydrogen equipment and recharging stations. Governments have taken a new look at hydrogen as a potential clean energy source. Thus far, hydrogen has been mostly overlooked, but heavy investments are now being made to promote its use.
The circular economy and plastic pollution have become major challenges, as only 14% of plastic is currently recycled worldwide. In reaction to this environmental scourge, Carbios, a French company, is developing plastic depolymerisation and biodegradation solutions. Tomra Systems, meanwhile, supplies deposit and recycling equipment, a solution taken up by Germany, which now recycles 90% of its plastics.

Small and mid-sized companies are not the only ones contributing positively to the economy. Large companies can also work in the interests of future generations. At a time when lowering greenhouse gas emissions is a key concern, Air Liquide has pledged to produce clean hydrogen, and Saint-Gobain plans to focus on reducing energy waste from buildings in 50% of its activities.
All this is helping to reduce CO2 emissions by 30 million tonnes annually, the equivalent of emissions produced by 6 million persons.

Our targeted companies help reduce negative impacts or offer new solutions.

In the positive economy, investors are throwing their support to companies driven by a true social ambition.

Measuring impact

Impact measurement is based on a rather rigorous analysis, along with discussions on calculation methodologies, which differ from one company to another. To date, the new investment approach of impact investing is under construction, and we are in the process of drawing up benchmark indicators to measure impact performance.

This content was originally published in French on the Boursorama website as part of the program "Ça vaut le coup !"

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