The challenge of combining profitability and social criteria

As a debit card advertisement used to say, "some things are priceless". Just as playing sports does not have to imply a financial outlay (the choice would be to go for a walk or run versus staying at home on the couch watching TV), in the world of investments, investing including social criteria does not imply having to pay a price; it does not imply giving up on obtaining a lower financial return on our investment.

It is true that 2022 was a complicated year for funds registered as article 8 or 9 of the Sustainable Finance Disclosure Regulation (SFDR). The post-pandemic, with distortions in supply chains, strong supply-demand mismatches due to the explosion of consumption and the war in Ukraine, among others, meant that among the best performing assets were not those that these sustainable funds have on their investment radar.

It is also true that analyzing the enormous amount of data that exists on companies, defining which ones to include and which ones not to include, standardizing a model to measure these social parameters and thus having solid and effective criteria for selecting companies, is an arduous task, costly in time and money.

For this reason, it is a differential factor to have the experience of a team with extensive experience in sustainability, as it is an important competitive advantage when it comes to identifying metrics, interpreting data and carrying out a robust quantitative and qualitative process that guarantees that the companies in which we invest really have a social contribution and that this contribution is measurable and quantifiable.

At Finaccess we identify companies with solid fundamentals, attractive valuations, cash generators, healthy balance sheets, good business prospects and quality management teams, which also have an impact on improving health and well-being, or contribute to increasing access to quality education for all, or reduce inequalities and/or contribute to the development of sustainable cities and communities.

Social issues such as diversity, equality and inclusion, product responsibility, transparent responsible practices, etc. contribute to companies being better valued by their employees, suppliers and consumers. Taking these factors into account helps these companies in the medium and long term to have a better brand image, greater profitability, and to be more competitive and stable, as they generally have fewer regulatory and economic risks.

Finaccess Social Commitment Europe is focused on finding companies that with their products and/or services contribute to various sustainable objectives, focused on the social sphere, that present high standards and social commitments in their business practices, while respecting minimum thresholds in environmental and governance issues.

Examples are:

  • We invest in businesses whose products improve people's quality of life, for example, in the health field with medical equipment that allows less invasive operations for the patient, reducing recovery times.
  • We invest in companies that contribute to the development of more sustainable cities through the development and design of solutions that enable greater safety and sustainability in homes, more energy-efficient cities and mobility.
  • We invest in companies that grant microcredits that favor the creation of new businesses, as well as in those that facilitate access to banking services through digitalization.
  • We invest in companies that, thanks to the transformation towards new digital formats and the development of technology around reading, make it possible to expand the possibility of accessing educational content in a simpler way and adapted to people's needs.

But all this would not be possible without the main player: the investor who values the economic potential of companies and the value of social impact. How we invest says something about our way of being and thinking. Therefore, integrating sustainability into our financial planning can be our grain of sand to achieve a positive impact on people, reduce inequalities and improve the society in which we live.