14th October 2010
The study by European Sustainable Investment Forum (Eurosif), a pan-European association focused on Sustainable and Responsible Investment (SRI), reveals that the ethical investment market now totals Euro5 trillion in terms of assets under management.
That compares to Euro 2.7 trillion in 2008, representing a spectacular growth of 87%.
While the SRI market remains driven by institutional investors (representing 66% of the total AuM), the share of retail investors has increased in almost all the countries covered by the study, with Austria, Belgium, France and Germany leading the way.
Bonds are now the favoured asset class among SRI investors, representing 53% of total SRI assets, while equities have dropped down to 33%.
The study also found that microfinance funds are beginning to generate interest from SRI investors and Eurosif predicts the alternative asset class will grow quickly as investors demand integration of Environmental, Social and Governance (ESG) criteria into more diverse areas.
Eurosif, comprising institutional investors, financial service providers, academic institutes, research associations and NGOs, says the findings indicate that the ongoing financial crisis combined with disasters such as BP's Deepwater Horizon environmental disaster in the Gulf of Mexico (see this BBC report) have acted as a "wake-up call for many investors", making them more aware of the need to fully integrate environmental, social and governance issues into investment decisions.
It believes the European SRI market is undergoing a "transformative period", adding that the European SRI is "in a remarkable place today even when compared to the bull market prior to the financial crisis".
The increasing, serious interest being shown in SRI is further reflected in a United Nations forum yesterday on developing principles for responsible investment attracting a record number of investors from all continents.
Eurosif executive director, Matt Christensen, says: "The previous questions about ‘financial performance' of SRI funds are now being replaced by queries about how to best measure the ESG impacts in order to meet the rising expectations of investors.
"These newer questions about how to best tackle and measure ESG factors in fund management will remain an evolving process with many unforeseen and interesting innovations in the coming years."
Pierre Schereck, President & CEO of IDEAM (Amundi Group) adds: "The remarkable resilience of the SRI market in the face of the ongoing global financial crisis should encourage asset managers in providing a clear and transparent approach towards their investors.
"Certainly the next challenge is to make SRI funds even more attractive and comprehensible to retail clients, helping them to find a common ground between their needs, risk profiles and values."
Eurosif was created with the support of Amundi, BNP Paribas Investment Partners, Crédit Agricole Cheuvreux and Edmond de Rothschild Asset Management.
Its latest study covers SRI across nineteen countries, including for the first time the Baltic States, Poland, Greece and Cyprus.
Eurosif affiliate members include Henderson Global Investors, Oxfam, HSBC, Greenpeace, Schroders, UBS, Bloomberg and Standard Life Investments.
My-Linh Ngo, associate director of SRI research at Henderson says: "This latest set of market data clearly shows SRI continuing to go from strength to strength. That this growth has taken place following the most challenging two years financially, should silence critics who argue SRI is a luxury. It is not, SRI is about making money and making a difference, it is the smart and right thing to do."
My-Linh says that the UK in particular is continuing to set the pace in terms of SRI: "Within the last two years, not only have we continued to innovate in terms of strategies, we have also seen other players such as sell-side brokers and investment consultants really begin to adopt it as they see its [SRI] value."
She says that while SRI has always been strong in the UK retail market, the institutional side where the bulk of assets reside, has been slower to embrace it. "The increase of broad SRI (which mostly relates to the institutional market) from £516 billion in 2005 to £884 billion in 2009 the study reveals is therefore great to see."