Sustainable and Responsible Investing Fund
SRI funds resemble conventional mutual funds in which anyone can invest. However, what sets them apart is their special investment policies that focus on sustainability, or ESG (Environmental, Social, and Governance) principles. Therefore, the objective of SRI funds is to invest funds to genuinely address sustainability concerns. Asset management companies also provide comprehensive sustainability information about SRI funds to empower investors with sufficient data for investment decisions, thus formalizing the emergence of SRI funds.
Greenwashing refers to the misleading practice of making investors believe that a mutual fund is an SRI fund when it is not. This is considered a shadowy adversary of "sustainability" principles based on ESG. It involves communicating that a business or its products are sustainable when, in reality, they are not. This results in investors or consumers suffering from paying higher costs or investing more without gaining genuine sustainability benefits.
To understand SRI funds, one must first grasp the concept of ESG. ESG stands for Environmental, Social, and Governance, which collectively aim to steer our world towards a better future. These aspects are crucial in driving positive change for the future. Consequently, countries worldwide, including Thailand, have begun to recognize and prioritize ESG. In many countries, there is a growing demand for businesses to demonstrate responsibility towards society and the environment as part of their corporate operations. This heightened emphasis aims to prevent becoming a burden on society and the environment. Moreover, stakeholders, including investors, may push back against businesses that neglect these responsibilities.
Fund management companies managing the SRI funds must disclose relevant information comprehensively under the same disclosure standards, such as investment objectives related to sustainability, sustainability targets that the mutual fund aims to achieve, investment strategies, and the securities analysis and selection process.
At present, there are a total of 13 SRI funds in Thailand under the management of 3 asset management companies: UOB Asset Management (Thailand) with 4 funds, TISCO Asset Management with 4 funds, and Kasikorn Asset Management with 5 funds. It is still considered that there are not many AMCs and funds, as official announcements for establishment were only made in the year 2022. However, there is a requirement for these funds to disclose comprehensive details according to the stricter criteria set by the Securities and Exchange Commission (SEC), including displaying the SRI Fund symbol prominently on the first page of the fund fact sheet.
When looking at returns since inception, most SRI funds tend to deliver positive returns at varying levels. However, when examining short-term investment periods such as 3 months, 6 months, or 1 year, it is common to find negative returns. This may reflect that investing in businesses that consider ESG factors comprehensively tends to yield better long-term and sustainable returns compared to short-term investments or those lasting less than a year.
The selection process of each fund varies depending on the asset management company. Details are as follows:
- Securities with sustainability ratings (ESG Rating) from reputable rating agencies with criteria for assessing ESG risk levels.
Securities included in various sustainability indices, both domestic and international, such as the Thaipat ESG Index and MSCI ESG Universal Index.
Securities of companies that reduce carbon footprint, which refers to measuring the amount of carbon dioxide and greenhouse gases generated from everyday consumption activities, including food production, transportation and waste disposal processes.
Securities of companies generating revenue or profit from environmentally friendly activities such as businesses involved in electric vehicle production or solar energy.
Securities that have undergone internal analysis by the AMCs, focusing on sustainability principles. This analysis should be detailed and transparently disclosed to investors to aid their decision-making process.
- Investing in securities of companies that emphasize “sustainability” as a core principle, providing investors with both direct and indirect benefits by promoting environmental, social, and governance (ESG) sustainability.
- Fund managers assist in selecting and managing investments, analyzing and selecting companies that have undergone thorough ESG scrutiny and demonstrate a commitment to environmental, social, and governance principles. The goal is to contribute to sustainable development in the future.
- Buying and selling processes are similar to regular mutual funds. SRI funds are a type of mutual fund that many people are familiar with and currently invest in. The key difference lies in the investment policy, which prioritizes sustainability or ESG. Therefore, those interested in investing can choose to invest with securities companies managing mutual funds or brokerage firms under the supervision of the SEC that offer SRI funds, similar to other mutual funds.
- It is an option to diversify investment risks. Research has shown that the volatility of SRI funds, focusing on sustainable investing, is lower than non-SRI funds, potentially reducing the impact of economic downturns or crises. Therefore, for those who prefer to invest in securities of companies aiming for long-term sustainability, SRI funds provide another option to diversify their investment portfolio.
Investors can check the list of SRI funds from the SEC’s link at:
🔖https://sustainablefinance.sec.or.th/Fund
SRI funds under Muang Thai Unit-Linked insurance.
Warning : Investors should understand the nature of the product, return conditions, and risks before making investment decisions.
Source :
🔖https://www.smarttoinvest.com/Pages/Investment%20Products/Investment%20knowledge/SRI-Fund-alternative-sustainable-investment.aspx
🔖https://thestandard.co/sri-fund-vs-esg-fund/
🔖https://www.smarttoinvest.com/Pages/Investment%20Knowledge/SRI-Fund.aspx