Eurosif, the European Sustainable and Responsible Investment Forum, has just published a study that calculates European Institutional SRI to be as high as 336 billion euro. This figure shows that SRI has already entered the mainstream financial markets in some countries and is increasingly being accepted and adopted by the greater financial community.
The study, titled "Socially Responsible Investment among European Institutional Investors 2003 Report", highlights the scale of European Institutional SRI across eight countries (Austria, France, Germany, Italy, the Netherlands, Spain, Switzerland and the United Kingdom).
According to the report, each national state’s respective culture, financial market structure and legal framework greatly influences the complex shape of SRI — among institutional investors, there is no single definition of SRI across Europe. Eurosif’s Executive Director, Matt Christensen said, "Readers of the study will find that, even if contrasts exist from nation to nation, European SRI is showing signs of entering the financial mainstream."
This is explained by the growth of institutional investors that are employing the use of simple exclusions and engagement practices as effective means to manage their financial risks. In the Netherlands, almost all of the pension funds surveyed for the study said they applied at least simple negative screens in their fund selection, either as a form of risk management or an ethical statement. Similarly, in the UK, comparing Funds Under Management subject to ‘engagement’ for pension funds to the total UK share ownership of their pension funds produced an SRI ratio of 24%. These facts can be viewed as a good sign for the future of SRI, since the high penetration rate of these practices point to investors and asset managers viewing them as causing little or no financial risk and possibly helping build company value.
A key driver pointed out by the study will be the role pension funds play in continuing to develop the SRI market in the years to come. Due to a focus on long-term results, limited potential for conflicts of interest, and the rising importance trade unions attach to their workers’ capital, pension funds occupy a unique position within the financial services sector. These funds are increasingly involved in corporate governance issues. SRI will be a logical next step for pension fund managers as they continue to refine their criteria in order to best manage the risks of their investments.
The report, which has been created with the support of the European Commission, collates national SRI data and provides an estimate of pan-European institutional market size. Eurosif analysis also details cross-country comparisons as well as provides predictions for future SRI trends. Dominique Bé, EC DG for Employment and Social Affairs states, "We are pleased to support Eurosif in its research and publication of this inaugural assessment of Socially Responsible Investment among European Institutional Investors. This excellent study provides more clarity and greater understanding for all interested parties about the current state of Institutional SRI in Europe."