Socially Responsible Investment (SRI) concerns the management of internationally distributed funds that invest in listed companies globally and State bonds. The investments involve buying shares and bonds of multinational companies that distinguish themselves by their good social and environmental policies and socially responsible management. In addition, bond investments include State bonds from countries that meet Triodos Investment Management criteria that safeguard the solidity of the fund in terms of liquidity risk and return on investment.
SRI also involves investing in innovative companies whose products contribute to the fight against climate change, to a clean earth, and to healthy people. The SRI funds have two key objectives. Firstly, they aim to encourage companies to continually improve their sustainability. Secondly, they offer investors the opportunity to invest in companies whose products and management meet strict sustainability criteria, while aiming to achieve a competitive return on the stock exchange.
Triodos Sustainable Equity Fund (Europe)
Triodos Values Equity Fund was renamed Triodos Sustainable Equity Fund on 1 April 2010. On 25 June 2010, the assets under management in Triodos Meerwaarde Aandelenfonds were transferred to this newly named fund, which is based in Luxembourg as a Société d'Investissement à Capital Variable (SICAV). The fund has been distributed in the Netherlands, Belgium and Luxembourg since its launch in 2007 and invests in the shares of multinational companies worldwide.
In 2010 the stock market continued to recover from the financial crisis to levels close to those at the end of 2007. The fund realised a return of 17.7% after costs, which is 2.4% higher than its benchmark before costs. Partly following the inflow from Triodos Meerwaarde Aandelenfonds, the total net assets of the fund increased by more than 500% to EUR 181 million.
Triodos Sustainable Bond Fund (Europe)
Triodos Meerwaarde Obligatiefonds have been available in The Netherlands since 2000. Triodos Values Bond Fund was renamed Triodos Sustainable Bond Fund on 1 April 2010. On 25 June 2010, the assets under management in Triodos Meerwaarde Obligatiefonds were transferred to the Triodos Sustainable Bond Fund, which is based in Luxembourg as a Société d'Investissement à Capital Variable (SICAV). This fund is distributed in the Netherlands, Belgium, France, Denmark and Luxembourg. The fund invests in Euro denominated bonds of multinational companies globally and, since 1 April 2010, in Euro denominated country bonds.
After the upheaval in the financial markets and European rescue operations that followed it, the bonds market has become increasingly volatile. Country bonds are no longer a safe haven and there is growing uncertainty about bank bonds. Against this backdrop the fund realised a return of 3.6% after costs, 0.5% below its benchmark before costs, while the net assets of the fund increased partly by the transfer of the Triodos Meerwaarde Aandelenfonds more than 1000% to EUR 140.7 million in 2010.
Triodos Sustainable Mixed Fund (Europe)
This fund was founded in June 2010. The assets under management in Triodos Meerwaarde Mixfonds have been transferred to the newly established Triodos Sustainable Mixed Fund which is based in Luxembourg as a Société d'Investissement à Capital Variable (SICAV).
The fund maintained a defensive investment strategy for most of the year, investing a relatively large proportion of its money in bonds. Performance was in line with the benchmark and realised a return of 9.7% after costs, outperforming its benchmark before costs by 1.1%. Net assets at year end were EUR 60.2 million.
Triodos Sustainable Pioneer Fund (Europe)
Triodos Values Pioneer Fund was renamed Triodos Sustainable Pioneer Fund on 1 April 2010, and is based in Luxembourg as a Société d'Investissement à Capital Variable (SICAV). The fund invests in companies that are pioneers in climate protection, clean planet, promoting healthy people and corporate social responsibility. The fund realised a return of 10.2%. Net assets increased by EUR 11.1 million to EUR 46.4 million.
Promoting corporate social responsibility produced positive results in 2010. During the year Triodos Investment Management made use of voting rights on behalf of the Triodos Sustainable Pioneer Fund at 100 shareholding meetings. In addition to 501 feedback letters sent to all the companies it researched, Triodos Investment Management entered into dialogue with more than 200 multinational companies, leading to a number of significant improvements in their corporate social responsibility policies and performance. Through Triodos Investment Management’s activity, Triodos Bank demonstrated in 2010 that sustainable investment on the stock market is crucial to encouraging sustainable corporate behaviour.
Socially Responsible Investment Funds Prospects for 2011
Economic forecasts remain uncertain for 2011. Projections for economic activity have recently been downgraded. The strong positions of the corporate sector and the emerging markets offset the negative economic trend to some extent. Triodos Bank expects that the stock market will, in time, again focus on issues of structural growth, such as resolving the energy issue and tackling climate change. The performance of investments funds (in terms of both return and net assets) investing in shares of listed companies will, on the whole, develop in line with movements on the stock exchange. Triodos Bank’s funds can benefit from their preference for shares in subsectors that contribute to solutions for several of our global crises, such as climate change and the food and energy crises.
Prospects for the bond funds are negative to neutral. Contrary to what government leaders had been hoping, a further spread of the euro crisis could not be prevented. During the month ahead the discussion about the future form of the European rescue fund and the extent to which subordinated banking bonds should be exposed to losses will continue unabated. Heading towards the end of the year, the bond market’s liquidity will also diminish rapidly. Any news about the euro crisis will therefore cause considerable market volatility.