The European market for sustainable and responsible investment (SRI) was worth 2.7 trillion ($3.7 trillion) in 2007, according to figures released yesterday by the European Sustainable Investment Forum (Eurosif). This is equivalent to 17.5% of the European asset management industry.
Eurosif said its survey of asset managers and asset owners in nine European countries showed that responsibly managed assets had grown by 102% between 31 December 2005 and 31 December 2007 a compound annual growth rate of 42%.
Growth in Europe was driven primarily by increasing demand from institutional investors for responsible investment as a tenet of good risk management, particularly around the area of climate change, said the Paris-based network.
The increased application of environmental, social and governance (ESG) issues in traditional financial services products, pressure from non-governmental organisations (NGOs) and the media, and a growing interest from wealthy individuals also boosted the European SRI market, it added.
Eurosif separates the SRI market into two categories, namely core SRI, and broad SRI.
The former includes: negative screening, whereby investors exclude companies or entire sectors based on social or environmental criteria; positive screening, such as best-in-class’ investing, where investors select sustainability leaders across all or most sectors; and thematic funds, such as those pursuing climate change or clean energy themes.
Broad SRI focuses on engagement with investee companies to encourage improved social or environmental performance, and the integration of ESG considerations into traditional financial analysis.
Eurosif estimated that the core SRI market had grown to 512 billion from 105 billion billion, and valued the broad SRI market at 2.2 trillion, up from 928 billion.
For the first time, Eurosif included statistics from Scandinavia (which were excluded from the year-on-year comparison). Norway and Sweden had the biggest SRI markets in the region, worth 209 billion and 191 billion respectively.
Eurosif said that Germany, France and Switzerland had recorded the fastest growth in core SRI, although the UK and Netherlands remained the largest markets.
Meanwhile, the Netherlands had experienced the fastest growth in the broad segment, followed by France, while the UK remained the largest market in this sector.
Discretionary mandates were the most popular SRI investment vehicles, while equities remain the preferred SRI asset class. However, fixed income and alternative asset classes cumulatively represented half of the total for SRI allocations, said Eurosif.
Matt Christensen, executive director at Eurosif, said: In spite, and because of, the ongoing financial market turmoil, environmental, social and governance issues are becoming more relevant as important criteria for investors.
Nathalie Monnoyeur, head of SRI development for IDEAM, a subsidiary of Crédit Agricole, confirmed that the current crisis was pushing asset managers to look beyond traditional financial analysis and to consider environmental, social and governance risks.