The two largest fund managers are Finansol, set up in 1995 by a number of cooperative banks. It has experienced dramatic growth in recent years - its social savings assets (which includes solidarity mutual funds among other similar schemes) have doubled since 2017 to €20 billion (Finansol, 2020).
The other one is Amundi, a division of the largest cooperative in the world, the Credit Agricole bank. Amundi is also the largest European asset manager and 10th largest in the world. This makes it unique in the asset management industry, which is driving unprecedented concentration of voting power with three largest asset managers in the US casting 25% of all votes in S&P 500 companies. Unlike other asset managers, Amundi is owned by the cooperative Credit Agricole, which has over 10 million members which is governed on a one-member-one-vote basis. We have covered the asset management industry in more detail in our earlier newsletter
. Solidarity fund assets under its management surpassed €2.4 billion in 2018, more than 20 fold increase from 2009. While still a tiny part of its overall assets of €1.8 trillion, the pace of growth is so drastic that if maintained (and that is a very
big if), equivalent of 60% of current Amundis assets would be in solidarity funds in twenty years.
The success of Solidarity Savings Accounts shows that there is massive, untapped popular demand for investment into enterprises like cooperatives. Solidarity Savings accounts represent a step towards the type of socially beneficial investment that was advocated in an earlier issue
of this newsletter as a better alternative to the questionable mainstream ESG investment.
This new approach is based on the idea that for investment in companies to make a difference, we need to invest in companies that are different. To change how businesses behave, we need to change how businesses structure their ownership and governance - because incentives for behaviour are derived from those structures. A monopoly might have CEOs and corporate culture that is committed to great moral values and beliefs, but it has the economic incentive to exploit consumers to increase its profits - unless it’s structured as a consumer owned cooperative, in which case the profits flow back to the consumers.
However, there are limits to an approach like the French solidarity funds. The most obvious one is that 90-95% of the funds are still invested in conventional capitalist firms. This is due to regulations that restrict employee saving scheme investments into unlisted corporations. It is not due to lower returns - in fact, existing research suggests that “there is no compelling econometric evidence pointing to the under-performance of solidarity funds”.
In addition, while Solidarity Savings Accounts provide a more convenient way for individuals and institutions to invest in cooperatives, for the movement to expand into new frontiers, new investment instruments for cooperatives need to be developed. We must not just create new, easier ways for people to invest in cooperatives, we need new ways to arrange how the investment works. The sectors solidarity funds have allocated most investment in have been housing and agriculture. An investment arrangement suitable for these sectors might not be suitable for a cooperative developing a software application - for example, there are no tangible assets like real estate property or farm land that can be used as a collateral. We at Coop Exchange seek to not just to make it easier for ordinary people to invest in cooperatives - we also want to help cooperatives access new forms of investment.
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