VIA AM SICAV:
Opportunities and limits of "responsible" investment, or the possibility of traditional
October 8, 2021
Developing and managing investment strategies for more than twenty years, the team at Veritas Investment Associates (VIA AM) have observed the emergence of many fashion phenomena, measuring their successes and, quite often, their failures. Because brilliant ideas, even emerging from well-intentioned minds, do not necessarily translate into lasting economic and stock market performance.
However, the duty of traditional fund managers is above all to maximize the performance of their investments, while minimizing the risks, according to the mandate entrusted to them. This implies considering a simple economic reality: in the long term, the evolution of financial markets converges towards wealth creation carried out by companies. Managers must therefore invest at a reasonable price in companies that create or will create the maximum wealth. In this sense, buying a company with an exceptional marketing concept but without real potential for value creation rarely allows you to make your investments grow. Likewise, investing in wind turbines or solar panels without checking the relationship between installation and maintenance costs and the selling price of electricity does not seem to us to be "good management" of savings.
Extra-financial analysis also has an economic and therefore stock market dimension. A company that behaves badly towards its employees, suppliers or customers, or even the river that borders its factory, risks scandals and costly lawsuits. Conversely, a company that creates a positive dynamic around it increases its attractiveness, recruits better talent, attracts new customers, increases the value of its brand. Convinced of the importance of ESG but also of the environmental and social issues facing humanity, for several years we have included ESG considerations in our traditional management. But we try to be realistic.
History has indeed shown until very recently that good intentions can harm the stock market performance of investments, and therefore savers. There is a dark side behind many economic and stock market successes. In recent years, the integration of ESG considerations has instead made it possible to improve the performance of European equity funds: stock selection has been better, but also investment flows have greatly benefited ESG funds. The reverse has happened in the United States, where ESG is less developed: the stock market champions of recent months, who alone or almost on their own have pulled the entire market to new highs, are not particularly good at ESG! It is unlikely that the future American retiree invested in a “strict” ESG fund would have agreed to deprive themselves of a few dozen percent of the performance of GAFAMs...
The extra-financial rating of companies tries to respond as best as possible to the challenges, particularly environmental ones, which the world population is confronted with. The concept remains relatively fragile: an issuer can find itself rated very well by one ESG expert and very poorly by another, depending on how both view the current situation of the company, past or future improvement efforts, etc. Standardization of these approaches seems to us to be necessary and unavoidable.
As systematic managers who like the "truth" of numbers, we believe that there is another, more objective way to integrate a strong ESG dimension into our management, by measuring and offsetting companies' CO2 emissions. Through the carbon credit market, we can transparently decide to pay a few basis points to neutralize the indirect effect of the investments we make on greenhouse gas emissions. It is even possible to finance this compensation with co-benefits, for example through projects which also fight against poverty or which promote biodiversity.
It is in this context that we have decided to launch specific carbon neutral shares for our VIA Smart Equity Europe fund. As the compensation effort must be shared, investors will pay a slightly increased management fee (+ 0.05%), while we will reduce our margin by an equivalent amount, if not a little higher. In this way, we continue to do everything to maximize the long-term savings of our customers, and at the same time contribute, modestly but very objectively, to facing one of the greatest environmental challenges of our time.
VIA AM is partnering with JUDO CARES, a player specializing in carbon offsetting, based on the expertise of more than 15 years of its partners in the field. Its independent positioning allows access to a wide choice of projects and independent selection of the best solutions.
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