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Banque Havilland:

Sustainability - the importance of private markets

According to Stefano Torti,
Director of Investments
at Banque Havilland, the
real change will come from
investors in the private
markets.
Stefano Torti, directeur Investissements / Group Head of Asset Management & Advisory

Sustainable investments and climate change are objective when it comes to environmental, social one third of global emissions and we can safely
two topics which are, this year more than ever, and governance investing. assume that these two assets classes tend to be
under the spotlight of investors and regulators. The results of the regulatory and investors largely in the hands of private owners. Finally, a
Are we finally seeing an acceleration, which can evolution is already visible: the market share large number of private equity, real estate and
create a real impact? of European UCITs funds which take into private debt funds are often out of scope of the
Sustainable investing is not really something consideration ESG at different degrees (the so Sustainable Finance Disclosure Regulation due
new, with some asset management companies called “Article 8” and “Article 9” funds) has finally to their jurisdiction or size.
and funds specialising in this area since several passed the 50% mark, even though this is mainly
decades. However, two things have changed in due to the reclassification of existing funds. How then to make sure that private markets are
the last few years: the investor’s sensitivity to the involved and contributing to a more sustainable
subject and the regulatory framework. Does that mean that we are well on track to world?
Investors’ sentiment, in line with the consumers, produce a real change? When it comes to private markets, the real change
has changed dramatically, with the realisation Certainly when it comes to listed securities, will not probably come from a different or more
that climate change is real and we need to be funds and fixed income, the level of transparency stringent regulatory framework, as the market
aware of the impact of our investment decisions. and pressure is finally here. Nevertheless, the it is too fragmented and the level of complexity
“elephant in the room” are unfortunately private combined with the lack of data would make this
And how about the regulatory aspect ? markets. To highlight that the real issue lays in approach very difficult. The real change will need
We have noticed a boost of this aspect, this segment of the investment universe, we just to come bottom-up, from the investors. Pension
especially in Europe. The cornerstone of the need to look at the data. For example, only in the funds and institutional investors are already
regulatory change came in March last year with US, there are over 17,000 private companies with putting pressure on this asset class also from a
the introduction of the SFDR, the Sustainable annual revenue of over $100m compared to only sustainability perspective, but that needs now to
Finance Disclosure Regulation, requiring for the around 2,600 public companies with the same touch also family offices, private investors and
first time that asset-management companies annual revenues (source: Capital IQ, February even retail clients, which are now slowly accessing
provide information about their investments’ 2021). This means that the large majority of this investment universe. Many of us already
environmental, social, and governance risks as businesses are not subject to any meaningful today when buying a new car or a new real estate
well as their impact on society and the planet. The level of transparency and scrutiny when it comes asset, we do consider their energy efficiency and
regulatory framework took then another step this to sustainability. Looking at CO2 emissions, we the environmental impact of our actions; so we
August with the revision of the Mifid to include get a similar message: according to the Climate should do when investing in private markets as
clients’ sustainability preferences, an important Watch of the World Resources Institute estimates, this will not only do well for the world, but also
step to assess and comply with each investor real estate and agriculture account for more than for our future portfolio returns.

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